Energy and Transportation, Tech and Business

Exponential Revolution #2 – The New Energy Matrix Facts and Speculations

There is no better way of understanding Exponential Revolution #2, the New Energy Matrix, than looking at the real-world examples. Here we cover the facts of the case, in which the evidence clearly shows that the Exponential Revolution is already taking place and will continue to advance. We also look at speculations, the areas in which the change is not so well established, but that already show significant progress, either through real changes or large investments by credible players.

Facts: Change is already happening

Solar and renewable power. Clean and endless energy

Solar and wind, and some other forms of renewable energy are reaching and surpassing grid parity. This means that their cost is starting to be cheaper than that of fossil fuels for generating electricity. Many experts link this declining cost curve with the impact of digital on renewable technologies, although it represents a combination of many factors.

The history of solar and wind energy goes back to the ancient world, with the Greeks. Chinese and Romans already exploiting these sources of power to a certain extent. However, it was only in the late 19th Century that solar and wind energy for electricity production started to develop. The first solar array was a 1% efficient selenium based cell installed on a New York rooftop in 1884. Over the next century, solar power was confined to specialized uses such as satellites, but the technology slowly developed.It was in 2000 when concern over climate change started a drive to increase renewable energy and feed-in tariffs were introduced.

Initially, Wind Power had the advantage and enjoyed an important boom, from less than 10 GW of installed power in the late 90s to over half a Terawatt today according to the Global Wind Council. Overall usage of Wind in the global electricity grid is near 5%, with many countries over 10% (e.g. the US) and some over 40% (e.g. Denmark). The global wind industry has developed significantly and installs over 50GW of power every year.

Wind Power has important limitations, as it requires large favorable sites which are severely impacted by the deployment of wind turbines. Its cost progression seems to have peaked at 4-5 cents per KWh, which is comparable to fossil fuels (even when we don’t factor in the environmental advantages) Consequently while wind will continue to grow and it is an important part of reducing dependency on fossil fuels, it will not change the nature of our energy matrix.

The technology with the opportunity to be the real game changes is solar. After all solar input to the Earth is orders of magnitude greater than our current energy consumption, and solar panels can be installed with limited environmental impact in small quantities. Consequently, solar has the opportunity to transform our energy matrix and make electricity virtually free.

Of course, solar has held this promise for the last decades and the changes haven’t happened yet. So why is it going to happen now? Basically, the reason is two-fold: grid parity for utility-scale systems and for home based systems. Improvements in technology and especially in the installation and management process have reduced the cost significantly, with favorable locations already below the 3 cents per KWh.

In terms of utility-scale projects, we have seen impressive projects well below grid parity cost in many locations. In the US in May 2017, a Tucson utility inked the deal for a system to power 20.000 homes for under 3 cents per KWh. In Chile, there was a bid in 2016 for 2,91cents per KWh. Finally, the record holder as of this writing is in the UAE at 2,42 cents per KWh. Obviously less favorable locations in terms of irradiation are still at higher costs, but 2,42 cents per KWh still represents about half the typical cost of utility-generated fossil fuel electricity, even without considering full environmental impacts.

The price of home-based arrays has also been improving systematically, especially reducing the installation and financing costs that now account for most of the cost. Cost for installing solar power in the US are as of 2017 3 USD per Watt. Considering irradiation, which changes significantly depending on the specific geography, and the useful life of residential systems, the cost of electricity can vary significantly. Some estimates place it between 5-10 cents per KWh for a high irradiation zone. This compares to an average cost for a consumer of 10-15 cents per KWh for residential users, making it an attractive proposition in many areas.

Thanks to this, solar capacity has been growing dramatically and it has reached over 300GW according to the IAE, representing ~2% of electricity generation in the world. Most of this capacity is Photovoltaic and has a good mix of utility-scale and residential. While it is catching up with wind quickly, it still has a lot more runway thanks to its lesser environmental impact and resource requirements. So it could continue to go down the cost curve as new technologies come online and production and installation become easier and cheaper.

Solar has two key problems to fulfill its promise. The first is regulation. Spain was the country that pioneered the renewable boom in the 2000s. However, utility protecting regulation has left us lagging now. Home solar has been made uneconomical in Spain through regulation, by forcing consumers to pay for the grid costs and peak power costs even if they use mainly solar. This is stopping solar in several countries. This is a political limitation, and as such will only be able to reduce demand temporarily. At the same time, it pinpoints a real problem, as the grid and backup power generation capacity need to be paid for, at least until it is totally substituted. The second is storage, the sun doesn’t shine at peak consumption so we need a way to store solar-generated power for use when it is really needed. That is why storage is a key element of the new energy matrix.

Storage and batteries. Making energy independent of time.

I am an electrical engineer so I have a deep understanding of electricity. However, I didn’t really understand the critical role of the lack of economical storage for electricity until I started working for electric utilities. The whole system is designed to overcome this limiting factor, this requires incredible expense and engineering in terms of the grid and the generating plants that contribute to it. The first utility I worked with had some huge plants operating at 20% capacity, they were the so-called “peaker plants” which are only activated in peak demand.

The sheer waste of the whole system is obvious to any engineering mind. Why build a huge capital expenditure plant in the billions and then have it operating at 20% capacity? The answer is that economical storage of electric power has been uneconomic since industrial electricity was born. We still operate a system that is very similar to the one Edison created with his first power plants at the dawn of the 20th century. It hasn’t been very necessary either, as fossil fuel powered plants can be easily turned off and on providing the peaking power needed.

This has changed as renewables enter the grid, as they depend on sun and wind to determine if they are “on or off”, and as batteries become more important for other applications. Namely consumer electronics and electric cars. Battery costs have been plummeting over the last decade, from more than 1000 USD per kWh of storage to around 200 USD today. They are expected to go even further and break the 100 USD barrier soon.

Mobile phones were the first devices to really jump start battery technology development. However, even smartphone batteries are small affairs by industrial standards. It has been the introduction of electric vehicles that has really accelerated battery development, at anywhere from 25 kWh to 80 kWh battery sizes are significant affairs. The increasing volume of electric car production is leading to being able to manufacture them at scale

In turn, this has lead to home batteries, like the Tesla Powerwall. At around 10kWh these batteries allow a home with solar panels to source most of its demand from its own generation capability. The battery cycles from charging mode during the initial daylight hours in which there is low consumption to contributing to the grid or to the home during the peak evening hours. There are many examples in the web of hobbyists. Some of the extreme ones manage 75% self-sufficiency even with two electric cars in not so sunny England.

The ability to put batteries in parallel or series to add them up one way or the other makes it feasible to add them up to utility scale. So a couple of million electric vehicles at 50kWh and five million homes at 10kWh could add up to a 150 GWh capacity for the grid of a medium-sized country like Spain (150GWh are equivalent to 30 billion USD in storage investment at 200USD per kWh). With a consumption of ~700GWh per day (Spain example), this is enough to smooth the peaks and avoid peaker plant operations.

This would totally change the way in which electricity works and bankrupt most electric utilities and grid operators as we know them. Consequently, we can expect a bumpy road to the storage economy in terms of regulation and special interests. However, it would make for a much more efficient and cheaper electricity production which would use probably just the renewable and nuclear capacity base.

For this to happen we not only need homes to have batteries but especially cars to change to electric and be plugged into the grid in an efficient way. So let’s look at electric vehicles now

Electric cars and motorbikes. Nikola Tesla’s revenge.

The first electric vs. combustion motor showdown happened in the early 1900s. Electric’s advantages were the same as today, cleaner and more direct transmission of power (i.e. higher acceleration and efficiency) and doing without controlled explosions within the vehicle. However, the phenomenal energy storage efficiency of gasoline won out. After all, gasoline still packs 100 times the power of LiOn batteries (although an electric battery would only need ~30% of the capacity of gasoline to be comparable) and has a global infrastructure to pour it in seconds into vehicles.

The second coming of the electric car is premised mainly on improved batteries, global warming, smog and Elon Musk. Let’s tackle each one at a time.

Batteries have improved very significantly since the early 1900s. Not only in terms of price as discussed in the previous reality, but also in terms of weight ratios (already beyond 200Wh/kg compared to the 30-50Wh/kg starting point for lead batteries). The large gap against gasoline could be bridged over the next 30 years or so according to Argonne lab report. However, with today’s batteries start to be competitive and the drop in prices could make them functional soon enough.

Global warming and smog are two significant reasons to move to electric vehicles. Transportation is about a fourth of greenhouse gases, so it is a great place to start reductions. Air pollution in cities is becoming a top concern in many cities. Its link with lung disease and even cancer is increasingly being proven, so it is becoming a priority to reduce by many governments.

Finally, there is the “great person” factor. In this case, we were lucky enough that someone as gifted as an engineer and communicator took it on to transform the transportation sector to electric. With his company Tesla he has captured the imagination of the consumers and galvanized the rest of the sector into action. He might have sped up electric car development by at least 5 years, whether Tesla ends up being the powerhouse it looks to be or not.

All of this has increased electric car penetration, with over 2 million electric cars in 2016, and the most advanced countries such as Norway selling one in three cars as electric. There has also been a boom in electric motorcycles, very relevant in the development world, with more than 200 million electric two-wheelers just in China in 2016 according to the IEA. Some countries are already planning the phase-out of internal combustion engine based vehicles with several dates announced either for new sales or for all vehicles. The closest date is Norway (2025) with other more longer-term commitments (e.g. France 2040, UK 2040, and India 2030).

Probably the area in which electric vehicles are moving the fastest is shared transportation, so let us turn to it now.

Shared transportation. From 5 to 50% usage.

Electric vehicles are also powering another swifter revolution that is being played out in many of the world’s biggest cities. More than 60% of the people of the world live in high-density settings such as cities, at the same time cars in those same cities stand idle 95% of the time. It was only a matter of time until someone put two and two together and used smartphones to rent out electric cars.

To me, shared transportation was introduced in a very personal way. I had the opportunity to discuss it with the global CMO of Car2Go who had just launched in Spain. For me that discussion was enlightening. I hadn’t heard much of shared cars until then and everything started to click.

First, the famous 5% number in terms of the percentage of time a car is used. Next, the fact that the car manufacturers know what is coming and are leading the charge themselves. I was really surprised to learn that Car2Go was part of Daimler, the parent company of Mercedes and several other brands. Third, the strong involvement of city halls which were intent on pushing shared vehicles as a way to reduce air pollution, traffic and parking problems. Finally, the proven business model that had already deployed in many cities, and was starting to accelerate further.

After cars came motorbikes and now in Madrid, we have three brands of cars and another three of motorbikes. I am sure it is not the densest network in terms of development, but still, just with this, it is life changing. I am a shared vehicle power user. I live in the city and commute often in it. My wife and I have a single car and I can’t get the business case to buy another one now. I can pick up a car or motorbike usually within less than 500m of where I am and take it to exactly where I need to go. All for the price of public transport. With the motorbikes, it reliably takes me half the time to get anywhere. They are all electric and really painless to use. I can also be multimodal, maybe I need to go in a hurry but then I can get back by walking leisurely. A mobility revolution.

We can expect Shared Transportation to continue to gather pace and merger with the taxi-cabs and Ubers once autonomous driving is a reality. Going from 5% utilization to 50% could reduce the number of cars on the sidewalks and parking by an order of magnitude. It will also make transportation easily accessible to much more and encourage us to use multimodal transport rather than be bound to the car. Obviously, it won’t work everywhere, as it requires a certain density but in cities, we will see a quick transformation making us wonder how did we survive before.

Water. Taking control of water.

We are more than 60% water and we can’t live, or our civilization function, without fresh water. However, water is one of the scarcest utilities we have. Less than 1% of all water available on Earth is fresh, with another 1% if we add the polar caps. Global warming is also making droughts and water shortages an increasing problem in many parts of the world, both developed and developing.

Can humanity liberate itself from its water dependency? Apparently yes, it’s a question of energy. If we have enough energy through solar we have the technology to generate as much water as we need. The most obvious solution is desalination, and some countries like Kuwait already source 100% of their water from desalinization plans. The advantage there is that desert habitats combine extreme drought conditions with great insolation levels for solar power generation.

According to the American Membrane Association desalinatization, energy costs are now around 2,5-3,5Wh per liter, with a theoretical minimum for membrane-based desalinization of 1Wh per liter. Considering average water usage ranges from 100 to 300 liters per person we would have a consumption of 0,25 to 1kWh per person for water per day. For a year of a three-member household, this would represent a maximum of 1 MWh per household per year. This is significant but manageable given household energy consumptions in the developed world from 6 to 15 MWh and could be incorporated into the solar footprint of a home, especially in a desert area.

Speculations: What is coming

Autonomous vehicles. AI drivers.

I will always remember how he introduced the conversation: “I am very worried. Our company is doing something great technically but we will disrupt the 5 million truck drivers in the US. What can we do to help these people?”. That was my first realization that autonomous vehicles were much more serious and close than I thought. When someone so smart and thoughtful as my friend started to worry about consequences then it was really coming.

Six months later I saw him again. This time another phrase struck me. “This is a race, we haven’t taken a vacation for the last year. It is all about who gets it right first”. This was about speed, if days counted we couldn’t be far away. If so much was hanging in the balance of getting the technology right, there was more to it than I thought.

The third foundational experience was going to Mexico DF for a friend’s wedding with my wife. One of the megacities in Latam, I had been to DF a number of times. Moving around had always been a pain. Taxis are not totally safe and are not comfortable or easy to find. This is quite a thing in a city with the famous hour-long traffic jams. This time around my friend suggested we use Uber. It was an amazing experience, that changed my perception of the value of the service.

In the developed world, especially in European cities, Uber or Cabify are marginally more convenient than taxis. They might be cheaper, maybe even slightly cleaner and it is cool to be able to hail it with your mobile. But by and large taxi companies have increased the level of service and convenience, and high labor costs maintain prices at a relatively high level, so its no big deal (at least for me, I know others who are extremely excited even in Europe).

Uber in Mexico DF has changed the experience of the city. DF must be one of the cities with most Ubers in the world, so it’s rare to have one more than 5 minutes away. Labor costs are so low that the price is really cheap. This changes your way of experiencing transportation and makes you use it a lot more. Apparently, high earning power Mexicans are even dropping their cars, because Uber is just better and cheaper.

That’s when I thought, this is what will happen everywhere once there is autonomous driving. Transport will be so much cheaper that it will change how we think about it. Not only for logistics but also with passenger traffic. Individual cars won’t make sense, and maybe even public transport will have a hard time competing.

That is why autonomous mobility is the capstone for the Energy Matrix revolution. It will change transportation and with that our relationship with space and time. Maybe 50km will be the new 5km, so where we build, live and work might change dramatically.

So how fast can we expect autonomous vehicles? While there has been substantial progress made in terms of autonomous driving support, which is rapidly become a standard feature, a fully autonomous vehicle is bound to find significant technical, regulatory and psychological challenges. The main companies pursuing it, Google, Uber, and Tesla, are facing short-term challenges in their projects however they seem confident of their long-term success.

After an aggressive initial deployment focusing on level 5 only (“Steering Wheel optional”) Google’s Waymo had to backtrack its ambition. However, it is now conducting trials with over 600 minivans and has even announced intentions to deploy in Detroit to try out autonomous driving in snow conditions. Overall Waymo has logged over 3.5 million driverless miles putting it at the head of the pack. It is also now collaborating with Lyft, Uber’s main competitor, to move faster

Uber got to a fast start after purchasing Otto, the driverless truck company founded by ex-Googlers. It also had a high visibility pilot in Pittsburgh with self-driving Ubers (with backup drivers) as part of the fleet. All of this was significantly slowed when Google sued Uber over intellectual property this year. However, self-driving technology is “existential” to Uber according to the company, because whoever gets there first will be able to outcompete other shared vehicle services extremely fast.

Finally, Tesla has the most organic approach. Self-driving cars are just another point in the roadmap for Tesla. Something they can offer their car buyers to make their life better and cooler. Already at level 3 autonomy (“hands off”), Tesla is trying to move to level 4. It has managed to weather the impact of the first autonomous car death and promises over-the-air upgrades to its drivers. However, it seems true level 4 and 5 will require extra hardware (cameras and sensors) not available in all models.

Overall autonomous driving seems to be experimenting strong progress. It will need to overcome significant regulatory obstacles but the consensus is that it will eventually get there. However, there is no consensus on whether it will take 5 or 25 years. In any case, as it develops we can expect one of the most important transformations in the way we live, work and get from one place to the other. Maybe soon enough if you want to get behind a steering wheel you will need to go to a historic amusement park, much like you need to go to a riding school to try out horse riding, something that was part of the everyday life of many not so long ago.

Drone logistics. Your faithful drone servants.

Drones have many applications in both Integrated Reality and the new Energy Matrix. The level of development in terms of cost, range and autonomous flying capability has been amazing and is still going strong. Now we are facing the regulatory challenges necessary to integrate them into the economy.

From the New Energy Matrix perspective, the main use will be short-haul transportation. With digital capturing an increasing share of retail sales short-range delivery is starting to become a huge part of the retail supply chain. The only way to put a lid on the ever-growing costs, environmental impact and human resources needed for it would be autonomous delivery.

Drones are able to deal with most of the typical transport requirements and will also be able to do so while improving significantly the service to end consumers. The combination of autonomous small vehicles being able to deliver directly to the home could transform the supply chain even beyond what we have seen today.

Drone logistics are already becoming reality. Amazon Air is the experiment by the e-commerce giant to transition its huge delivery infrastructure into autonomous flying vehicles. Given the huge involvement of Amazon in home delivery, this is something to take seriously. While details are still sketchy, it seems to be under trial in several use cases. It might make sense to start it with suburban deliveries, which are more challenging economically, and only later move on to the chaos that drones could represent in a fully urban setting.

Hyperloop. Planes are slow

Elon Musk’s contribution to the great person theory of history doesn’t end with the electric vehicle or the autonomous car. Not even with space or intelligent robots, which we will cover in the “further away technologies” section. His biggest visibility area in 2017 is certainly being Hyperloop. However, Elon didn’t invent the Hyperloop, although he did give it its really cool name and inspired the Tesla-Space X team that created the open source design.

The origin of vacuum based high-speed transportation goes all the way back to the end of the 19th century and was developed and even trialed in NYC in early 20th. However, it wasn’t until Elon Musk’s very public endorsement that it achieved its fame and notoriety.

The Hyperloop’s promise is simple. A system that could allow large hundreds to low thousands transport of goods and people at extremely high speeds and very low costs. We still have to see operational systems, but some analysis promise one-way tickets in the tens of dollars and speeds in the 1000km/h mark.

The best way to show that the Hyperloop is not just pure science fiction is to showcase some of the Hyperloop companies. Hyperloop One is the most visible, with hundreds of millions already invested into it and the backing of Richard Branson in late 2017. It has also a number of feasibility studies underway with a number of governments and even a potential contract with Dubai. Hyperloop One has already trialed the Hyperloop concept at a full-scale version.

Will the Hyperloop be a workable solution? It will be seen over the next months. If history is any guide it will prove much more expensive and difficult than theory suggests, but even in that case, it could be an extremely interesting addition to the potential transportation modes on Earth. Reducing reliance on planes and using the rest of the new energy matrix to reduce emissions further.

Smart grids and mini-grids. From transporting to integrating.

There is probably no component of the modern world that has stayed so relatively constant throughout the last century as the power grid. The power grid is the silent and unknown backdrop that makes our daily life possible. It connects power generation, transmission and distribution making it possible for us to flip a switch and receive reliable electricity within a certain level of parameters. It is a marvel of engineering, taming a dangerous force like electricity and putting it at our service.

The power grid has many limitations though. It is the paragon of centralization, prepared for a world of large power plants that drive consumption. It has limited capability for fine control or two-way management, which would be key for a storage and renewable world. It also wastes a significant amount of energy as it is transported and dots the landscape with ugly infrastructure. Finally, it has limited control over its constituents parts, failing to capture the power of integrated reality.

This is all changing quickly, with a large number of smart-grid or mini-grid initiatives being deployed across the world. The aim of these initiatives is to create a new type of grid, which is much more flexible and efficient. Not only the grid will be able to “sense” power flows and adapt to bidirectional energy contribution and storage. It will also be able to “sense” its own infrastructure and detect failures or attacks instantly, walling them off or setting emergency response teams.

One of the most complete initiatives is the San Diego University mini-grid, which has 90%+ percent of own energy generation and manages it through a smart grid with integrated storage. Beyond it, there are smart grid projects in almost every country, with less developed regions like Africa trying to leapfrog directly to smart grids.

There are even a new species of smart-grid that focuses on marrying the New Energy Matrix not only with Integrated Reality but also Digital Governance. It attacks the centralized nature of power grids and allows to decentralize them through blockchain and tokenization. Grid+ is one of those many projects, with an ICO on October 30, 2017. It creates a hardware agent to install in your home so you can manage your own energy purchasing, sales, and storage in real time. Taking back control of your energy needs and optimizing your energy footprint.

What will happen when the New Energy Matrix, Integrated Reality, and Digital Governance give birth to the next generation power grid? The jury is still out, but we can count on a more efficient and decentralized system that integrates distributed generation, storage, and renewable natively.

Autonomous flying vehicles. Why drive if you can fly.

Imagine you need to go across Sao Paulo, Mexico City, LA, or any other gridlocked megacity. You need to do it in about ten minutes. The only feasible way to do it today would be by helicopter and this is expensive and inconvenient, as landing pads are scarce and far between. Now Imagine someone says that you could do it from your backyard immediately and with just the click of an app at the price of an Uber. That is the promise of autonomous flying vehicles according to its boosters.

Autonomous vehicles and they Hyperloop already seem like quite a stretch for many, so the latest announcements about autonomous flying vehicles might seem like mindless futurism. However, the advantages of flying over land-based vehicles are clear. Not having to build roads is great for the environment. Traffic is no problem when you have ten kilometers of vertical space and AI-controlled vehicles to play with. Distance is much less of a problem when you are flying and specific locations are always accessible.

Autonomous flying vehicles would be incredibly convenient and cool. So what would we need for them to work? There are three key criteria to fulfill: autonomous, can we get them to self-drive to avoid all getting a pilot’s license and life insurance, flying, how is flying tech for small crafts, can it be affordable, and finally efficient, we can’t deploy millions of this if they are based on fossil-based fuels like kerosene. As we will see, we are actually doing quite well on all three counts, so maybe we will experience this type of vehicles soon after all.

According to Fortune, there are over 15 flying car startups, at which 8 of which have completed a test flight. Of this several have high profile deals with the likes of Uber, Google or Microsoft, and at least one is already doing pre-sales and planning to start deliveries by the end of 2018. We will examine Uber Elevate and a couple of the most advanced flying car startups to see how they stack against the criteria.

Uber Elevate is not so much a flying car startup as a PR and ecosystem program. Uber is trying to heighten awareness of the technology through videos and whitepapers, and get everyone to collaborate through a summit. They also have a very particular claim of what they are trying to accomplish that allows us to at least examine the “efficient” part of our framework. They want to have a “flying taxi” from San Francisco to San Jose (currently close to two hours and $100+ dollars with regular Uber) cost around $20 and take 15 minutes. This would certainly be efficient, and according to Uber the VTOL (vertical take-off and landing) vehicles they would operate are all-electric. It will also be autonomous

Kitty Hawk is about flying. It also has some cool videos you can watch. Its first purchasable product should come out later this year. It aims to be to planes, what a Zodiac is to boats a cheap and accessible version that anyone can drive. It will initially be focused only on over water flying (less regulated as you can’t crash on anything) and it aims to be very accessible.

PAL-V is the yacht of flying, rather than the zodiac. It is going to sell a 500k USD multimodal vehicle that can both drive and fly. Still a far cry from the types of vehicles that Uber is looking forward to, but a step in the right direction.

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