The S-curve: reason to be optimistic about the energy transition

 The shape of the S-curve is caused by exponential growth.  Something starts off minuscule, but if it grows by, say, 10% a year, it will double every 8 years.  In 16 years it's up four-fold, in 24, eight-fold, in 32 sixteen-fold*.  But at some point, it starts approaching the natural limits set by its environment.  When everyone has a colour TV, the rapid growth from when it started out comes to an end.  

This dynamic produces a sideways S-curve--rapid growth at the beginning succeeded by slower growth later, as the market niche is filled.

Source: ClimateCrocks

Notice how electricity started an S-curve in 1900, but was then interrupted by the 1930s Great Depression and WW2.  Computer penetration has levelled off at 70%, though that prob'ly doesn't include smartphones, where penetration must be close to 95%.  All the same, the pattern is clear: slow gains at first, then an explosion, followed by a levelling off.

From ClimateCrocks

Many people suggest that rates of new product introduction and adoption are speeding up, but is it really, across the board? The answer seems to be yes. An automobile industry trade consultant, for instance, observes that “Today, a typical automotive design cycle is approximately 24 to 36 months, which is much faster than the 60-month life cycle from five years ago.”  The chart below, created by Nicholas Felton of the New York Times, shows how long it took various categories of product, from electricity to the Internet, to achieve different penetration levels in US households.  It took decades for the telephone to reach 50% of households, beginning before 1900.  It took five years or less for cellphones to accomplish the same penetration in 1990.  As you can see from the chart, innovations introduced more recently are being adopted more quickly.  By analogy, firms with competitive advantages in those areas will need to move faster to capture those opportunities that present themselves.

So why is ClimateCrocks optimistic?   Because the global uptake of wind, solar, batteries and EVs shows the classic pattern of the S-curve: rapid compound growth.   At first penetration was tiny, and people said, 'oh, what nonsense, wind/solar/EVs  are less than 1% of the market, how ever could they reach 100%?'   Yet look, for example, at plug-in sales in Germany.  3% in 2019, 13.5% in 2020, a likely 30% this year (2021).  The maths of sustained compound growth is inexorable.  

These technological transformations are fuelled by rapid cost declines (for example, new-build solar going from 3.2 times the cost of new-build coal to 1/3rd the cost in just 11 years) or by greater convenience, or by both.  EVs are a couple of years away from price parity with petrol/diesel vehicles (ICEVs).  New-build wind and solar are cheaper than new-build coal.  In fact, they're cheaper than the cost of digging up coal and burning it, and that's before a carbon tax.  

Whereas in the past we had to rely on  the goodwill of communities to switch to cleaner energy or transport, now we can rely on self-interest.  If we combine goodwill with self-interest, the transition will be irresistible, and fast.

* Solar is growing by 15% per annum, and has been for decades.  That means it doubles every 5 years.  EVs have been growing at 50% a year, which means sales go up 5-fold every 4 years.