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

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

Take a look at the explosive progress and falling prices of batteries, photo voltaic and wind within the chart under…the numbers are actually spectacular.

Because of this 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 mentioning that photo voltaic and battery storage are happening in price at an astounding 18% and 19% annual fee (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 Conflict 2. He doesn’t present it right here, however I’ve appeared into the price of fossil fuels and so they dropped in worth 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 not too long ago.

These fossil gasoline 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 may be 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 around the globe move 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 reside an easier, much less vitality intensive life. Whereas there may be nothing unsuitable 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 a lot of my readers might disagree.

Chamath can be assuming these traits 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 larger for photo voltaic panels and batteries than it’s for the entire methods that produce electrical energy. I do assume we are going to produce vital strain on utilities with distributed technology, however it could take a bit longer. Let’s change gears to speak in regards to 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 facility plant, and 4 cents for gasoline and working prices.

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

The primary part is when photo voltaic’s whole price is lower than that of pure fuel (which was the most cost effective method 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 protecting gasoline, working, and energy plant prices. So, if you wish to add new capability or exchange a coal plant, photo voltaic wins more often than not.

Photo voltaic Prices Decrease Than Different Prices (Working Solely)

Slide from NextEra second quarter convention name.

The second part 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 brief 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 gasoline and other people to function and preserve it, at a sure worth of firmed utility-scale photo voltaic (let’s say 4 cents a kWh), you’ll inform your pretty godmother, “no thanks, it isn’t definitely worth the gasoline and working prices, however when you can flip this pumpkin into an electrical carriage, that may 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 p.c of your energy, it doesn’t have to 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 major supply, it wants to resolve the intermittency concern. On this part, which we’re getting into in some locations now, you not solely select photo voltaic for brand new technology capability on account of energy progress or changing fossil gasoline vegetation which might be previous the top of their helpful life, however you begin closing totally paid for fuel energy vegetation which might be only some years previous and are in excellent situation. It could be clever to simply mothball them and convey them up for a couple of weeks a 12 months (much like a peaker plant) till we get a 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

Section 3 is named “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 gasoline at no cost, it nonetheless couldn’t compete because it prices 6 cents to take care of 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 can present 13,695 kWh of electrical energy a 12 months for 25 years (or 342,375 kWh). After all, there could be some downtime and degradation over time, so let’s say 300,000 kWh. So, immediately, $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 prices, however not the 6 cents a kWh wanted to succeed in this “GOD parity.” If the price of photo voltaic drops 17% a 12 months (which is the educational curve of photo voltaic within the final 10 years), it’ll 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 a giant downside.

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

There may be additionally the potential downside that your lights will exit when you run to the grocery retailer for ice cream! So, we in all probability want a small battery that stays on the home.

General, could also be nearer to utility disruption than we predict! I feel most individuals need to stay related to the grid as a backup and could 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 benefit from 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 a substitute of mine. If you wish to study 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 several other ARK ETFs. However I supply no funding recommendation of any kind right here.