Reinventing Production Food Systems Energy and Transportation Information and Communications Materials and Resources
Solar power, batteries, sensors, and AI will enable a new energy system that is distributed, with demand predictively managed to match supply. Energy will be generated mainly through solar PV (complemented by wind), which is already the lowest cost form of energy and is disrupting the new-build, grid-scale, fossil fuel-based generation market.
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In fact in many markets, the total cost of solar PV is already below the marginal cost of fossil-fuel and nuclear electricity. Distributed energy generation combined with distributed battery storage will replace the centralized electric power system, as localized production eventually costs less than the transmission and distribution costs of a centralized energy system. Existing fossil-fuel plants will see their utilization rates drop as zero marginal-cost solar, wind, and battery power grows, effectively
used only to cover ever-shrinking gaps in demand. Within a few years, as the economics of these conventional plants deteriorate further, they will essentially be stranded, so we may need to selectively and temporarily subsidize some of them while the accelerating build-out of new clean energy infrastructure catches up with demand.
This vastly more distributed system will allow energy to be produced anywhere, at any scale, and will provide power at a total cost approaching 1 ¢/kWh and negligible marginal cost.
Peaking power plants will be rendered obsolete as battery storage flattens both the demand and generation curves (destroying volatility-based pricing power) and provides more predictable, higher quality, and resilient electric power. Even the concept of baseload generation will disappear as central generation is replaced by a network of smart, on-demand generation and storage resources. The collapse of GE’s power division, which bet on a fossil fuel, centralized power generation future, is the shape of things to come.78 Indeed the existing centralized system is facing a death spiral of increasing costs, lower demand, and bankruptcy as utilization rates drop and demand migrates off grid.
As the virtuous cycle of clean disruption gains momentum, fossil fuels and fossil-fuel technologies will enter a vicious cycle that will also affect the heating market. The fossil fuel industry’s diminished scale will make heat more expensive, leading companies to replace it with cheaper, more predictable solar and battery technologies, leading to further erosion of fossil fuel markets, leading to more expensive industrial and space heat, leading companies and consumers to drop fossil fuel heat altogether.