The electric power industry will be the most exciting investment area in the next fifteen years. This bold statement comes directly from the eye-popping headlines surrounding the Tesla Model 3 launch and now Norway’s announcement that it is to completely ban petrol cars by 2025. It also heralds a rapid decline of oil, but opportunity for natural gas.
What future we subscribe to depends on whether we believe in linear or exponential adoption of new technology. In the linear approach, the nearly 400,000 Tesla Model 3 pre-orders represent only 1.6% of total car sales in the United States, and a decade from now this will have risen to 15%. However, the exponential approach, proposed by such thinkers as Ray
Kurzweil, would say that 1.6% is only 9 doublings away from 100%, and if electric vehicles are doubling every 1-2 years, we are only 9-18 years away from 100% of the market being electric.
What would be the consequences of such a shift? Transportation consumes roughly the same amount of energy as the electricity generated. In other words, if vehicles shift from oil to electricity, the oil industry is dead, natural gas is a short term winner and the electricity industry has to double in 10-20 years. This is a tectonic shift in our energy outlook, and one that is probably more likely than people realize.
Electric utilities who have seen their business models under attack due to distributed generation will see a rapid reversal of fortunes. If power generation needs to double, we will need all the gas, nuclear, hydro, wind and solar we can get. Combined heat and power (CHP), which is starting to make inroads in certain places will become commonplace, and gas-fired central generation will be the quick solution to soaring demand, both of which will drive the boom in the natural gas industry.
The grid will have both more central generation and more distributed generation at the same time. This will stress an already challenged grid, driving the need to balance demand and load in real-time. Central to solving this problem will be the Virtual Power Plant (VPP) created by Enbala Power Networks. Enbala, is like the conductor of the orchestra. Driven by market signals, its Symphony by Enbala software allows generators, batteries, water plant, air conditioning units, and all manner
of loads to act in concert. The VPP optimizes behind the meter, across the meter, and in front of the meter to firm wind, firm solar, respond to voltage drops, and maintain system frequency. Real time response to random events will be critical to keeping the lights on.
Recent investments by General Electric and Edison International endorse Enbala’s position as the unquestioned leader in achieving optimized performance through real-time control. Enbala is the most important solution to the instability that the grid faces over the next decade as solar and Tesla-driven growth destabilize the status quo.
Richard MacKellar is a managing partner at Chrysalix Venture Capital.
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