Why & How Photo voltaic Manufacturing Will Speed up Over The Subsequent Few Years

I’ve been wanting to jot down this text for some time, however this publish on X from Chamath Palihapitiya prompted me to motion:

Have a look at the explosive development and falling prices of batteries, photo voltaic and wind within the chart beneath…the numbers are actually spectacular.

This is the reason I feel we could have a close to zero marginal price of vitality by 2030. The incremental price of producing energy will method ~$0.005/kWh in… pic.twitter.com/NBNsL3AWCV

— Chamath Palihapitiya (@chamath) October 5, 2023

Chamath is declaring that photo voltaic and battery storage are happening in price at an astounding 18% and 19% annual price (respectively), and that is considerably quicker than two traditionally well-known occasions, the ramp of the Ford Mannequin T and manufacturing of US plane throughout World Battle 2. He doesn’t present it right here, however I’ve seemed into the price of fossil fuels they usually dropped in value dramatically when every entered the scene — coal centuries in the past, oil a century in the past, and pure fuel through horizontal drilling (fracking) most lately.

These fossil gas studying curves have run their course for essentially the most half, and the prices of fossil fuels is rising each due to basic inflation (which impacts renewables too) and extra importantly as a result of the easy-to-find-and-extract areas have principally been exhausted. There’s loads of coal, oil, and pure fuel left, however it’s more and more costly to supply and likewise costly to burn, particularly as nations world wide go legal guidelines regulating their utilization as they find out about air air pollution’s dangerous results and the impact of burning fossil fuels on our local weather. Folks realized these issues a few years in the past, however earlier than renewables had been reasonably priced, the selection was burn them or dwell an easier, much less vitality intensive life. Whereas there may be nothing mistaken with that way of life, local weather activists weren’t in a position to persuade many individuals to undertake it or persuade governments to mandate it. I additionally oppose mandating a low-energy life, however lots of my readers might disagree.

Chamath can also be assuming these tendencies will proceed till we get to a price of vitality of a half penny per kWh. I feel that could be off fairly a bit, as a result of the speed of price decreases is increased for photo voltaic panels and batteries than it’s for the whole methods that produce electrical energy. I do suppose we are going to produce vital strain on utilities with distributed era, however it might take a little bit longer. Let’s swap gears to speak concerning the 3 phases of photo voltaic.

3 Phases Of Photo voltaic Era

For the simplicity of this text, we’re going to say the value of pure fuel electrical energy is about 12 cents a kWh, 6 cents for distribution, 2 cents for the ability plant, and 4 cents for gas and working prices.

Photo voltaic Prices Decrease Than Various Prices (Capital + Working)

The primary section is when photo voltaic’s whole price is lower than that of pure fuel (which was the most affordable approach to make electrical energy in most locations not way back). This occurred in lots of areas when utility-scale photo voltaic hit about 6 cents a kWh a few years in the past. That’s overlaying gas, working, and energy plant prices. So, if you want to add new capability or substitute a coal plant, photo voltaic wins more often than not.

Photo voltaic Prices Decrease Than Various Prices (Working Solely)

Slide from NextEra second quarter convention name.

The second section is when firmed photo voltaic (photo voltaic + battery) turns into decrease in price than simply the variable price of a pure fuel (or coal) plant. Since economists ignore sunk prices, however price accountants don’t, within the quick run solely variable prices matter. Because of this in case your fairy godmother constructed you a model new state-of-the-art trendy fuel energy plant and all it’s a must to pay for is the gas and folks to function and keep it, at a sure value of firmed utility-scale photo voltaic (let’s say 4 cents a kWh), you’d inform your pretty godmother, “no thanks, it isn’t well worth the gas and working prices, however in the event you can flip this pumpkin into an electrical carriage, that will be a lot appreciated.”

Why did I modify the bar from photo voltaic to firmed photo voltaic? As a result of when photo voltaic is only a couple % of your energy, it doesn’t must be firmed, since the remainder of the grid has sufficient backup energy to deal with issues if you aren’t producing; however as photo voltaic turns into a big supply, it wants to unravel the intermittency problem. On this section, which we’re getting into in some locations now, you not solely select photo voltaic for brand spanking new era capability resulting from energy development or changing fossil gas vegetation which can be previous the top of their helpful life, however you begin closing absolutely paid for fuel energy vegetation which can be only some years previous and are in good situation. It could be clever to simply mothball them and convey them up for just a few weeks a yr (much like a peaker plant) till we get a little bit extra photo voltaic, however many of those vegetation simply can’t compete within the basic market. CleanTechnica began reporting on circumstances like this a number of years in the past, however they’re nonetheless not widespread.

Photo voltaic Prices Decrease Than Grid Prices

Part 3 is known as “GOD parity” by Tony Seba. It’s when the value of distributed firmed photo voltaic (on your own home or enterprise) is lower than the distribution price of your native utility (6 cents in my instance). This causes not simply the fuel energy plant to be disrupted, however centralized photo voltaic and wind too! On this case, there isn’t an financial case for the utility grid. Even when a fairy godmother gave the utility a magic energy plant that requires no gas without spending a dime, it nonetheless couldn’t compete because it prices 6 cents to keep up its wires.

The quotes I’m getting in some locations for a ten kWh photo voltaic system are about $16,422 plus $12,250 for 2 Telsa Powerwalls, coming to a complete of $28,672. That may present 13,695 kWh of electrical energy a yr for 25 years (or 342,375 kWh). After all, there can be some downtime and degradation over time, so let’s say 300,000 kWh. So, at the moment, $28,672/300,000 kWh (additionally not contemplating the time worth of cash or curiosity prices) offers us 9.6 cents a kWh. That’s very aggressive with the 12 cents per kWh the utility costs, however not the 6 cents a kWh wanted to achieve this “GOD parity.” If the price of photo voltaic drops 17% a yr (which is the educational curve of photo voltaic within the final 10 years), it’s going to hit 6 cents per kWh in 3 years, in 2026. That’s when individuals will begin going off the grid en masse and the utilities have an enormous downside.

One other large discount is once I can simply use my Tesla Cybertruck or Mannequin Y as an alternative of shopping for two Powerwalls. Let’s say you could spend a pair thousand {dollars} to hook that car to your own home — your price can be about $18,422/300,000 kWh, or 6 cents a kWh.

There’s additionally the potential downside that your lights will exit in the event you run to the grocery retailer for ice cream! So, we most likely want a small battery that stays on the home.

Total, could also be nearer to utility disruption than we predict! I feel most individuals wish to stay linked to the grid as a backup and can be prepared to spend $30 a month for that, however the days when everybody pays a whole bunch of {dollars} a month to their native utilities could also be numbered.

If you wish to reap the benefits of my Tesla referral hyperlink to get Reward Credit, right here’s the code: https://ts.la/paul92237 — however as I’ve mentioned earlier than, if one other proprietor helped you extra, please use their hyperlink as an alternative of mine. If you wish to be taught extra about Tesla’s new referral program, Chris Boylan has written an glorious article on it.

Disclosure: I’m a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], Hertz [HTZ], NextEra Power [NEP], and a number of other ARK ETFs. However I provide no funding recommendation of any kind right here.