The transition of our energy sector from one that is heavily reliant on fossil fuels and one-way electricity flows – is underway, that much is true. But what is going to ensure that the transition ‘sticks’? How will we be able to ensure the success of the transition while securing our future?
To my mind, there are two things that are going to fundamentally impact the success of this transition. Finance and energy storage… well of course.
Finance is an obvious one in many ways, but one that is significantly underestimated. In order to ensure a successful energy transition, we are going to need to invest and invest heavily in new technology. Not just invest in technology to embed into the grid, but invest in developing that technology in the first place. But who pays for all of this?
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While governments are often very clear that the transition needs to happen, things are a little foggy when it comes to who will pay for it. In many cases, the costs ultimately fall to the customer – even when they have not been given a choice in the matter.
Utility companies can’t (or won't) carry the full cost of implementing the technological changes that need to be made – it doesn’t make economic sense and in many cases, adds to a series of conflicting objectives – sell power cheaply, but invest in the best technology available; sell as much power as you can – but strive for energy efficiency.
Governments certainly can’t foot the bill themselves either. So, if the need for the transition is so vital, so certain, so obvious – how do we ensure there is enough funding available to make it happen? Funding that won't ultimately contribute to more families falling into energy poverty, or adding additional hidden costs for consumers?
We throw amounts around like $2 trillion needed over the next decade to fund this or that… yet, where is that funding going to come from? This is a topic I’d like to explore in more depth this year – and if you have a perspective and would like to share it with us, please reach out to me at email@example.com
Storage is also an obvious choice in many cases and the reality is that without it, we will not successfully transition, we will waste energy (literally and figuratively) and end up with a hugely inefficient industry. The importance of energy storage was highlighted yet again toward the end of last year when the brains behind Lithium-ion batteries were given the Nobel prize for chemistry. Bloomberg NEF believes that in order for energy storage to be more efficient, investment in excess of $660 billion will be needed over the next two decades. (Again, we come back to finance).
At the current time, energy storage represents just 17% of installed solar or wind capacity globally, and this will need to change to take ensure the success of the transition globally. UBS Investment Bank reported in November 2019 that storage will be the tipping point for a successful energy transition, predicting that prices will fall by up to up to 80% and that full grid parity could be achieved by 2027.
Do you think that storage is going to be a fundamental driver of the transition? What are your thoughts on the financing of the transition and its various elements? We’d love to hear your thoughts.
Until next week!