The Exponential Cost-Savings of Clean Energy | Ramez Naam | SingularityU India Summit 2017

[Music] so I want to talk today about the disruption of the world's largest industry the energy industry $6 trillion dollar year industry and how India can be a global energy superpower you've heard a bit about me I worked in tech for many years Microsoft ran a small Tech startup I've written five books one of them was on this topic of energy environment and Innovation to overcome the world's resource issues that led me to working at Singularity and that also led me to becoming an investor in clean energy so I invest in early stage clean energy startups and I'll try to bring some of that perspective of business models and economics to this now energy is a huge business opportunity but it's also a moral imperative we need energy for development if you want to lift people out of of poverty if you want to enable them to innovate to build new cities to build new products they need access to Modern energy 1.3 billion people around the world don't have access to electricity and at least 300 million of them are here in India in a country that has one of the world's best tech ecosystems so that's one moral imperative but the other moral imperative is dealing with the consequences of energy around the world the World Health Organization says 5 million people a year die of air pollution 1.2 million Indians die of air pollution a year it's now the number five killer in India and India is sadly overtaking China in terms of some of the worst air pollution in the world so we have this moral imperative to provide more energy and to do so in a way that's clean and safe and healthy for people fortunately we also live in energy abundance if you took all of the world's energy use for a year and added it up put it in volumes of oil imagine a cube of oil 1 km on a side 16 of those that's what the world uses every year it's a vast amount but that is dwarfed by the continual influx of energy from the fusion reactor in the sky our sun bombards our planet at the top of the atmosphere with 10,000 times as much energy as we use from all sources combined there is no shortage of clean energy for it fact if we tried to harness that 10 seconds of the energy content of the sunlight hitting our planet would meet one day of Humanity's energy use one year of Humanity's energy use is met by the energy content of just one hour of sunlight the issue is not supply the issue is technology and economics of harnessing it storing it and utilizing it effectively fortunately that technology is evolving as well so I'm going to talk today about what's happening in wind power what's happening in solar power even more exciting what's happening in energy storage the next big disruption that's coming what's happening in the future of transportation and then finally some thoughts on how you mostly as business people can take action in this sort of disruptive environment so let's start with wind power wind power used to be a footnote in the world's electricity Supply but that has changed dramatically over the last 20 years or so we've gone in the last just over a decade from 30 gaw of wind power deployed around the world to 300 gaw 1,000% growth in 11 years now uh wind power is about four or 5% of world electricity 6% in the US where I'm from now that's happened for a variety of reasons and one of them as we all know is policy decisions subsidies for wind power help scale right but they those are limited in utility and would not have produced this effect were it not for a second effect which is an exponential Plunge in prices if we look at the price of wind power contracts signed in the US wholesale Grid electricity costs about 6 cents per unit in the US maybe about four rupees per unit in uh 1980 the price of wind power wholesale was nearly 10 times that so it was ridiculous people will buy the cheapest energy they can buy it's a fungible resource you have to make it cheaper if you want to win but over 20 years that has changed dramatically and now the average price of a new wind power deal in the US last year was 2.3 C about 1 and a half rupees per unit making it the cheapest electricity in large swats of the country and the same technology is available here now so at 24 25x price decline in that time and that's happened in large part because we've learned to to build these much larger uh monster machines that are wind turbines you we've made wind turbines taller they can access winds up higher where the wind blows more steadily and faster and if you double the length of a wind turbine blade it sweeps through four times the area so you got a very uh positive economies of scale and so you can see that as the size of wind turbines goes up the price in Orange drops perhaps more important is that wind power and solar power are intermittent they only provide Power at certain times but we've as we've made these larger wind turbines they're more able to still operate and generate electricity with low speed winds that has opened up more territory that they can operate in and it's made them more consistent this is a measure of the capacity factor of a wind turbine what fraction of its rated load of its maximum Peak load does it produce over time and you see that goes up by about one point per year year now and in the best sites that are highly windy we have wind turbines producing 50% 60% of the time and that's approaching the fraction of rated capacity that a coal plant operates at the other thing that's really helped in wind power AI Big Data machine learning algorithms and so now with the application of that we're getting better at forecasting what the wind will be even just a few minutes into the future merging the power output from different wind turbines together and so on this is a field that is innovating rapidly and I'd love to talk about it more because the price will keep dropping but for India I really want to move on to the larger changes that are happening with solar power if you look at just the direct photons That Make It To The Ground from the Sun with less than half a percent of the world's land area we could provide all of Humanity's energy needs with current efficiency solar modules right so the issue is not abundance and nor is it amount of land that you need the issue is and always has been cost this is a silicon wafer of computer chips and this is a very expensive object per gram of weight and solar panels are made in ways that are not entirely dissimilar so if you imagined a layering thousands of square kilometers with uh silicon chips that cost would be enormous right but with silicon we see that there is moors law that has brought down the price per Computing unit for decades and decades in 2011 I wrote an article for Scientific American talking about a similar effect in solar power an exponential decrease in the cost of solar power at the time it was laughed at uh by experts in the field even though the data said very clearly it was happening uh but when we look back at what has occurred the cost of solar has plunged enormously in the late 1970s nearly $100 a watt for a module of solar solar and now 36 Cents a watt is sort of an average retail price that you can buy that's a 2 200 times price reduction over this period of time and nothing in physical infrastructure drops in price that fast right the tractors don't buildings don't roads don't this is almost like the digital Revolution it's not and this time for digital the price drop has been Millions but this is still the closest analogy we have that in this physical space we are having an almost digitall like reduction in price that is still ongoing and that means that we are now achieving crossover by crossover I mean the point at which in the sunny parts of the world with no subsidies solar is now the cheapest source of electricity that you can buy let me show you what that looks like if you want to build a new natural gas plant in the US five or 6 cents a unit is what it will be you want to build a new coal plant in India it'll be about 4.2 cents a unit a kilowatt hour three rupees 3.11 rupees was the average tariff for a new coal plant in India last year so about 4.6 cents let's say and now we're seeing those sorts of prices achieved in jingang and China in the GOI desert a giant solar plant being built at about 5 cents per kilowatt hour unsubsidized in the US I made this slide about 2 years ago this is a subsidized price First Solar a US company in Macho Springs Nevada built this plant at 5.7 cents maybe it's a little over 8 cents per kilowatt hour still expensive but it was a very low price at that time the next year I had to update the slide because next era built one at 4.2 cents and then the next year I had to update the slide again because First Solar came in with a new record low in the US selling to Warren Buffett's company birkshire hathway at 3.9 and then 5 months I to update this because the city of Pao Alto signed a deal at 3 3.6 C buying solar power outside of Los Angeles again that's a subsidized price but it's about 5.1 C if you back out all the subsidies so if you look in the US we've had an 8X reduction in prices over the last decade of the solar contracts being signed now that's great what does it mean for India well in India a threshold moment occurred just last month when the riwa Ultra Mega solar plant was put out out for bids and the low bid came in at 2.97 rupees per unit 4.5 cents importantly the Tariff on for a new coal plant in India is 3.1 rupees per kilowatt hour so this unsubsidized is now the first time in India that solar has come in as simply the cheapest electricity you can build and if we thought in perspective of how fast this change has happened this is not just the modules this is the land the integration the labor the frames all of it put that in perspective three four years ago 2013 the price was 9 rupees per unit in India so you've had a 3X price drop in just four years that is the pace of change that's happening now this is a new record low price not all solar this year we built at that price most of it would be more expensive but you can bet that within 12 months there will be another record low set and within 12 months after that there'll be another record low set and almost all the prices of new solar plants in India will be at this level and India is not even the cheapest place if you go to Mexico they had a power auction about 6 months ago the average price came in at 5.1 cents so about uh let's say 3.3 rupees the low price 3.5 cents 2.4 rupees something like that from an Italian company NL in Chile in the North near the equator we've had a dozen cases now where in power auctions with no subsidies solar has just swept everything and the lowest price when this happened last year in August 2.91 this was not just the lowest price for solar we'd ever seen this was the lowest contract price for electricity ever signed on planet Earth with any technology that record lasted about one month until this happened this is my favorite picture of all time I think in du buy uh this the second Trant 750 megawatt of this large solar power plant being built came in at an astounding 2.4 cents a kilowatt hour that's 1.6 rupees that's about half the price of a new Coal Power Plant in India and this is not a case of just one crazy bidder coming in at a price where they can't make a profit because the top the four cheapest bids were all under 3 cents now Dubai benefits from having more more Sun than India actually low labor costs like India and low borrowing costs and that's one of the Magics is if you can get your borrowing cost down then you have the ability to build cheaply of course solar varies in how much sunlight you get the world's Pioneer in building solar until this past two years was Germany Germany is up there in the green it actually makes very little uh physical sense to build solar in in Germany but the political will of that country brought down the price for for all of us in the US of course you see it starting in the South and the west and the Southwest globally those 1.3 billion people that don't have electricity live where they live almost entirely in Sunny parts of the world in subsaharan Africa and South Asia and three4 of the world's growth in energy demand over the next two decades will be in that rectangle right between India and China and parts of southeast Asia China now is the world's number one uh deployer of and manufacturer of solar panels by a large margin in both but India is better provisioned with sunlight than China is in fact India has the sunlight to make it a solar superpower so I told you that wind power went up by a factor of 10 in 11 years solar power makes that look slow starting from a lower base still the pace of deployment has been enormous a 100x growth in 13 Years Around the World in India over the last 7 years so half that period of time the growth in the amount of solar deployed has been 75x a staggering Pace to 12.2 gaw as of March as of just last month and now the Prime Minister wants to hit a 100 gaw in India and that might sound crazy but it is entirely doable at this growth grow rate so you heard that uh if you take an exponential process it looks like a hockey stick if you put it on a log scale it looks like a straight line This is the growth of solar around the world on a log scale basically 40% growth per year doubling every two years now this will slow this cannot be maintained indefinitely the pace will slow last year was only 35% maybe that will be the new growth rate but it's still a phenomenal growth rate that amounts to uh you know 100 gwatt a year globally being installed in the next 2 or 3 years and this intersects something else it intersects the learning curve the way that manufactured goods get cheaper with scale it's the Ford Model T and with a Model T it's the first time we see this phenomenon that you can take the price of the Model T in the vertical axis and the number of model T's built and it's a very smooth line as you double production you brought down the price of a Model T 16% every time and if you look at solar in the same way as production goes up on the horizontal axis cost goes down that's the real predictor and that leads you to this phenomenon that is true of nearly all exponential Technologies which is this virtuous cycle this positive feedback loop which is you have some Innovation that brings down your price that opens up a new market to you first solar cells were only cheap enough to go on power or satellites in space but that allowed them to sell some units that scaled the industry that brings prices down and that in turn leads to uh the continuation of this because now you tap into more new markets which brings down your prices again and again and again how cheap can solar get last year at 2015 actually I made this forecast in the sunny parts of the world we could get down to 2 and a half cents per kilowatt hour uh by maybe the 20 years from now I was so wrong because those red stars are how the recent record low prices that we've had I am one of the world's most optimistic people on so and I have been wrong on how far how quickly the price is coming down so the cost will keep dropping we still have to deal of course with what happens if the Sun is not shining or the wind is not blowing and a common view is that solar will mean that we don't need a grid but that is not true the opposite is true solar and wind make the grid actually more important because you can do things like this on a good day in Southern California The Sun Shines during the day wind can blow at any hour but it blows statistically more at night than it does during the day so solar plus wind add up same thing happens over the course of a year is in Germany 12 months of data in the summer months there's more sun and in the winter months there's more wind and add them up and you have more and more of your power needs met so for a subcontinent like India probably 70% from just solar and wind put together but ultimately you have to do other things anybody know this company nest what happened to Nest Google bought them what did Google pay for nest $3 billion why do you pay $3 billion for a thermostat because it's the start of the smart goodd what Nest does is it allows you to programmatically control when energy consumption happens it lets utilities move the energy demand from when energy is scarce or demand is high to when energy is more abundant and it's cheaper that's adding intelligence to the grid that's one form of it or electric vehic charging we're going to see EVS grow and grow it makes sense to charge them when the energy is abundant and the prices are lower in northern Europe with there's a lot of wind power middle of the night in India eventually that will be middle of the day when they're sitting at work or things like water freshwater issues around the world India perhaps needs desalination as well as better treatment of already used water here's an example of a a real life desalination plant this plant in uh Abu Dai processes 500 million gallons like, 1500 million uh lers of salt water into fresh every day and it uses 8 gaw of power and even though the price the energy cost of desalination has plunged it still uses a huge amount of energy and that's half of its costs so can you take your manufacturing process your desalination process and tie it to the places and times when energy is cheapest ultimately though we have to crack this problem of storage and storage to me is where solar was 10 or 15 years ago still expensive but on the verge of a incredible price drop that we will look back and say that was a Black Swan no one expected that well I'm telling you now to expect it so Elon here is introducing the Tesla power wall and the funny thing is this is not a Tesla product not really it's a Tesla product but inside of it is Panasonic batteries and what elon's doing here is he's using Tesla's brand power to get this technology out to people but there's not been some sudden new technological breakthrough instead there's been Decades of a slow exponential Trend that people weren't watching if you look at the energy density of a battery how much energy can you store per gram and the cost of energy they're both exponential curves over a 15-year period the density has gone up by about factor of three energy capacity of a battery and the cost has gone down by a factor of 10 and that's actually very predictable long-term process so a lot of forecasters have looked not using this sort of exponential model and said oh we think uh battery prices can come down by 3x over 10 years starting in 2013 Tesla's Target is 5X in 5 years and they look like they're on path to doing that so if you look at this it starts to say that uh you can have a small home with a solar panel and a small battery half the size that TLA power wall and in the summer months in Germany this would Supply 70% of its own electricity for a house with a refrigerator and appliances and so on and in India that would be higher and more consistent throughout the year people are not going to go off the grid we all want 99.9% up time flip on the lights and it comes on but if you're a utility selling by the unit and your customers are cutting their demand by 70 or 80% what does that do to your business model right that's a disruption we call it the utility death spiral in the US it's a real danger that exists now utilities of course are aware of this and so Tesla took $1 billion in pre-orders for the Tesla power wall in the first week that it was on sale but 90% of them were not for homes 90% of them were these utility scale batteries because this is something that utilities can do as well and every other manufacturer is in this Trina solar has a shipping container size megawatt hour battery I've stepped inside of and these are still enormously expensive the price per unit roundt tripped is maybe 20 cents maybe 12 or 13 rupees per kilowatt hour it's actually incredibly expensive but that's cheaper than Peak power we have these things called peer natural gas plants that might get operated for just 10 hours a month and their cost is enormous their cost is maybe 25 cents a kilowatt hour and there's gigawatts of these deployed around the world and the math says they are now out of business because batteries have come under that price and again as the batteries hit those larger markets their prices come down all right how fast battery prices drop at the same rate as solar the top line here the green diamonds that is the exponential price decline of solar panels the blue diamonds are the exponential price decline of batteries they map to almost exactly the same Pace between 21 and 24% price reduction per doubling of scale so batteries now have hit a price where some markets make sense for them that will allow them to scale which will bring down the cost increase demand and so on and it's not just lithium ion lithium ion is the Battery Technology that is in the lead now but behind that are dozens of other battery technologies so I'm an investor in one this is a flow battery company and this is a big bulky battery you wouldn't want to use it in your phone it's three times as large but for a lithium ion battery might uh be depleted or damaged by a thousand charge discharge C CES this can go 10,000 charge discharge Cycles so there's huge amounts of innovation still in the pipeline and ultimately energy storage can drop in price by another 5 to 10x over the next few decades so this leads to some crazy conclusions because we've always assumed that clean energy would be more expensive energy we should do it because we have to save the planet we should do it because we want clean air but the price of energy always fluctuates what does the price of Technology do it only goes down and so if you play this math out it tells you that clean energy will be the cheapest energy and that is a GameChanger even very conservative organizations are now starting to say this the International Energy agency the world's experts on energy the iea is not what you would call an exponential organization let me show you here are the ia's forecasts of how fast solar would grow over the last uh 15 years or so the the 2002 forecast is the lowest line on this graph and the dark blue is how fast it's actually grown and so what we see is that every year at the iea they up their forecast and every year they have to up it oh 2004 we were a little low lift it 2006 we were a little low lifted again 2008 lifted again 2009 lifted again it looks like someone is taking the same Excel macro and hitting control C control V into the next row now who thinks that they that 2014 forecast looks pretty good right who thinks the Ia has got it now who thinks I figured it out no one you have no confidence the International Energy agency the world's experts in energy you know who the butt of my joke is and they haven't because they just draw a straight line they assume that solar deployment each year will be the same as before and not going up when what we actually see is 35% growth per year in deployments we see an exponential process not a linear process and yet the iea says solar will be the cheapest and largest source of energy by mid-century around the planet here's UBS a large Bank saying something I thought I'd only ever hear myself say Renewables are now deflationary to Energy prices or here's Alliance Bernstein a private Equity Firm in the US they put together this graph called Welcome to the pterodon based on a a song by the rap group Public Enemy and that they drew the costs of coal oil and natural gas along the bottom here and then that Gray Line I think someone's kid took a crayon and scrolled on this chart or something like that right now that's the cost of solar right when you zoom out 60 years and if we added the cost of wind to this chart and added the cost of batteries that are starting their exponential decline that's what this looks like that is disruption in the making right that is the new digital technology that looks far inferior to analog film but will lead Kodak to be out of business and in fact that market disruption that business disruption is happening this is peab budy coal anyone heard of them largest private Coal Company in the world four years ago largest coal company of any sort in the US now in bankruptcy this is their stock price BTU that was their stock toer symbol we're all about energy right in fact the four largest coal companies in the US all went bankrupt in a four-year period 99% of their market cap disappeared not because coal is gone but because coal demand peaked and if it starts to go down even a little bit if you're selling a commodity into a market that is shrinking that is not a good place to be and so we're seeing that possibly happen elsewhere as well if you look at the utilization of existing uh coal thermal power plants in India it's the top line here the red line it's gone from 80% which is healthy down to a little over 60% those other lines are the EU China and the US where all of them are hitting 50% utilization and if your coal plant is only being run 50% of the time you're starting to lose money and if you're losing money you have to raise the rates and that accelerates the pace at which you get disrupted so that's electricity becoming cheap and abundant but of course that's not the only sort of energy we use because we have to travel from place to place right and the king of this is oil yet I believe oil will be disrupted as well and so did uh this man Shake yamani who was the Saudi oil Minister during the uh oil crisis of the 70s the Stone Age did not end for a lack of stone it ended because we invented bronze tools and bronze was just a better technology than Stone so we left all these stones on the ground that we could have used because we had something better and he's saying we're going to leave oil in the ground too because we have better technologies that we'll invent all right oil is an incredibly volatile Market it's hard to predict the oil price swings of the last 10 years have often been caused by a one or 2% Supply demand imbalance right you raise Supply by one or 2% the price craters demand goes up 2% higher than Supply the price plun or Soares right and so no one can predict the short-term price of oil this is the real short-term price of oil in dark blue versus various analyst projections of what it would be there all everyone assumes it'll sort of return to normaly it's not really what happens I can't predict the short-term price of oil but I can maybe predict the long-term price of oil and I think the long-term price of oil will be cheap because it will be like coal a market that is shrinking rather than go growing and then the price will be just marginally above the cost of production and the reason for that which I did not believe two or three years ago is electrification I thought electric cars were not going to go anywhere and it's still radical to say that they will be a big contributor to the stru of oil demand because they are only 0.1% of cars on the road they are less than one pixel on a graph they're smaller than the width of a line but their growth rate is astounding 73% growth in electric vehicles last year and now they're 1% of all the new cars being sold in 2 years there'll be 2 or 3% of the new cars being sold and as you've heard they these things are amazing a Tesla Saleem said is a computer on Wheels it looks like a spaceship that you're in and it's a computer on Wheels in other ways with a Tesla you get new feature updates when Tesla released their first model if you had it on you had your foot on the brake took your foot off it stayed put but a gas carard creeps forward a little bit right some Tesla owners complained so one day 10,000 Tesla owners get an email saying you have a new feature in your car if you go to your control panel uh turn on this thing called creep when you take your foot off the brake the car will roll forward there was no recall they didn't bring the car back into the shop they released a new feature a new app if you will for their car over the wire all right now that's an interesting one but then some for whatever reason the Tesla was already the fastest street legal car but Elon decided that it wasn't fast enough so one day Tesla owners woke up to an email that said you have a new feature in your car it's called insane mode and if you turn it on you can drive really really fast you can accelerate really really fast now we used to think of electric cars as boring no fun short range clunky underpowered right let me show you what Insane Mode looks like and I apologize for the little bit of profanity you will hear I'm really mad that the option is insane like it's not like just why that's perfect isn't that good that's a random like the car is insane right everyone thinks the car is insane so why not have you know like an insane mode right makes sense so you just come to like a complete stop all right and then before you know it oh Brooks what the f 70 mph Brooks whole first of all you can't do that to people like you got to give people a fair warning you can't just say yeah you can Brooks what I think I it in your seat now so that's what we risk of H on Model S electric cars were clunky they weren't going to be any fun to drive but it's an exponential technology batteries got cheaper battery density went up now that's an 8 $50,000 us car it's a ridiculous car right it's not affordable but now we have a $35,000 car coming out that accelerates faster than a Ferrari has self-driving features can take five people and is basically free to fill up all right and it's not just Tesla we have multiple providers that are looking at cars in the $20,000 range with 300 km ranges you saw a version of this graph the other day the US Department of energy forecasted the number of electric Vehicles would have a 200 mile range and it's not the blue line it's the red line at the very bottom if you can't read it I forgive you cuz it's so low they said there' be 20 30,000 cars the 200 mile range electric on the roads by 2040 Tesla sold 3,000 model 3s in the first week one vendor one manufacturer is on Pace to sell orders of magnitude more cars than the doe thought there would be of all sorts and do it in the next two or three years and as those they sell more cars the battery is the most expensive part the battery price drops as the price drops they sell more cars and that means the cost drops again and again and so you're back into that virtuous cycle and the craziest thing I will say is that electric cars are destined to be cheaper than internal combustion engine cars and that's because this is the entire drivetrain of an electric vehicle has 90% fewer moving Parts than an internal combustion vehicle and that means when they're made at even similar scale they will be dramatically cheaper within the next 10 15 years that Porsche acceleration 5-seater self-driving car will be cheaper than a smart car and when that happens you are talking about the destruction of 2 million barrels a day of oil demand and that's about what it takes to plunge the oil price down to just over the marginal price of production so that's why I was say I can't put the short-term price of oil but I believe the long-term price of oil will be cheap because we'll be using less there's more Technologies on the way better batteries that could increase the range by about a factor of 10 as we move into uberization when was the last time you had an Uber and worry about how much range was left in the car you don't that will further accelerate the pace at which we deploy these as we move into self-driving that will accelerate the pace as well because the cars will just go charge themselves okay so in this disruptive world how do you take action the Chinese afis I'm probably somewhat apocryphal that crisis is danger plus opportunity right you've heard about the danger between air pollution climate change we have very real risks we have a moral imperative to provide more energy and do so in a clean way and that is an opportunity and there's also huge business opportunities in the energy business if we look at the increased demand for electricity from electric vehicles if all light Passenger cars in India were electric instead of oil within about 10 years that could be a 50 billion Market opportunity when we look at uh how different companies have soared in the space rooftop solar in the US how did it get it start was a combination of things the technology got better the price plunged there were policy choices made to make it more affordable things like net metering just passed in India But ultimately it was a business model Innovation that set it free solar City doesn't make solar panels they're not a technology company they're a company that said people want solar on their roof and it has a maybe a five or sevene payback but nobody has the money to buy it we will just provide it to you for free and you'll pay us monthly we'll lease it to you and we'll Arbitrage we'll split the difference in the savings we'll skim some of the profit off of it so as an investor I look for companies like that that provide a solving and efficiency as Nick said provide an immediate value to a consumer and then skim profit off of it in the back end that's one of the things that I look for and when you find those intersections of a technology advancement policy change and a new business model opportunity that's where the rapid change can happen and they often exist in a virtuous cycle with each other and what's waiting what's needed is for someone to take leadership in starting that wheel spinning and when they do that can be a multi-billion dollar opportunity like Elon has seized so that's why I'm an optimist and that's why I believe India can be an energy superpower thank you very much

Channel: Singularity University Summits

Views: 11,575

Keywords: energy, renewable energy, economy, technology, ramez naam, clean, cleantech, fuel, oil, solar, clean energy, future, india, singularity university

Id: 6eOFokM3lUI

Length: 36min 36sec (2196 seconds)

Published: Wed May 10 2017