The future seemed bleak in 1972. The Club of Rome released their report on the limits to growth and it warned that our planet was faced with overpopulation, which would result in economic and societal collapse. Fortunately, just the opposite happened.
Today, 40 years later, although the global population has indeed doubled, poverty, hunger and war have all plummeted. The Green Revolution has enabled us to feed more people using fewer resources and created a multibillion-dollar market at the same time.
Now, faced with the prospect of global warming, there is a new energy revolution brewing. However, the transformation is not solely, or even primarily, driven by concern about carbon, but represents a shift from resource driven energy to that which is derived from technology and will, like digital innovation, unleash the economics of accelerating returns.
Why Solyndra Failed
When a many people think of solar power these days, they think of Solyndra, the ill-fated company that recieved a half billion-dollar loan guarantee from the U.S. government and still went bankrupt. All too often, solar energy seems like just another reason for tree-huggers to throw away money.
In reality, Solyndra didn’t fail because the market for solar energy is poor, but because it is moving so fast that the company failed to keep up.
Take a look at the chart above and it quickly becomes clear that solar is set to be an enormous business. Costs are already near grid parity and the US Department of Energy’s Sunshot Initiative aims to reduce the cost 75% by 2020, making it cheaper than coal based generation.
At the same time installed capacity is growing quickly. Demand is set to double this year in the US and increase by 15% globally each year to 2015. As production ramps up new efficiencies are being found in manufacturing, installation and the solar cells themselves, driving costs down even further.
Growing the Next Saudi Arabia
Probably the biggest disappointment in alternative energy is ethanol. Using conventional crops like corn to make fuel is incredibly inefficient and subsidies for ethanol production have mainly been handouts to powerful agriculture lobbies. The primary impact has been to raise the price of food and create hunger.
However, as I noted in an earlier post, growing oil from genetically engineered algae can be much more viable. It’s advantages are that it can be up to 100 times more efficient, it thrives in seawater so doesn’t compete for resources with conventional agriculture and is also able to absorb carbon dioxide from power plants.
The approach is getting a lot of interest from top energy players. Exxon has invested $600 million in Craig Venter’s effort. That, in turn, encouraged Chevron to invest in a competing initiative. Ford is also researching the viability of the algae based fuels and the technology has already been tested successfully by airlines.
Another, more speculative, program is Plants Engineered To Replace Oil (PETRO), which aims to gain efficiency by bioengineering conventional plants like tobacco to directly produce fuel. In his book, The New New Deal, journalist Michael Grunwald reports that this could potentially increase the yield of biofuels from 50 to 5000 barrels per acre.
Mitt Romney recently pointed out that you can’t drive a car with a windmill on it. It’s that keen eye for the obvious that makes him so beloved to so many.
However, some of the world’s most creative scientists are actively working on an idea that would use wind and solar to produce fuel from microorganisms The concept, known as electrofuels, utilizes a special kind of microbe that can produce biodiesel, methane and butane from electricity. Although the technology is still new, it holds a lot of promise.
Like the other biofuel efforts, electrofuels don’t need freshwater, so won’t take food out of our mouths or have other adverse environmental impacts. Further, their efficacy is driven by bioinformatics, the efficiency of which is improving at an exponential pace, so electrofuels have the potential to be cheaper than digging energy out of the ground.
Next Generation Batteries
One of the great barriers to renewable energy is the need to store it. People still need electricity when the sun isn’t shining and the wind isn’t blowing. However, one of the hottest areas of investment is next generation batteries.
GM backed Envia doubled the efficiency of their battery to 400wh/KG, which will cut the cost of the next generation of Chevy Volts by about $5000 while increasing their range. IBM is investing in lithium air batteries that have the potential to power electric cars for 500 miles on a single charge within ten years.
These approaches, along with others such as Lithium Sulfur batteries, are also being scaled up to industrial size that can power entire cities even on dark, windless days. The power to store energy efficiently is almost as important as the power to create it.
So, while you still can’t put a windmill on your car or even, truth be told, on your house, that is really quite beside the point. What’s important is that technology driven energy is transforming the economics of just about everything.
The Industrial Battlefield of the 20th Century
The market for energy is about 10% of global GDP or roughly $6 trillion per year (that’s trillion with a “T”). Clean energy has also been, strangely enough, the first high tech industry that America has not led. China is the top solar cell producer, Europe is ahead in wind production, Japan and Korea have dominated the market for lithium ion batteries.
That seems to be changing fast. First Solar, a US company, now produces the most efficient solar panels in the world. GE is investing $600 million to compete with it and Semprius has an experimental solar cell that will double efficiency. American made components in wind turbines have increased from ⅓ to ⅔ and US firms are set to dominate the next generation of batteries.
Ironically, we have the financial crises to thank. As Michael Grunwald reported in his book cited above, the $90 billion portion of the stimulus devoted to clean energy financed this resurgence. Further, ARPA-E, a new agency modeled on the one that created the Internet, is investing in the next generation of cutting edge technologies.
The Great Transformation
As Ray Kurzweil has noted, “all technologies will essentially become information technologies, including energy” and the economics of energy are beginning to harness the power of information. An article in Scientific American documented that the principle of Moore’s Law applies and that solar power could be half the price of coal by 2030.
As we move from resource-based energy to technology-based energy, a virtuous cycle is taking hold. Lower costs lead to higher production, which lowers costs further. Geopolitics will also be transformed, as third world strongmen emboldened by the accident of geography will be trumped by engineers wielding algorithms.
As I wrote before, the future will not be made as much as it will be designed and that’s as true for energy as it is for physical products. The impact will be staggering.
image credit: freshenergy.org
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Greg Satell is an internationally recognized authority on Digital Strategy and Innovation. He is available for consulting and speaking engagements in the areas of digital innovation, innovation management, digital marketing and publishing, as well as offshore web and app development. Check out his site, Digital Tonto and follow him on twitter.