The renewables and battery revolution. What history teaches us about the future.
The advent of cheap renewable energy and battery storage has already started to change the world. It is not an exaggeration to call this change a “revolution”. Some companies and countries will make it through this revolution stronger and better. Many will fail. If you are a leader in an energy related company or a government minister you need to understand the dynamics of this revolution in order to manage your way through this transition.
History Future Now has worked in the energy sector for over 20 years in a career that has included coal and natural gas power stations, oil refineries, and renewable energy such as solar, wind, tidal, wave, biomass, biofuels and heat recovery systems.
In this article History Future Now is going to briefly describe the energy revolution that is taking place and will then go back in time to look at how other leaders managed the previous energy revolutions of coal and oil. What did they do right? Where did they go wrong? We will then move forward in time and see how the changes taking place today are likely to impact our future.
The Renewables and Battery Revolution
The current energy revolution combines renewable energy and battery technology. There are many types of renewable energy, including wave energy, tidal energy, biomass energy and biofuels. But the key renewables are solar and wind. Why? In certain parts of the world they are now the cheapest form of electricity available, without any subsidies. To be clear: this means that they are cheaper on a cost per kilowatt hour than oil, diesel, coal, natural gas and nuclear power alternatives. As the cost of solar and wind energy continues to drop, they will become the cheapest form of energy in most countries.
Even in countries where they are not yet the cheapest form of electricity, they are having a significant impact on the electricity market. Utility companies in northern Europe are no longer developing new coal or natural gas powered power stations. Why? It takes 10 years to develop, build and commission a power station and takes 15-20 years before there is a payback on the capital spent. Based on existing price points, it is highly probable that solar and wind will be cheaper than conventional power long before that time, which will leave those new power stations uneconomic to run. Why bother building in the first place? This is why many people in the renewables industry are not that concerned by President Trump’s energy policies. While he may like coal and may think that climate change is a Chinese hoax perpetrated on the West, the investment committees of utilities will be making a simple calculation as to whether they agree to fund the construction of a new coal power plant: will it be competitive in the long run? And the answer is “No”. Even if President Trump were to subsidise coal and to penalise renewables, few investment committees would be willing to gamble that those policies would last the next 25-30 years before a power station has reached a payback on their capital. The answer will still be “No”.
There is a problem, however. Solar and wind energy have a well known Achilles heel: when the sun does not shine and the wind does not blow they don’t generate power. Oddly, this is not an insurmountable problem. Solar and and wind are relatively asynchronous: when it is sunny, there is not as much wind and when it is windy, there is not as much sun. They complement each other. But you will get periods of time when there is no wind and no sun. There are other ways of dealing with this. Firstly, not all electricity users need to have power all the time. Some large electricity users, factories for example, are paid to reduce their electricity demand at certain times, so that supply and demand can match more evenly. Another option is for special, fast reacting, power stations – called peakers- to switch on at peak times to provide more electricity to balance supply. Finally, the electricity grids of many countries and regions are linked by high capacity power lines so that electricity can flow between regions; from Germany to Denmark, for example, when there is a drop-off in wind supply.
Even so, despite all of these coping mechanisms, wind and solar cannot provide all the power to all countries all the time.
This is where batteries come in. Lithium ion batteries are the standard form of battery used today in electric vehicles and electronic devices such as smartphones and computers. They are also increasingly being used as back up power for renewable energy. It is obvious why this makes sense. If you can store the energy from solar and wind energy and release it when it is needed it solves the problem described above. Batteries have other advantages over existing peaking plants: they don’t need fuel; can be mass produced in a factory and are thus very fast to deploy; and are nearly instantaneous in their ability release energy.
However, while battery back up systems are being deployed, they are still expensive and the economics are tight.
Nevertheless, everyone in the industry believes that the cost of batteries will continue to fall very rapidly, in the same way that solar PV costs have plummeted over the past 5-10 years. Why do they think this? Battery technology has two major bulk markets – electric vehicles and storage for electricity. Both are massive potential markets and advances in one market will spur on innovation and drive down costs in the other market. Tesla, for example offers not only an electric vehicle – powered by a battery – but also home battery storage for solar PV. Elon Musk believes that the home battery storage market will be larger than the electric vehicle market and yet it is fundamentally the same technology. This is in contrast with the existing energy markets: coal and natural gas is heavily used in electricity production but barely used for transportation while oil is heavily used in transportation but barely used in electricity production.
Neither renewables nor battery technology are ideal on their own. But as a hybrid they are very powerful and will fundamentally reshape the energy landscape.
Before we look to the future, we are going to go back in time to see how companies and countries responded to the two previous energy revolutions.
The shift to coal
Most readers will know that the first industrial revolution was based on steam power that was created through the burning of coal. Many will not know, however, that it was desire to dig coal out of the ground to be used as a regular household fuel that created the impetus for the steam revolution in the first place. By the late 1700s England was suffering from widespread deforestation. Most of the fuel used to heat homes was wood. The growing population needed more wood but there was only a finite amount of wood available, which was being cut down. The Napoleonic Wars, which started shortly after the French Revolution in 1789, increased the demand for oak, which was used for building ships, and triggered even more deforestation. A single warship could consume 6,000 oak trees.
To solve this fuel crisis people started to dig out coal from the ground. The fact that coal could be burned as a fuel was well understood. In an era of abundant wood there was no point in spending the effort of digging it out of the ground. It was also a less desirable fuel to burn. But, as less wood became available, people started to mine for coal. This was hard work, made more difficult due to the fact that the coal mines would quickly become flooded with groundwater, which needed to be pumped out. The very first steam engines were created to drive pumps, fuelled by the coal from the mines that they were pumping out. As the mines got deeper and more complex, wood timbers were used support tunnels, which further exasperated the deforestation crisis.
Eventually, steam engines were adapted to drive a range of industrial processes and became light enough to be mounted on wheels, bringing about the steam train and ship revolutions.
From the perspective of a company or a country these changes were profound, but not obvious at the outset. Coal was not as good as wood. It was hard to dig out of the ground, while trees were easy to cut down. Once a seam of coal had been mined, it was gone, while trees grew back. You needed a series of expensive, additional inventions that did not yet exist, such as steam powered pumps, in order to maximise the output of a mine. Worst of all, consumers disliked coal and preferred using wood. If you had asked a company to invest in coal at the outset, before large-scale deforestation and before the steam powered pump, the answer would likely have been “No”. But those companies that did embrace the change and harnessed the opportunities unleashed by coal became very wealthy.
The shift to coal had a profound impact on the world economy, beyond being a substitute for burning wood for heating. The first companies to develop technologies based on coal were in Western Europe and the United States. While coal was not as appealing for heating homes, it was more energy dense and could burn hotter than wood, which was critical to many industrial processes such as creating large quantities of low cost iron or driving the machines needed to manufacture high quality, low cost, goods and textiles.
This, in turn, shifted the economic and political balance of power around the world. The West was able to flood the rest of the world with cheap, high quality manufactured goods. Many of the islands around the world that are still owned by European countries and the US today are vestiges of the coal era as they were used to store coal reserves for steam ships to refuel with on their way to sell goods to Asia.
China and India, once manufacturing powerhouses, reeled under the onslaught of these cheap products. Attempts to put up trade barriers to protect their domestic industries were pushed aside as Western countries used the iron clad ships and mass produced modern weaponry to force free trade. It has taken China and India nearly 200 years to recover from this imbalance of power that was triggered by the shift from wood to coal.
The shift to oil
Oil today is predominantly used for transportation and to create a range of chemicals needed for other industrial processes. But it did not start off by being used for those purposes; its major use was as a medical ointment. Like coal, people were aware of the existence of oil for thousands of years – Herodotus makes a reference to it over 2,500 years ago. But, also like coal, there was no demand to do anything with this black sticky substance that seeped out of the ground in various parts of the world.
The modern demand for oil came about as oil derived from the blubber of whales started to run out. Whale oil was predominantly used for lighting purposes, either as lamp oil or for candles. Whales had been hunted commercially since the 1400s. Basque fishermen, for example, caught northern right whales as they went to breed in the Bay of Biscay. These large mammals went to sleep on the surface and, when killed, would float, making them easy to catch and handle. The Dutch and the English became major whalers in the early 1600s and the American colonists joined them in the late 1600s and 1700s. The first sperm whale was caught in 1712, which ushered in a new wave of hunting as factory whaling ships went far out into the Atlantic, and then the Pacific, to hunt and then render whale blubber down to oil onboard. This allowed ships to stay out at sea for months at a time and rapidly increased the number of whales a ship could catch. By the 1860s the population of whales had been decimated, which provided the impetus for entrepreneurs to find substitutes for this lucrative trade.
In the early 1840s a Scottish chemist realised that if you distilled oil it was possible to create a number of useful products from the original oil, ranging from a liquid that could be used for lamp oil – which he dubbed paraffin oil – to a thicker liquid that could be used as a lubricant. In 1850 a Canadian geologist created another process that extracted oil from coal, bitumen and shale, which he called kerosene. In 1859 Edwin Drake drilled the first modern oil well in Pennsylvania and the oil industry as we know it today was started.
The oil revolution had a beneficial impact on the whale population, which was being driven into extinction, as it reduced the demand for whale oil, which rapidly became more expensive than paraffin oil and kerosene. It is also worth remembering that whale oil stank, making it quite unpleasant. But the modern era would not have emerged had the oil revolution simply been a substitution of whale oil for petroleum based oils, in the same way that the coal revolution was not simply a substitution of wood for coal for heating.
Oil quickly became used for other activities. It was light, easily transportable and very energy dense. As a liquid it could be stored and piped very efficiently. This made it ideal as a substitute for coal in transportation and certain forms of machinery. A lot of individuals and companies made great fortunes during this era as oil moved from being a source of clean light to a source of advanced mobility.
Oil has had a profound impact on geopolitics. The First World War was predominantly fought using steam engines to transport troops along railroads and horses to bring supplies to the front. While petrol based motor cars existed and biplanes flew over the battlefields they were not in widespread use. The shift to the Dreadnaught class battleship, fuelled by oil, did have a significant impact on the navies of both Britain and Germany during the war.
During the interwar period great advances were made in both the discovery of oil reserves around the world and in the use of oil as a means of transport. One of the great “what ifs” in history is the discovery of oil in Saudi Arabia. Prior to the First World War most of the Arabian peninsula and what is now Iraq, Kuwait, Bahrain, Qatar, had been directly or indirectly part of the Ottoman Empire. At the end of the war the Ottoman Empire had been carved up into smaller countries, of which Turkey was the most populous. In 1922 King Ibn Saud met with a mining engineer to explore for oil in eastern Arabia. Over the next decade other Western companies, including Standard Oil, got rights to explore the area. Oil was discovered in Bahrain in 1932 and in 1938 a major oil field was finally discovered in Saudi Arabia. Had the Ottoman Empire not collapsed when it did, or had oil been discovered in the Persian Gulf region earlier, the Ottoman Empire would have been in a radically different financial and strategic position, which may have allowed it to survive to this day.
The Second World War was driven by oil. At the beginning of the First World War Paris was about to fall. French General Gallieni commandeered all of the taxis in Paris to drive soldiers to the front line in order reinforce the line against the invading German armies. It became very clear how important oil and motor cars were going to be for the military. In 1940 the Americans and British, Chinese and Dutch imposed an embargo on the export of oil and other raw materials to Japan, as a result of the Japanese occupation of much of China. Japan had no indigenous oil reserves and without the oil its military would soon grind to a halt. This embargo was the direct cause of the Japanese attack on Pearl Harbour in December 1941. Germany, also had its own oil problems. Like Japan, it had no indigenous oil resources. Once the war got started in earnest it constantly faced oil shortages, which significantly impacted its ability to wage war.
In the Post War period oil has continued to have a major impact on the geopolitical order. By the late 1960s oil production from the Middle East, and from Saudi Arabia in particular, was so large that political events in 1973 – the Yom Kippur War – and in 1979 – the Iranian Revolution – caused a significant economic impact on the major industrialised nations. These oil shocks triggered a response in the West to become more energy efficient and to seek other forms of supply. Norway and Great Britain developed oil and gas resources in the North Sea and Mexico, Venezuela, Alaska and Texas all became major oil producers.
In 1990 there was a smaller, less dramatic, oil shock caused by the invasion of Kuwait by Saddam Hussein. This resulted in a series of unforeseen consequences that still resonate nearly thirty years later. Frightened about the long term impact of Iraq absorbing Kuwait and the risk of an invasion of Saudi Arabia, the US and other Western powers formed a coalition to liberate Kuwait.
The presence of large numbers of western troops in Saudi Arabia during and after the 1990 Gulf War caused much concern among very religious Saudis. American troops were deemed as occupiers and the demand for all Western troop to evacuate the Gulf region was one of the reasons behind Osama bin Ladin’s attack on the US mainland on 11 September 2001. This then highlighted the possible impact of terrorist attacks on Western soil which prompted the Iraq War in 2003 to overthrow Saddam Hussain, who was suspected of building stocks of weapons of mass destruction that could be used against the West at any time. That war, plus the campaign in Afghanistan, dragged on until 2011, before being replaced by civil war and the rise of ISIS. Since then the West has been targeted multiple times by muslim terrorists.
Thus the last 100 years have seen oil play a major role geopolitically. Its impact was felt in the First World War and was one of the causes of the Second World War (Germany only declared war on the United States after the Japanese had attached Pearl Harbour). It has resulted in a huge transfer of wealth from industrialised countries to the Middle Easter oil producing nations and has triggered wars and terrorist actions that have lasted nearly 30 years.
Oil did not fully replace coal and coal did not fully replace wood. In the same way, the renewables and battery revolution will not replace oil. But the geopolitical impact will be just as profound.
The shift to renewables and batteries
Renewables have existed for centuries. Waterwheels were used by the Romans and wind power was used by the Dutch in the 1600s for a range of activities such as pumping water to drain the land, grinding pigments for paints and sawing wood for ship building. Solar photovoltaics, which is the key driver of the current revolution, are relatively new and became vaguely commercial in the 1970s for specific applications such as electric calculators or powering satellites and remote equipment.
It was only after the 1970s oil shocks, however, that industrialised countries started to put significant amounts of money into the research and development of solar and wind energy. The 1992 United Nations Conference on Environment and Development, held in Rio de Janeiro, raised the alarm that coal and oil usage was changing the climate significantly. After Rio many Western countries introduced a range of mechanisms and subsidies to encourage the commercial deployment of renewable energy in order to curb and replace demand for coal and oil.
Battery technology has also been around for a long time. In 1800 Alessandro Volta (he of “volts”) created the first battery made out of copper and zinc discs separated by paper soaked in brine. Battery technology was adapted to be used in electric cars in 1884 when Thomas Parker produced an electric car and in 1888 another electric car was produced by the German Andrew Flocken. Had there been no whale oil crisis there might not have been a big push for oil based paraffin oil for lamps which means that there might not have been a widespread supply of petroleum for cars. It is remarkable to realise that there is a historical thread that links Moby Dick to World War 2 to ISIS.
The combination of renewables and batteries will have a number of profound impacts on existing companies, the world economy and the geopolitical balance of power.
Impact on incumbents
There are two groups of incumbents that should worry most about the renewables and batteries revolution. Companies and countries that produce and make use of fossil fuels. Lets start with companies first.
The incumbent transportation and electricity companies
All of the major car manufacturers now have serious plans to roll out electric vehicles, in part spurred on by Tesla, which showed that there was a market for high performance electric cars like the Model S and the Model X and for mass market vehicles like the Model 3. Early electric cars had poor battery range of less than 100 miles. Most of the new vehicles being sold in the market now or planned for release in 2018 and onwards have ranges that are are between 200 and 350 miles – more than enough to deal with the “range anxiety” that put off many potential buyers of electric cars.
Electric vehicles have a number of benefits over conventional internal combustion engine (ICE) vehicles. They perform better than most ICE powered vehicles in terms of acceleration, due to the torque generated by electric motors, and road handling, due to the low centre of gravity. They will be convenient to charge, either at home, at work or on the motorway, so there will be no need to travel to a filling station to recharge. For city dwellers and governments they have the added benefit of producing no emissions – which is becoming a major health concern in urban areas.
Electric vehicles are also likely be more reliable that ICE powered cars. There are very few moving parts. This is bad news for anybody involved in maintaining vehicles. Finally, electric charging will create significantly more flexibility for powering autonomous vehicles. While it is possible for an ICE to provide the power for an autonomous vehicle it will be harder to manage than electric vehicles over time.
These innovations and developments at the car level has spurred on the development of electric car charging companies which are laying the infrastructure for the mass charging of electric cars. This is bad news for all companies that are involved in the production, processing and sale of fuels for automotive transport.
Over the past few years millions of homes in the US and Europe have had solar photovoltaic panels installed on their roofs. This decentralised power has started to cause issues with utilities, who have expressed concern that houses are not paying enough for the electricity that they are using from the grid when the sun is not shining. The problem utilities have is that it is expensive to maintain the electricity grid. The grid is paid for by users. So, if there are not enough users, there won’t be enough money to pay for the grid. Utilities have responded to this problem by calling for houses to pay a higher standing charge to cover the grid cost, which has increased the cost for households.
Battery technology solves this problem for households – if all of your power requirements can be met by solar power that is stored in batteries during the day, you can have power at night. The cost of the battery can be offset by the cost of the grid standing charge, which householders don’t want to pay. As more households switch to battery storage the cost for the remaining households to maintain the grid will go up, which will make the switch to battery storage even more appealing. This turns into a vicious, or virtuous depending on your viewpoint, circle.
In the meantime, most of the new installations of electrical power in developed countries today are renewables, either solar or wind. Traditionally, it was electricity utilities that built, owned and operated centralised fossil fuel power stations. This required relatively few generating assets manned by relatively few people. These centralised facilities were very complex to design, build and operate. It was an industry dominated by specialists.
Interestingly, if you look at the historic shareholding register of many of these electricity utilities – and oil majors – you will find that they were predominantly owned by pension and insurance funds. Why? It is because utilities and oil majors have traditionally been very reliable payers of dividends. Dividends provide a great income for retired people. But there is a growing set of problems emerging for utilities.
Firstly, many utilities are in terrible financial trouble, in part due to the fact that large scale wind and solar photovoltaics are able to offer day time power at incredibly low rates. Historically, day time power was the peak profit making part of the day for utilities. Second, they are facing higher costs related to decommissioning of old power plants and taxes linked to emissions and CO2. With lower revenues and higher costs it is increasingly difficult to pay out dividends. There is a final problem for utilities: pension funds and insurance companies are realising that it is not that difficult to own and operate a wind or solar farm. Unlike a coal power station, with its complex supply arrangements and operations, it is relatively easy to run a solar farm. As a result, financial institutions such as pension funds and insurance companies are now the largest owners of wind and solar assets in the world. Not the traditional utilities. This shift will have major implications on oil and gas majors and utilities. The incumbents will suffer and new entrants, who will certify and manage solar and wind installations on behalf of financial institutions will flourish.
The combination of large scale solar and wind energy with battery technology is going to be the nail in the coffin for the traditional utilities. It is incredibly hard for utilities to make the transition to this new world. They are heavily encumbered by staff and pension liabilities and ageing power stations. Their cost of capital is much higher than that of a pension fund, so they will always be more expensive. You can see this problem reflected in their share prices. RWE, a major German utility, had a high of around €100 per share in 2008 and has seen its price slide almost every year since. It is now at €14 per share. EON, another Germany utility, had a share price of around €50 per share in 2008 and has slid down to €7 per share. EDF, of France, has seen its share price drift down from over €80 per share in 2008 to €8 per share.
The incumbent countries for fossil fuels
While it is sad to see individual companies that have been successful for decades wither away, they are just companies. As they die shareholders will drift away and will invest money in new companies that will make it through the energy transition. Employees will also move over to more exiting opportunities.
The impact on countries that produce fossil fuels will be far more dramatic.
First, it is important to emphasise that History Future Now does not think that the renewables and battery revolution will kill off coal, oil and natural gas. That is not the case. They will exist for a long time to come. Oil and natural gas are both used extensively as the feedstock for many chemical processes, plastics and synthetic materials. Parachutes, safety glass, toilet seats, fishing rods, toothbrushes, perfumes, roads, aspirin, deodorant, tires, fertilisers. They all are made from petroleum products. The list goes on and on and on. Coal also has a range of industrial applications. It is used for making steel, alumina – for aluminium, agricultural fertilisers, nitric acid, dyes, plastics, carbon fibre and silicone metal which is used for lubricants, toothpaste and hair shampoo. These products are massively valuable to modern life and it is almost inconceivable that we would be able to live without them.
We will just stop burning them. Most coal, oil and natural gas is burnt as a fuel to generate heat. That heat can either drive pistons directly, as with an internal combustion engine, or indirectly, by boiling water to create steam which then drives a rotating engine connected to an electricity generator. In a world where most transport is derived from wind and solar electricity powering batteries for electric vehicles and most electricity is from wind and solar energy powering batteries, it does not take much to believe that we will reach the effective end of the fossil fuel age within the next 20 to 40 years.
The countries most affected by the decline in oil use are clearly those whose economies are most linked to the production of oil. The World Bank provides a good overview of this. The most affected countries are in Africa, the Middle East and Central Asia. Angola, Gabon and the Congo are particularly affected, with over 30% of their GDP linked to oil and Saudi Arabia, Kuwait, Iraq, Oman have 40-50% of their GDPs linked to oil. By way of comparison, the US – one of the world’s biggest producers of oil – only has 0.4% of its GDP linked to oil and Norway, with its small population, has nearly 6% of its GDP linked to oil. In contrast, coal plays only a small percentage of the GDP of most countries, including major coal producers. Australia, despite being a big coal exporter, has only 0.8% of its economy linked to coal. The highest GDP percentage linked to coal is Mongolia with 5.6%.
So it would be fair to say that a drop in oil demand will result in a drop in oil revenues for many countries that are already vulnerable. The World Bank map below shows the percentage of a country’s population between the ages of 0 and 14 years old. Most of the world’s youth children are now living in Africa and the Middle East. Many of these countries have significant percentages of their wealth tied up in oil. Where will Iraq, for example, with about 40% of its wealth linked to oil, find the money to educate its young population – 41% of whom are under 14? It is also clear that the power and influence currently wielded by oil producing countries will fade away. No one will be interested in fighting wars in the Middle East over a resource that no one wants.
The newcomers. The companies that will win
We have discussed the impact on the incumbents – both companies and countries. What about the winners in the renewables and battery revolution? Lets think back to the coal and oil revolutions. Coal was introduced as a replacement for wood for heating homes. It ended up providing the fuel for the industrialisation of the West with massive steam powered machines producing a range of manufactured goods that were transported on coal powered steam railways and steam ships across the world. Oil was introduced as a replacement for whale oil for lighting homes. It ended up providing the fuel that enabled new modes of lightweight personalised transport; cars, trucks, and airplanes. It also became the raw feedstock for thousands of different products.
Renewables and batteries clearly have a starting point. They are replacing coal and natural gas in the generation and storage of electricity and oil in the powering of cars and trucks. It is likely that any company that is involved in these activities will end up as a winner. Clearly this means electric vehicle makers plus all of the supply chain companies necessary for the manufacture and assembly of electric vehicles. It also means companies involved in the production and supply chains for wind and solar energy. Battery makers and all of their supply chain, including raw materials producers such as lithium, will benefit. It also means companies involved in financing, advising and setting the standards for them.
But as coal and oil started as simple substitutes for existing needs, but became much much more, renewables and batteries are also likely to create dozens of new industries that do not, or barely, exist today. We are already getting some glimpses of the future.
For example, battery powered quadrocopters have evolved from being toys to being used for inspection devices for difficult to reach locations such as bridges, replacements for helicopters in film making and policing to collecting data on farms to then moderate the use of fertilisers and pesticides. Some quadrocopters are being developed as flying vehicles for passenger transport and as delivery vehicles for packages. These are all new uses for batteries that upend existing industries and make new industries possible.
Another example is the electrification of rural parts of developing countries where there is no electric grid infrastructure. Renewables and batteries make the grid unnecessary. Why build a very expensive gas fired power station with a grid when it is cheaper to have a solar or wind farm near users with no electricity grid at all? How about using high flying quadrocopters tethered to solar power and battery chargers on the ground to act as low cost mobile phone “towers”?
Why own a car at all if autonomous electric vehicles can provide you with transport whenever you need? If the cost of electricity from renewables is next to nothing it would make sense to charge peak pricing at certain times of day and to provide low cost transport for the rest of the day, ensuring the vehicles – which have low maintenance costs per mile – are constantly used and generating income.
The newcomers. The countries that will win
If oil producing and exporting countries are the big losers, which countries will be the big winners? Solar, wind and batteries can be split into multiple value buckets.
One bucket is the manufacture of these systems. A big difference between old and new energy is that conventional power is typically large and bespoke while renewables are modular and mass produced. This is clearly an advantage that China and other countries that can mass produce items will have.
A second bucket is the deployment, financing and servicing of batteries and renewables. This will be dominated by local players on the deployment side, while financial institutions and the original equipment manufacturers could do well on the financing and servicing side. This is good for both any country that deploys renewables and batteries.
A final bucket is for new products and services that make use of renewable and battery technology – think DHL and Amazon in delivery services, for example. That can be done by both local companies and multinationals, benefiting multiple countries.
As renewables and batteries are deployed in large volumes a big chunk of value will go to China. They produced the goods, in the same way that Australia currently exports coal and Saudi Arabia exports oil. Ultimately, however, it is the services that are added and created by these technologies that will create real value. The West still has a big advantage in that, though many parts of the world are catching up.
Humanity. The ultimate winner
There is one final winner in all of this. And that is humanity. The burning of fossil fuels is already changing the climate. The only way to get off burning fossil fuels is for there to be a better alternative. And that alternative now exists. It will take time for renewables and battery technology to fully displace the old system – but due to the mass production capability it will happen faster than many people imagine. That is good, despite being be a little late to mitigate against fossil fuel pollution that has already been released. Renewables and batteries are highly decentralised forms of power. That is good for reducing corruption in poor countries and for reducing massive money transfers from resource poor to resource rich countries.
This revolution will change things for a lot of companies and a lot of countries. Change is always hard to manage. But overall, the renewables and battery revolution is a good thing and something for all of us to embrace.
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