Ramez Naam - Investing in the energy transition | SingularityU ExFin South Africa Summit

I am between you and the end of the day it is me then I break and then the amazing David Roberts to close it out how many of you have heard me speak about energy at one of these events in the last two years a reasonable number of you and many of you have not well I am here to talk about not just the energy transition but the energy disruption the transition to clean energy that will disrupt a six trillion dollar industry and more and why I am so excited for South Africa and your potential in this transition and this I come to this industry actually from a software background but over the past several years energy has been the core of my work and now we've become an investor in clean energy so I'll bring an economic perspective to what the startups in this space are doing as you're heard voltar talking about this transition and this disruption is led by economics it is led by the change that is happening in the price of clean energy because around the world with every sort of clean energy we have solar wind onshore offshore we have seen this incredible plunge in prices over the past decade as these industries have grown from a tiny to quite scalable and have been able to reinvest funds in R&D in this sector and that is what is driving the transition globally so let's start by saying this the bottom of that fossil fuel range in that previous slide is this a brand new natural gas plant perhaps a supercritical coal plant that produces electricity at a cost of about one rand per kilowatt hour about six or seven US cents that's what as cheap as you can get and in many places even a brand new one will be more expensive than that and we are smashing through those prices the price of wind power we have number of record low prices around the world now in Morocco 0.4 grams less than half the price of new gas or a coal in Brazil a third of our an two cents in Mexico similar a third of our n2 if we look around the world we have this transition happening where in every country on planet Earth the price of electricity from new wind power is dropping plunging really and smashing through that red dashed line that is the cost of a brand new super efficient gas or a coal plant and that means that we've entered a second phase of renewables because you'd be forgiven if you didn't know this because up until just a few years ago we were in phase one of clean energy and phase one was policy dependent wind power solar power they were both tremendously more expensive than fossil fuel electricity in the 1980's the 1990s the 2000s and they only got deployed because we mandated it or we subsidize them but then something happened about five years ago four years ago we started to see this second phase emerge where wind and I'll talk about solar later because they had scaled head who reached price points that they were competitive for new power on their own and I'll come back to this first and second phase and what comes after now of course it matters how much wind you have there's different wind enos of different parts of the world and here in South Africa you are actually blessed with some of the finest on land winds of anywhere in the world and you have wind power bids now at about almost down to half around four cents and dropping which makes it just plain competitive with any fossil fuel electricity so driven first by policy and then by these declining costs the wind industry has scaled it's grown by a factor of five over the last decade and that scaling is the key to it coming down in price yesterday Kathy woods from arc investor talked about rights law rights law is bigger than Moore's law it's more fundamental actually Moore's law is probably a special case of rights law rights law says that almost every industrial process as you scale it up for every doubling you get a certain percent price decline in we call it a learning curve frequently in wind power that's about 19 percent every doubling of wind power has brought down the price about 19 percent and that means that in all exponential technologies not just energy there is this fundamental dynamic that at first the new technology is incredibly expensive and what you have to do is find a first market where it's still good enough for that market where the demands are there or where the conditions are ideal and when you do that you get some sales your demand arises and then through rights law your price Falls and when your price Falls you find that there are more markets that you can enter and this is as true for genome sequencing or 3d printing or carbon fiber or AI as it is for wind power and I'll come back to this again so that means that wind power will keep getting cheaper as it scales now if you really wanted the best winds on earth you'd go offshore if we look at a map of wind speeds and we include not just land the fastest winds and the steadiest winds aren't on land they're on the continental coast or deeper and offshore wind power despite that looked like it would be horrific ly expensive for most of history because we have to build these giant machines anchor them to the seafloor they have salt water that makes maintenance difficult you have to send crews out there to the construction and so on so many of us most of the industry I believe as recently as 2016-2017 thought offshore wind would never be priced competitive and we were wrong I was wrong because in the summer of 2017 in fact we had three bids in Europe in the German market of offshore wind at unsubsidized prices just wholesale competitive prices and the price of offshore wind has dropped by a factor of at least five in the last decade and continues to drop and so now it looks like the opposite is true far from being not competitive offshore wind looks like the future of wind power now those bids I meant in Europe there in the North Sea where they have class seven winds offshore which is what South Africa has along its entire coastline you are blessed with one of the windiest places on earth not just on land but at sea and wind power by the way I'm going to talk about solar in a moment blows at night and it blows heaviest in the winter so wind power will keep getting cheaper and that has important ramifications but of course what you'd rather hear about is this because solar power makes wind power look slow and stagnant if we look at just the cost of solar panels themselves per watt of power they produce they have seen a staggering cost decline it was 77 dollars a watt in 1977 to buy a solar panel today it's 22 cents that's a 350 times caustic line and this is physical infrastructure this is the baseline resource that powers almost everything in our societies in our industry in our lives but it's dropping in price almost like a digital resource right not quite phones or chips have dropped about 10 million at times in price in that time frame nevertheless this blows away almost any other physical infrastructure you can think of in terms of the pace of its price decline and that means now we have crossover we're in the sunny parts of the world Solar is now the cheapest energy you can buy and is dropping more rapidly than anything we've ever seen in this sector so again we have to beat this level six to seven cents one round in India one of the the most rapidly growing energy consumers of the world we've had multiple bids over the last two years at less than four cents at about half our end cheaper than new coal and the largest amount of new electricity generation built this fiscal year in India Solar is now number one for new build that's because the cost of solar has dropped by a factor of four in just four years in India in the u.s. west and south West we have bids of three cents if you remove all the subsidies zero point four and the cost of twenty year power purchase contracts for solar in the US has dropped by a factor of ten in ten years in the Middle East and Dubai one of my favorite photos of all time in an oil capital we have solar at almost 1/3 of our and much cheaper than natural gas fare in Chile 0.3 year and in Mexico 2 cents per kilowatt-hour now are the recent bids this is just an unprecedented price decline of any energy technology ever in history and so you see starting from a higher baseline solar prices everywhere around the world have plunged and again you'd be forgiven if you didn't see this coming because it was just three four or five years ago that solar became competitive without subsidies in any part of the world alright and we'll talk about what comes after so driven by that Solar has grown not by a factor of five by a factor of 30 in the last ten years now if you take a hockey stick and you put it on a log scale so every tick is a doubling or a factor of 10 if it looks like a straight line it's an exponential here solar on a log scale a thousand times growth in the last 20 years now solar is still tiny it's still only about 2% of global electricity and though growth rate fluctuates and it's slowed a bit the last few years and it might stay slow for a few more years before ticking up again nevertheless this is an explosion of solar around the world with much further for it to go and Africa of course is the sunniest continent and that means Africa eventually ultimately will have some of the cheapest energy on planet Earth given the right financing and other developments and South Africa in particular is one of the sunniest parts of Africa and one of the sunniest nations on earth and now you have a solar bids here at about 0.6 or an and they actually should be about half the price if you do a comparable to Mexico or Dubai or so on and I believe they will continue to fall and so if we look at these prices now globally around the world where is solar if you can get a good interest rate good financing where is it cheaper than building a new coal plant or a new gas plant all of those areas and that means that even if all of the world's pro renewable Pro clean energy policies went away tomorrow solar would keep growing in those competitive markets and that means it'll keep dropping in price because sollars version of rights law is 30 percent reduction per doubling not 19 and it has about one and a half more doublings to go than wind because actually a smaller industry to date so it's gonna go through this virtuous cycle again and now it is almost a matter of inevitability that solar will be cheaper than fossil fuels not just in those previous places but in this expanded map and if solar keeps dropping at 30% per doubling than in four doublings when solar reaches about 30% 32% of world electricity solar in a place like South Africa will cost one cent a kilowatt hour and that's not even factoring in a new more innovative disruptive technologies this is a material called perovskite and only about 10 years ago we really realized we could use this instead of silicon to make solar photovoltaic cells and peroxide is a clay it's abundant it's cheap it takes less energy to make by far into a solar cell than silicon so it should be cheaper in the long run and it converts more frequencies or wavelengths of light into electricity than silicon so we can make in the long run more electricity in the same area and so this you see this is the solar efficiency of different technologies perovskite has improved faster than any material we've ever seen it's done in about five years what silicon took 20 years to do and so I actually am terrified of hard tech investments they are the scariest category in all of clean energy I really love what I find a software company or a finance company there's a network effect nevertheless this was irresistible and so I invested in a company that can take a perovskite layer take a silicon solar cell a commodity cell that's come out of a factory and slap it on and boost the efficiency so that's the sort of innovation that's not even factored into the price forecasts that I showed you so solar will keep getting cheaper as well these are not endpoint prices these are transition prices for an industry that is still relatively in its infancy now of course the Sun doesn't always shine and the wind doesn't always blow it turns out they're mostly counter cyclical there is more wind in winter more Sun in summer and the wind blows more at night Sicily and the Sun of course only during the day if you see the Sun at night call me something something strange they will recall your local doctor something strange has happened but while we can put them together and get maybe 70% maybe even 80% of electricity from just Sun and wind if we're intelligent and integrate over a large area but ultimately we have to cracked this problem and energy storage is now the most exciting area in clean energy now you all know who this fellow is right good south-african Tony Stark he's the closest thing we've got that I show this because the reason Tesla has made such amazing progress isn't because Elon invented the arc reactor it's because lithium-ion batteries are also an exponential technology and I can show you this over the last eight years as 2010 to 2018 the price of lithium-ion batteries has dropped by 85 percent it's staggering 2010 feels like just yesterday this is a 6x price decline in 8 years the same pace as solar in fact and batteries are still quite expensive energy storage is still quite expensive but it's cheap enough that now we have places where solar plus a small battery in your home is cheaper than buying from the grid that's true in Germany it's true in parts of California anywhere they don't let you sell power back to the grid we have places in the US where it's cheaper to use a battery for peak power and peak evening hours 4 p.m. to 8 p.m. when demand is still high but the Sun is set then it is to build a natural gas plant to fill that void and this is still a transition price over the next decade Sol or batteries will drop in price by another 3 to 5 X and that will make the combination of solar and batteries or solar wind and batteries irresistible and just competitive nearly 24/7 with fossil fuel generation and that's just lithium ion in fact there's a dozen or more other battery chemistries that are out there there's improvements lithium ion to improve the energy density a company called Cielo nanotechnologies just became the first battery unicorn with our technologies as silicon and one of the electrodes and boost the amount of energy even having a battery their solid-state batteries their sodium batteries or for the grid this is one of my portfolio companies also ESS this is a flow battery it's big and bulky you wouldn't ever put this in our mobile device or in a car cause it weighs three times what a lithium-ion battery does but while the battery in your phone if you drain it down a few hundred times to zero starts to get degraded you can drain this to zero twenty thousand times with no performance degradation whatsoever so immediately if you think of the long-term cost this drops the price of energy storage by a factor of three and this is a product shipping today that I think will have massive disruptive implications so energy storage will keep dropping in price as well and now this transition hasn't been well understood by forecasters in fact it's been one of these deceptive transitions will probably showed you a chart a bit like this on the first day do you remember a graph a bit like this exponential change deceives us we expect the linear the new technology is starts from a very low base line and that's continually doubling in price performance but it's so bad at first that we discounted solar you know 20 years ago was 10 times the price of coal it was in that zone disappointment but then we at that crossover point though we hit maybe in 2015 for solar and wind in some parts of the world and forecasters don't understand this and have missed this completely I'll show you an example this is the IEA the International Energy Agency the world's foremost experts on energy they put it in Paris for the OECD but the IEA is not what I would call an exponential organization ok I will demonstrate this let's look at the IEA z' forecasts for the how much solar the world would install every year into the future with what's actually happens when the left is the actual amount of solar the world is installed every year and on the right are successive years of IEA forecasts for the future of solar it's like some analyst is looking at their Excel spreadsheet and taking last year's formula and hitting you know copy paste right that's not a methodology or it is a methodology it's not a good methodology this is the very definition of linear versus exponential thinking and the reason this happens is because these analysts they they've never been fired for being too conservative they're fired if they're too aggressive and B they don't understand the cost declines that are coming here's a solar price decline in the forecast in the u.s. here's what the US Department of Energy forecast to the right and here's what actually happens right or here's offshore wind and 2017 the IEA made these forecasts they said offshore wind would reach about 9 cents a kilowatt hour by 2040 and said we had bids of about six cents for can construction completion in 2021 that were made the same year the IEA made these forecasts well here's my favorite here's battery forecasts here's the US version of the IEA here's their forecast for battery price declines made in 2013 batteries were gonna drop in price by 1/3 by 2048 who's gonna be amazing and here's what actually happened so don't bet on the forecasters bet on the innovators they're the ones actually making it happen they are the ones that have skin in the game and so now these incredible pricing lines bring us to this incredibly disruptive moment so I've already told you about two phases of clean energy policy dependent all right was phase 1 governments had to subsidize it and then 2 was competitive we just entered competitive four or five years ago what's three three is disruptive three is when clean energy isn't just cheaper than building a new coal or gas plant not just a new solar new windows cheaper than new coal or gas is when new solar or new wind is cheaper to build than it is to keep an existing coal or gas plant operating okay think about that you've got a coal or gas plant and the cheapest thing you can do is scrap it and build solar instead now the first person to call this was a CEO of NextEra a big utility in the US he said about a year and four months ago he said by the early 2020s it would be cheaper for them to build renewables than to keep their existing coal fleet alive and then a think tank called carbon tracker did the math is that here's the operating cost of coal in the US and here's the cost of new solar and new wind I said they said we agree the early 2020s are it all right so this disruption is coming now because of an American and because of the times I do get asked about this fellow isn't Trump just gonna stop this he loves coal he doesn't believe in climate change he hates clean energy no in fact in the first four weeks of Donald Trump's presidency the u.s. shut down more coal plants than in the first eight or the first four years of Barack Obama's presidency and in 2018 the US more or less tied a record that it is set of the most coal plants ever shut down in a single year and that's because of my favorite characteristic of Donald Trump so there is one thing about Donald Trump that I love which is he's only the president he's not the king he can do a lot of things but he cannot change the laws of economics and he cannot change the pace of innovation that is worldwide and so in fact under Trump things have happened even faster than predicted this is an announcement it happened in October about six months ago this is a utility in northern Indiana called nips Co Indiana in the u.s. is a Midwestern state it's a red state as we call it ad voted for Donald Trump by 19 points and it has mediocre Sawin and pretty good but not amazing wind South Africa has better Sun and better wind than the state of Indiana and this utility is 65% coal power today and they put out their five-year planning document and they said it would save their customers four billion dollars to go from 65% coal today to 15% coal in 2023 and 0 by 2028 in fact they said the cheapest things we need to go 2-0 right away but they were nervous about learning to operate that grid and they're a placement plan for cold didn't even include any natural gas it was to replace that coal with solar wind batteries and flexible demand things like electric vehicles that can charge at the hours that you want that you have the most energy available South Africa has better Sun and better wind than Indiana by far and this transition is now global it's not just Indiana and South Africa here's China the biggest energy consumer around the world here's the cost of coal rising as these plants age here's the cost of new wind our and the cost of new solar this disruption is happening in just about every country around the world and this is also from carbon tracker maybe you don't like carbon tracker what does Mackenzie say well Mackenzie made this chart of what year would solar or wind be cheaper than existing coal or gas let's look at the chart by country they said in almost all of the world one of solar or wind would be cheaper than coal and gas by 2025 and the rest by 2030 this disruption is not 30 or 40 years out this disruption is happening in some cases by 2020 this disruption is right around the corner in fact this economics is here in South Africa more or less today and this starts to look for the fossil fuel industry like a Kodak moment not the good kind of Kodak moment and in fact the disruption is happening already coal coal consumption around the world already peaked in 2013 it's plateaued let's say it's been bouncing around near that peak ever since but when coal made that transition from a growth commodity to a flat commodity with no growth eight of the world's largest coal mining companies went bankrupt in that time frame because they were built for a growth not for a flat market and it's going to get worse than that coal will bump around on a plateau for a few more years and in the middle of this decade it will start to crash this is not a precise numerical prediction but this is the general shape of the curve that we're going to see and when it does is going to take other industries with it it's not just coal miners and coal power plants what about shipping 25 percent of both carriers of both carrier cargo is coal or our ports for some ports coal is the number one commodity what about rails for some rail companies coal is the number one commodity they carry and it's not just coal either it's also natural gas or at least natural gas power plants natural gas is a commodity will keep growing probably for another 20 years I wish that weren't true but we voted for heat and a lot of it for industry and those sectors we'll probably drive its arise especially in Asia but for the third of it we use for power we may have hit will be very close to the peak of natural gas use for electricity right now for these same reasons and that's why in 2017 general electric the number one manufacturer of components for natural gas power plants had to cut 12,000 jobs and almost shut down its gas turbine unit because people just weren't building them like GE expected so that's a bunch of things too short more or less but there's opportunities as well there's opportunities on this continent it is now the case that almost everywhere in Africa off-grid for those for the six hundred million people in Africa that don't have electricity that a small solar system is cheaper than burning kerosene for light and provides tremendous other benefits and the thing that stops it from happening is how do you finance it and how do you collect payments and so we see in countries like Kenya that have massive uptake of mobile money that off-grid solar is growing rapidly and in countries that don't it's not so - the friends from NTN here in the building you know Godspeed to you because as we get mobile money as a tool in the hands of this billion people on this continent they will have access to modern energy and enter the modern world and what about South Africa itself well South Africa has huge potential with both Sun and wind but it also has some challenges and here's one challenge that I'm I'm sure you're all aware of that's that's in the papers I was just looking up you know reading headlines about Escom and this one struck me from March stage for load shedding further declines in water reserves that's madness why do you need water to make energy because you have a thermal plant you have to evaporate water making it a steam to turn a turbine you don't need water for solar you don't need water for wind that's the reason you're having loadshedding that's crazy now things I think are headed in a roughly good direction the president has proposed a restructuring of Escom it into three companies all state-owned a generation company you know the power plants hopefully solar and wind transmission the long liens distribution the last couple miles of lines that's a step it's a good step it's a small step here's what a modern structure would look like for the energy system in South Africa it would be not necessary privatization of all parts but more competition generation should be competitive different companies that are able to build and operate power plants should be competing with each other on price that's how you get the best price and then you should add in a layer called energy retailers this is what happens in Australia so it happens in the deregulated States in the US where you have you make a contract with a retailer and the retailer decides which generation companies to buy from based on price or based on your preference maybe you want only solar for your home maybe you don't care maybe they have different structures of deals like telecoms do and then it pays the transmission institution companies to use their lines this is a modern regulatory framework and this is the sort of thing that South Africa should be heading towards and feel free to take a picture and tweet it at whoever you would like to in this case but should South Africa solve McMahon told me he was going to do that I hope that's okay mix that I said that Ashley started with Shane I'm sure they both will should South Africa solve these problems though the opportunities are massive here's one in the Deloitte breakfast this morning I made a comment that the way to prosperity for South Africa is like the path followed by China and South Korea and Taiwan which is to be an export economy that's the way to massively lift boats here and manufacturing is the path that those countries have taken and guess what if you have cheap energy some of the cheapest on planet earth giving your natural resources that allows you to manufacture goods at a lower cost and brings in revenue and jobs and growth now I'm not gonna be so simplistic as to say energy solves this problem it doesn't you have other challenges with job training and business formation and investment and venture capital as Valter was saying but you have this massive resource that if you can tackle those problems can create an export economy and manufacturing here I'll give you one example of a country that does this you know Iceland is one of the leading smelters of aluminum aluminum comes from bauxite ore there is no bauxite ore in Iceland they ship bauxite there because Iceland has cheap geothermal energy and they use it to turn that into a higher value commodity they export and so South Africa should have cheaper electricity with a combination of solar and wind than I slit or nearly any country on planet earth so that's a massive opportunity or how about this massive problem that you have water well energy is the master resource that's what the late economist Julian Simon said and it turns out with cheap energy you can turn the abundant saltwater you have into fresh and that might sound like science fiction or sound like it would be incredibly expensive to you but let's look at what happened in Israel Israel ten years ago was in water crisis not unlike what happened here in Cape Town over the past months in a year and now Israel is a water exporter they've a number of things they've done but one is this the Sorek desalination plant provides sixty percent or more of israel's drinking water 1.5 billion litres a day that's all hundred litres a day is the allotment here per person that's 7.5 million people's worth of drinking and bathing water and it's 2,000 liters per dollar it's like Iran a person a day that's what it costs now so Israel did other things they change their farming practices they picked crops that were especially valuable with low water and so on that's desalination is not the whole the answer but this is a massive opportunity especially as you get cheap TV so this is the land of in my mind if you can grasp it if you can make the changes required to grab onto it alright I promise you talk about the energy disruption and I only talked about electricity let's talk about another form of energy let's talk about oil because oil is gonna be disrupted too if we were talking about oil ten years ago we probably talking about peak oil that we couldn't get enough oil out of the ground who here remembers peak oil concerns but it turns out that high prices create an incentive for exploration innovation alright that's the way it works and so there is no peak of oil we have more than enough oil for whatever we want to do more than enough oil to fly ourselves frankly the peak that is coming though is the same peak that happened to Cole it's a peak of oil demand when the world just needs less oil when fewer people are buying less oil and I'm not the first person to see that or the hundredth the first was a Saudi Sheikh Ahmed yamani who was the Saudi oil minister in the 1970s during the OPEC crisis in the year 2000 he said this to his fellow sheiks he said guys the Stone Age didn't end for a lack of stone and the oil age would end with oil still in the ground right he was ahead of his time but what he was saying was the world is going to invent better technology and no longer need our product and that's happening now it hasn't happened yet we're not yet at peak oil demand but sort of shockingly we're at a different peak we're at the peak of the combustion engine last year I thought we would see the peak of combustion engine car sales happen around 2022 2023 it probably happened a year and a half ago in China the biggest car market it probably happened in June of last year for two reasons one is a cyclical downturn in the auto market but two the electric vehicle sales while still small are basically taking all of the growth of the market and so we've seen this right that virtuous cycle that I showed Tesla started with a quarter million dollar sports car than an $80,000 luxury car and then a $35,000 affluent family car all right they went through that virtuous cycle of scale leading to lower prices leading to bigger markets and now it's no longer just Tesla I know Cathy wood is very very bullish on Tesla I'm not really sure I'm not a retail stock analyst I look at startups I don't know I think Tesla still in some trouble I hope they make it I'm a huge fan of Elon but even if Tesla did fail it wouldn't matter they've started this revolution with VW saying they would spend 50 billion on V's General Motors saying their future is all electric Auto OMS collectively have committed two hundred and fifty five billion dollars to electric vehicle development over the next five years and v's are growing exponentially they're still small there's only five million electric vehicles on the road at the end of 2018 out of a billion cars but it took 20 years to get the first million sold 18 months for the second million ten months for the third million you know six months for the fourth million and four months for the fifth million I haven't updated this graph we're probably it passed six million at this point and just like in solar the analysts were caught flat-footed here's a number of different analysts are gonna see three years from each flash on the screen that's the IEA that's Exxon that's OPEC that's BP that's blue Berg that's how they've had to revise their projections for electric vehicles just over a three-year period and they're gonna keep making those upward revisions most likely because they're caught in the same linear mindset here as they have been for solar but while this is interesting even if a hundred percent of EVs of car sales were electric today it would still take 20 years to age out the fleet but something more provocative something more profound is gonna happen a wholesale change in how we get around it's the advent of this the Robo taxi you would call it it's electric it's autonomous and it's a service you may still own a car that you save for the weekends but increasingly this idea of a self-driving electric goober is what will dominate our day to day commutes and our urban and suburban mobility and UBS says this is a two trillion dollar opportunity and it's just a few companies in the lead to tackle this and I'll show you who they are but let's start first with this as a service you know all about uber right and how many people here think uber disrupted the taxi industry yeah sort of that wasn't most of what they did most of what they it had nothing to do with taxis because if you look in the US uber and lyft now do three times as many rides per year as taxis did at their peak uber and lyft didn't just disrupt taxis that's a tiny fraction of idiots they invented a whole new market people will do things with an uber or lyft or a DD or Kareem that they just wouldn't have done with a taxi and that's in part by the convenience control safety and it's in part because of price because in most parts of the world and uber or lyft is about half the cost per mile of a taxi so one more reason that you're gonna use this instead of a taxi and then autonomy will just accelerate that and I hope not opinions on autonomy are controversial I believe it's coming quite soon these are videos from probably the number four player in autonomous driving is a startup called Zuke's in San Francisco and they're sped up three times there they're a little bit not deceptive but the car is not moving all that fast but what I want to convey to you is this there are people who doubt and you'll read articles saying we'll never have autonomous vehicles but they're missing history because once upon a time computers couldn't beat us at anything then they beat us at checkers and then eventually B there's a chess and maybe does it go then they beat us at video games and now they're beating us at diagnosing medical imagery and just like that software and sensors that can see 360 around the car that can make this in microseconds that'd take you a thousand times longer to make will eventually be better at driving in all conditions than humans that's guaranteed the only question is how fast will that happen and I believe it's going to happen the first phase of it which is not all conditions but decently sunny places with decent streets and somewhat orderly traffic is going to happen in the next three years and here's the companies that are in the lead to do that number one is Google Google subsidiary whammo started a beta with a few hundred people in the Phoenix suburbs at the end of last year they had said they were gonna fully launch in December they didn't but a few hundred families in Phoenix have an app and they call a self-driving way mo that comes and picks them up all right number two is General Motors General Motors GM bought the start-up crews for a billion dollars when Clues was one year old great venture capital lead story here then Softbank and Honda came in and have pumped four billion more dollars into that company and now it's valued at 19 billion dollars all of General Motors is 50 billion so this startup is now 40 percent of GM and they if they've never made a dime right but you see these vehicles in San Cisco all the time and GM says this company will have an autonomous taxi fleet operating by end of this year and they've already gotten approval in the US for a version this vehicle with no gas pedals and no steering wheel on all 50 states of roads and we have a metric that lets us see how well these companies are doing because when you test autonomous vehicles in California you have to give the state data every year and how many miles did you drive and how many times did a human have to take over and these human interventions are not emergencies usually it's the vehicle gets confused doesn't know what to do and it sort of sits there for a while until a human says ok let's go around this stalled car or what not and so we can see that an average American drives 14,000 miles a year wham-o drove 11,000 miles for human last year and that was up by a factor of six from 2015 Cruz drove more than 5,000 zooks drove more than 2,000 which is more than than way mo drove just three years earlier so all of these companies are driving an incredible amount per human takeover they're not perfect they can be a little bit too conservative as drivers nevertheless this is remarkable and if this keeps up by 2021 Wayne will be driving 50 60 70 thousand miles a hundred thousand kilometres per human intervention and that's more than good enough for a commercial consumer fleet and then the other wild card is Tesla Tesla is going about it very differently they're not waiting to launch a service they're selling cars and just rolling out features some of this this is in beta you can't get this yourself yet but they're showing what stock 2017 Model S can do with beta software and so they're the wild card in this race why does this matter it matters for economics because half the cost of an uber or lyft per mile is the driver get rid of that and people will take more over and lifts right or way mows or cruises but won't that mean more driving and that's more oil consumption and sort of a contrary to my theme no because these are all going to be electric why because electric will be or perhaps even is already the cheapest cost per mile and here's why this is the entire engine and drivetrain of an electric vehicle this is the engine and drivetrain of an internal combustion engine vehicle and so this difference drives a number of things one the electric vehicle gets five times as many miles per unit of energy as the internal combustion it's is tremendously more efficient to the maintenance costs are one quarter per year in the electric vehicle than in the internal combustion engine vehicles it has so few moving parts and so you put those together and this is a study over a four-year ownership of a vehicle it's looks like electric vehicle are already cheaper they're more expensive to buy but that benefit in the cost of energy per mile and the lower maintenance cost makes them just cheaper over a period of ownership and of course Eevee's will go through this cycle as well and they'll get cheaper and cheaper just for the upfront cost because the only reason they're expensive is that batteries are expensive and they're made in small quantities what will happen when they're made at scale well here's Ford Ford says when they think about evie factories what they see is the floor space for an electric factory is half that for a conventional car factory that capital cost of the factory is cut by half and the labor cost is cut by a third the labor cost of the drivetrain is cut by 80% but you still make windshields and seats and and so on so that leads us to believe that Eevee's won't be ten or twenty percent cheaper they'll be half the price per mile and so when we go back to this Robo taxi we've cut the cost in half by removing the driver we've cut the cost in half by making it electric by about twenty thirty and so the cost of a taxi is three dollars a mile the cost of your personal car is eighty cents a mile we're talking thirty five cents a mile and beyond that I think there's like Cambrian explosion coming of new form factors for mobility that's a four or five seater car most of us in our commute or in a uber we have the average like one point one people so why do you need a four seater car what if you had a two-seater like this cheap two-seater electric or what if you had a 12 °c during mini buses you could share with others when you start looking at those the prices get enormous ly disruptive a quarter or a fifth or a sixth of the cost of owning your own car that a tenth the cost of an uber and that's going to drive tremendous switching behavior and that will bring with it so many disruptions not just energy the auto industry two trillion dollar industry why do you care about a brand why do you care about BMW or Mercedes when yours hopping in a pod this industry either these companies will get into the Robo taxi company Robitaille see market which has a strong network effect and is winner take most so they're too late perhaps or they will die right two trillion dollars auto insurance way mo is gonna self insure Google just has the cash balance to self-insure and the accident rate should drop by ninety percent a trillion dollars disrupted downtown real estate you're in Houston and in most mega cities a quarter of the real estate is parking structures open-air parking structures or parking buildings multi-story parking that real estate can be put to better use great but now you have more supply in the market of real estate and the demand hasn't changed so your real estate prices in the city core could come down by a lot that's a trillion dollars Amin mentioned this other phenomenon you might be willing to live further from home that Kinsey calls out the great flattening they say that's a trillion dollars work to a lot of trillions now right and it's not gonna stop with capacitor cars a van like this does a hundred and fifty two hundred miles a day we can Electrify it today the Tesla semi coming in 2020 Piper Jaffray says the payback time for a driver or an owner that switches from diesel to this will be two years right and so ultimately the biggest disruption is this the oil industry sometimes two trillion dollars a year in just this one commodity the peak of oil demand is coming the European oil major see it now total says in France it could happen by 2030 Ecuador in Norway formally statoil says that sometime in the 2020s shell says in the next five to 15 years how much of oil demand to destroy passenger cars trucks lubricants and we still use some electricity for building heat and electricity or summer oil that will go away that's two-thirds of the world's oil consumption at risk of disruption now when will this happen here's the IEA s forecast the IEA thinks oil demand will rise forever more or less well we know what their track record Bloomberg thinks it could happen as early as 2020 I think that's way too aggressive actually these will be one of those deceptive exponential curves but it will happen in the coming 10 years and I think in the next five years and that could drive the price of oil down massively if a third of oil demand goes away the price drops to 40 if half of oil demand goes away the price drops to a little over 30 and stays there alright I'm going to close with some additional thoughts on how you can take action in this disruption and we say that a crisis is both danger and opportunity and there's danger for you if you have assets in any of these classes but there's opportunity too so here's four tips for things you could do and the first one is very technical so please play close attention it is this cover your you-know-what because these are gonna be incredibly volatile markets they're the oil market looks pretty good today but it's just gonna get scarier and scarier out there and the same with automotive auto supply gas stations real estate there's lots of this to invest for energy will be cheap and for you that means invest in your own country to take advantage of that energy to more productive use three own your own energy until Escom is fixed you can look at this I have an investment in India it's a company that does solar on commercial and industrial buildings warehouses malls factories and it's just plain cheaper to put solar on a flat roof in a very sunny place than it is to buy from the grid and the same math applies right here and even if your facility doesn't allow that there's companies that will give you a corporate power purchase agreement sort of a virtual arrangement that will build solar for you nearby and allow you to buy that over the wires and what this company HST can help you with that here in South Africa and in other parts of the continent and for finally invest in the future that it showed you tens of trillions of annual disruption or attentionally and annually perhaps a hundred trillion in a decade but there's also gigantic upside solar and wind together are only about 8% of world electricity the upside is huge and there's many ways to invest in this stuff directly on a spectrum of risk and return you can invest in debt lending to new solar and wind projects early equity in those projects index funds of retail stocks individual retail stocks or startups I'm in that upper right corner in the startups that I hope to have to be the next Tesla's and solar cities and so on and whenever I invest in a clean tech startup I create a syndicate where other people can invest alongside me so if you're interested in that feel free to let me know but I will close with just my final thought which is the future is bright for South Africa if you grasp it thank you very much [Applause]

Channel: Singularity University

Views: 26,165

Keywords: Singularity University, SingularityU South Africa, Exponential Finance, Development Bank of Southern Africa, Deloitte, Discovery, MTN, Finance

Id: Yl0VtxAbt40

Length: 52min 16sec (3136 seconds)

Published: Tue Jul 30 2019