Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. While I do make mistakes, I try hard to do my analysis thoroughly, and to make sure my data are correct (old habits die hard!) Also, don't ask me why I called it "Volewica". It's too late, now.

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Sunday, July 9, 2017

A New Tony Seba speech

Tony Seba calls it "God Parity" when solar plus storage falls below the cost of transmission.

This is the latest Tony Seba speech. It's long but eminently watchable.

He makes the usual point with the two pictures of the same New York street in 1900 (with just one car, the rest horses) and 1913 (all cars except for one horse-drawn carriage); of how AT&T (the inventor of the mobile phone!) hired McKinsey and Co in 1985 to forecast total mobile phone demand by the year 2000, and were 120 tmies out; and how Kodak (the inventor of the digital camera !) went from record profits in 2000 to bankruptcy in 2012 as conventional camera sales collapsed.

He pointed out that technological adoption rates (for successful technologies) are ALWAYS S-curves,  starting slowly then accelerating, and only peaking out when they approach 100% market share. Over the last couple of decades,  the S-curves have become steeper: new technologies are being adopted faster.

Lithium ion batteries fell in cost by 14% per annum from 1995 to 2010.  From 2010 to 2014 the rate of decline accelerated to 16% per annum.  From 2010 to 2016 it accelerated again to 20% per annum [which implies that in the last couple of years it has been higher than 20%, which we know is true]  For Con Ed (a US utility) 1/3rd of generating assets are used for just 6 hours a year.  So even if batteries are too expensive to be used for 3 or 4 or 5 hours of time-shifting power output, they are already cost competitive for these brief periods of peaking power.  By 2020 or so (3 years away!) it will cost the average American consumer just $1 a day to store 24 hours of electricity demand.  But disruptions starts earlier.  The most profitable part of utility sales is the supply in the afternoon-evening peak which is just 6 hours. Already tropical islands are switching to 100% solar+batteries because it is cheaper than diesel.

ICE (internal combustion engine) cars, i.e., petrol/diesel cars convert just 17-21% of the energy stored in the petrol/diesel into motion; electric cars convert 90-95%.  Plus electrons are much cheaper to transmit than atoms.  He gives the example of a Jeep Liberty which would cost $15,000 for 5 years of "gas" (i.e., petrol) vs $1565 if it were electric.  Petrol cars have 2000+ moving parts (transmission, driveshaft, clutch, valves, differential , pistons, gears, carburettors, crankshafts ....) EVs 20.  Reflecting this, Tesla has offered an infinite mile warranty.  Biggest cost of maintenance is tyres. In 2013 he drew the battery cost curve which projected an SUV at $35-$40K in 2017-18, $29K by end 2019, and $22K by end 2022 for cars with over 200 miles range.  People said he was mad.  But we have the Chevy Bolt, the Tesla Model 3 and soon the new Nissan Leaf.

Lidar (needed for autonomous vehicles) cost $70,000 in 2012, $1,000 in 2014, $250 in 2016.  $90 Lidar on the way. World’s first 1 teraflops computer cost $46 million in 2000 and covered 150 square metres.  2016, a 2.3 teraflops computer by Invidia cost $59, and is about the size of a laptop.  Invidia expects a 1000 times improvement by 2025.  All these forces together will lead to transport as a service: autonomous cars which you will only use when you need them (the average car is used for only 4% of the time—the rest of the time, it’s parked) Per mile, costs of transport will drop 10 fold.  The (ICE) used car market will collapse. ICE car companies will have to compete with zero-value used cars and transport as a service which will be 10 times cheaper.  By 2030, the car fleet will be 80% smaller.  Oil demand will peak in 2020, and will be 30% lower by 2030.

A newly-built Danish school gets 50% of its electricity from solarpanels—in its walls.  Copenhagen is 55 degrees N, 3 degrees south of Juneau in Alaska, and 5 degrees north of Vancouver.  If they can do it, 90% of the world can.  Installed solar capacity has doubled every 2 years since 2000 (a 40% per annum growth rate)  Solar provides 1.5% of total world electricity, but it is just 6 doublings—12 years—away from providing 100% of world electricity.  By the end of this year, solar will be at or below grid parity in 80% of the world.   The falling cost of rooftop solar will soon fall below the cost of transmission, never mind generation.  Generation will be distributed, like an internet of energy.

When I watch Tony Seba, I am optimistic about us—mankind—doing enough to stop runaway global warming.  Solar is just getting cheaper every year, and if it continues growing at anything like the rate it is now, we will cut CO2 emissions by 30% over the next 15 years.  Electric cars will dominate the market in 15 or 20 years, and that will lead to a further cut in emissions from transport by 30% plus (remember a big chunk of oil demand is for stuff like tarmac or as feedstocks for plastics).  If we can also cut the emissions of iron and steel, cement production, and air transport we will be able to reduce emissions by 70% over the next 20 years.  This is far better than the IEA (International Energy Agency)’s  projections which assume emissions will keep on rising for decades.  Of course, you then have to deal with dimwits like Australia’s “Liberal” party, which now wishes to subsidise a coal-fired power station, which no utility will build (because it’s so much more expensive than renewables.)  But I hope intelligence will win.

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