Electric cars are just the start – our entire energy infrastructure is being disrupted

published 19 October 2017

171019-solaar-b — The real game-changer for battery technology is renewable energy

When people get excited about battery technology, it's usually in connection with electric vehicles.

And it is all very exciting. Shell has introduced electric charging points at various petrol stations in London, Surrey and Derby, which allow electric car drivers to recharge about 80% of their battery in half an hour. It's a small start, but it is a start.

But there's another big battery-driven shift going on. And it's one that could have even bigger consequences than the move towards electric cars...

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

The rise of the micro-grid

The International Energy Agency reckons that solar will continue to dominate future growth. According to IEA executive director Dr Fatih Birol, solar photovoltaic capacity growth "will be higher than any other renewable technology up to 2022", according to The Guardian.

In sunnier climes, solar energy is already having a huge impact on the economics of electricity production. In the US, for example, wholesale electricity prices will sometimes go negative because of excess generation (too much sun, not enough energy consumption), which means generators in one state are effectively having to pay others to take their overspilll.

That points to the big problem with renewable energy finding somewhere to keep it. Coal you can burn that to harvest the energy when you like. Nuclear you can switch on and off. But solar power works when the sun is shining. Wind works when it's windy.

In other words, you can't just switch them on and off. You need a middle stage where you can collect the energy and then release it again when you need it.

There are two obvious solutions. One is storage. We're now getting to the stage where we now have batteries for individual homes. Tesla's Powerwall is probably the best known, although there's also a big German manufacturer, Sonnen, and various other providers.

In the US, reports The Wall Street Journal, one property developer Mandalay Homes now plans to build estates of ultra energy-efficient homes that come with batteries installed. The idea is to create a "virtual power plant for demand response".

What does that mean? You're effectively creating your own little micro-grid, that can take the strain off the main grid by accommodating any spikes in demand.

And this isn't just happening in the sunny parts of the US. In Japan spurred partly by the 2011 Fukushima disaster towns and cities are aiming to become at least partly self-sufficient via the use of microgrids.

As Reuters reports, one city in northern Japan Higashi Matsushima has used reconstruction funding to build "decentralised renewable power generation to create a self-sustaining system capable of producing an average of 25% of its electricity without the need of the region's local power utility".

The idea is partly to have decent back-up power systems to prevent a repeat of the blackouts that followed Fukushima. But it's spreading across Japan.

Demand management and smart energy systems

Consumption is all about "smart" grids and demand management of energy systems. Basically, this involves enabling all of the devices connected to a grid to talk to each other, and direct and use electricity more effectively. This helps to avoid consumption spikes and makes more sensible use of energy at peak times.

So your various devices would know when was the best time to do the dishwashing, say, or to heat (or cool) the house to a given temperature.

Professor Takao Kashiwagi, who is the head of Japan's New Energy Promotion Council, tells Reuters that the days of big power plants are numbered. "Instead, we will have distributed power systems, where small power supply systems are in place near the consumption areas."

It's all very exciting. Who wouldn't want a more efficient energy system, ideally powered by a clean and virtually limitless energy source? It could be far more revolutionary than anything we've seen so far, including the internet.

And clearly there are huge implications for many sectors here the potential beneficiaries range from battery manufacturers to the miners of battery' metals to energy efficient builders to companies involved in the internet of things'.

On the other hand, the "disruptees" in this case, the utility companies could have a very interesting challenge on their hands. Particularly as they've been seen as dull, reliable stocks for a very long time.

We'll be looking at how to profit from this in an upcoming issue of MoneyWeek magazine if you're not already a subscriber, sign up here.

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.