The Falling Cost of Energy

We are seeing extraordinary shifts across virtually every technology arena even though, in areas of large-fixed infrastructure (buildings, energy systems, etc.), it can sometimes be hard to see the change. Whether solar PV or wind pricing, the ability to squeeze out efficiency in systems or battery capacity per pound, the pace of change in systems commercially available is often hard to comprehend. As the Department of Energy has put it, we are living through a Revolution Now.


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With the breadth and pace of change in the energy market, it shouldn’t surprise anyone that it is hard even for those pushing innovation to keep up with that pace of change.

Innovation is certainly a strong thematic in government energy policy discussions around the world. The announcement of the “billionaires’ club” Breakthrough Energy Initiative provided one of the major side elements of the COP21 in Paris.  Also associated with the Paris negotiations, a pledge by major governments to double energy R&D funding by 2020.

Building on this, four major ‘names’ (Arjun Majumdar (Stanford, first head of ARPA-E), John Deutch (MIT), George Shultz (former Secretary of State), and Norm Augustine (former Lockheed Martin CEO) have called for a major private-sector push for energy innovation.

The concept is interesting. In essence, they seek to create ten ten-corporation initiatives. Each of these 100 firms would commit to $10M/year in funding, for a total of $10B over a decade, to develop breakthrough energy options, or Energy Innovation Entities,  that make it through the innovators’ valley of death into broad commercialization and deployment.

Despite the hype, there are lots of challenges in this concept. It is heavily focused on developing tomorrow’s options without mentioning today’s and it is not clear how combining corporations would sit with the existing firm’s corporate governance.  Despite these challenges, it is an interesting concept that takes seriously the research showing that innovative companies need help getting even the best ideas to market.

Each Energy Innovation Entity would be supported by roughly 10 companies, each committing about $10 million a year for 10 years — a “10-10-10” mechanism.

Embedded within the discussion, however, is an example of just how hard it can be for innovators to keep up with the pace of change. The authors use, as their major example of where large-scale private business investment is required, battery technology.

A battery that costs less than $100 per kilowatt-hour with a lifetime of more than 1,000 cycles would be a game changer for offering affordable and reliable renewable electricity across the world. Today’s lithium ion batteries cost three times more. $100 per kWh is generally see as a critical threshold for making EV vehicles truly cost competitive with traditional gasoline vehicles on purchase price (and much less expensive to own).  This is certainly true. It is revealing how the authors talk about the need for this research though.

Batteries have been nose-diving in price.  In the Energy Innovative Entity concept op-ed, the authors imply that the current cost of batteries is around $300 per kWh. And getting from there to $100 will be a challenge that we do not appear to be on the road to solving.

That, however, does not comport with today’s reality.

The Chevy Bolt, being built today, has batteries that General Motors is buying at $145 per kilowatt-hour capacity.  GM released that price information five months ago.  And, GM forecasts achieving $100 per kWh battery pricing by 2022 in the normal course of business.


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The actual price five months ago is less than half what the authors cite.

With the rapid advances in battery density and rapidly lowering costs, the GM graphic above is likely pessimistic about what we will actually see in the market place.

It seems plausible that the $100 per kWh battery target will be broken before 2020.

Simply put, the advances in energy systems  – and across virtually every field of technology and science – are moving so rapidly that even those most concerned with ‘innovation’ are having a hard time keeping up.

That doesn’t take away from the author’s argument about the need for more investment in energy research however. Climate change will not be solved simply by getting to batteries that cost $100 per kWh. But it is a good reminder that there are reasons to be optimistic about our ability to combat climate change. Not least of which is that innovation is moving so fast that even innovators can sometimes fail to keep up.

Image courtesy of Flickr. Originally published by S&S on March 21, 2016.


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