The world of energy has changed dramatically in the past few years, but you haven’t seen anything yet. Amory Lovins, co-founder of the Rocky Mountain Institute, says we’re just getting started. And here’s the kicker: some big electric utilities may not live to see the other side.
Lovin will speak at the Empowering Customers and Cities conference in November and he was interviewed recently by the Energy Times. Below, we share a portion of the interview.
The nutshell is this: Some of the transformations – renewables and shared transportation, particularly – are occurring faster than was forecast even a few years ago. Meanwhile, consumers no longer see power as units of energy; they see it as a service. The 100-year-old business model no longer applies. Here’s what you can do to set yourself up for success for the next 100 years. – Kevin Ebi
By Energy Times
Renewables are altering our energy landscape faster than anticipated, leaving many century old monolithic utilities unable to pivot to face new energy realties.
So says Amory Lovins, who will kick off the Energy Times’ third Empowering Customers & Cities executive energy conference in Chicago November 7-8. Lovins is the chief scientist and co-founder of the widely respected Rocky Mountain Institute. He recently chatted with the Energy Times about major issues transforming the energy sector at a faster-than-anticipated pace.
ENERGY TIMES: What are the major instigators of change in energy – and how will utilities fare?
Lovins: I am more concerned than I was before about the pace of cultural change in large complex organizations. The pace of energy transformation is set not by incumbents but by insurgents, who don’t care about and are not inhibited by the incumbents’ legacy assets, business models and cultures.
ENERGY TIMES: Are you saying that today’s large electric utilities are not going to be able to make the transition?
LOVINS: Some will, some won’t. It’s very tough to turn the supertanker quickly enough. Their business model is upside-down because they’re selling electrons as a commodity, when what customers want is the service they derive from the electricity - like hot showers and cold beer. If customers convert electrons to service more efficiently, a utility that sells electrons won’t cut cost; it will lose revenue.
ENERGY TIMES: What is at the core of utility misperception?
LOVINS: They’re assuming predictable, linear changes in technologies and prices. But that’s clearly not what renewables have been doing. For example, last year alone, unsubsidized solar power in Mexico, a very hot market, got 37% cheaper; European offshore wind got 43% cheaper.
ENERGY TIMES: What about the challenge of dealing with expanding renewables?
LOVINS: Reliable integration of variable renewables requires careful but available and well-understood technical and institutional improvements to existing grids. Bulk electrical storage is generally not necessary because there are eight cheaper grid flexibility resources. But grid integration may be about to get a lot easier. New rechargeable batteries using a solid polymer electrolyte can have about one-twentieth of the materials cost of a lithium battery and achieve better density with nothing rare, toxic, or flammable. At high volume, such batteries may be able to make distributed solar available 24/7 at an added cost of about half a cent per kilowatt-hour. If that happens, I wonder who’s going to want to pay for the grid, which costs about 4 cents to deliver a kilowatt-hour. If you can make it anytime and anywhere cheaper than that, why would you want to do it through the grid? These are the kinds of disruptions in the electricity system that I don’t think utilities are ready for.
ENERGY TIMES: Is the grid subject to disruption given the emerging technologies you see in storage?
LOVINS: This technology puts batteries in the running at a cost low enough to enable bypass of the grid entirely. But even without this innovation, utilities face fundamental change unseen for over a century.
ENERGY TIMES: You wrote your book, Reinventing Fire, back in 2011. What has changed?
LOVINS: We showed how to run a 2.6x-bigger U.S. economy with no coal, oil, or nuclear energy and a third less gas, with $5 billion in lower costs and 82-86% less carbon emission and that would require no new inventions and no act of Congress. With smart sub-national policies in mindful markets, that transition could be led by business for profit. What’s happened since then is that market adoption is nicely on track for the first six years of that 40-year journey. Renewables are a little ahead of schedule. Six years ago, we did not focus much on electric vehicles or what we call the PIGS to SEALS transition: from Personal Internal-combustion Gasoline Steel-dominated vehicles – PIGS - to SEALS, which are Sharable, Electric, Autonomous, Lightweight, Service vehicles, that is, mobility as a service. These changes are coming out much faster than we thought.