Eoin Treacy's view -
“I have been early twice in financing the low carbon Energy transition,” says Bruce Huber, cofounder of the Alexa Capital advisory group. “But we feel it’s third time lucky.”
One reason for his optimism is what he calls the “tectonic plateshifting” in the car industry that is driving down the cost of Energy storage. Storing clean power has long been a holy green grail but prohibitive costs have put it out of reach. This has begun to change as battery production has ramped up to meet an expected boom in electric cars.
Lithium ion battery prices have halved since 2014, and many analysts think prices will fall further as a slew of large battery factories are built.
The best known is Tesla and Panasonic’s huge Nevada “gigafactory”. Tesla claims that once it reaches full capacity next year, it will produce more lithium ion batteries annually than were made worldwide in 2013.
It is only one of at least 14 megafactories being built or planned, says Benchmark Minerals, a research group. Nine are in China, where the government is backing electric cars with the zeal it has directed at the solar industry.
Could this lead to a China-led glut like the one that helped drive solar industry writeoffs and crashing prices after the global financial crisis?
“It’s something to watch,” says Francesco Starace, chief executive of Italy’s Enel, Europe’s largest power company.
The thirst for electric cars, not least in China, means “the dynamics of demand are completely different” for batteries than for solar panels, he adds.
Still, Enel’s internal forecasts show battery costs falling by about 30 per cent between 2018 and 2021 and it is among the companies already pairing batteries with solar panels to produce electricity after dark in sunny places where power is expensive, such as the Chilean desert.
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The main objections to renewable Energy are focused on intermittency and their reliance on subsidies. However economies of scale and the application of technology represent reasons for why we should be optimistic these can be overcome over the medium term. That represents a significant challenge for both the established Energy and utility sectors.
Right now we are talking about a time when solar and wind will be able to compete without subsidies on an increasing number of projects. However if we continue on that path there is potential for the sector to be a victim of its own success because the lower prices go and the more fixed prices are abandoned the greater the potential for volatility in Energy pricing.
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