Batteries and Utilities

Bryan Caplan reminds everyone to check their assumptions:

…an adage I urge my fellow economists to adopt: “Always keep your eye on production.”  Whenever analyzing an economic problem, you should, by default, ignore longs chains of social causation and ignore distribution.  Instead, remember that mass production is the root cause of mass consumption.  Then ask yourself, “How will whatever we’re talking about change the total amount of stuff produced?”

“Always keep your eye on production” superficially sounds free-market or right-wing.  But it’s non-ideological.  Think about tax policy.  The adage urges us to forget distributional effects and focus instead on how taxes alter behavior – which along many prominent margins, they plausibly don’t.  “Always keep your eye on production” also reminds us to think long and hard about what “production” really is.  When pondering pollution policy, for example, the saying makes us reflect, “Is clean air, like a car, a valuable consumption good?”

This has great application when it comes to energy policy and energy industry trends.  From The Verge:

Earlier this week, during a disappointing Tesla earnings call, Elon Musk mentioned in passing that he’d be producing a stationary battery for powering the home in the next few months. It sounded like a throwaway side project from someone who’s never seen a side project he doesn’t like. But it’s a very smart move, and one that’s more central to Musk’s ambitions than it might seem.

This has been part of the plan for the Gigafactory all along. At an event in New York last fall announcing plans for SolarCity to build a gigantic PV-panel factory, Musk and Rive mentioned that every SolarCity unit would come with battery storage within five to ten years, and that the systems would supply power at a lower cost than natural gas. Those batteries will come from the gigafactory, currently being built in Nevada. Once the factory comes online, the strong demand for energy storage will allow it to immediately ramp up production and achieve economies of scale. Tesla CTO JB Straubel (who has said that he “might love batteries more than cars”) says that the market for stationary batteries “can scale faster than automotive” and that a full 30 percent of the gigafactory will be dedicated to them.

Indeed, SolarCity has already begun installing Tesla batteries…

The prospect of cheap solar panels combined with powerful batteries has been a source of significant anxiety in the utility sector. In 2013, the Edison Electric Institute, the trade group for investor-owned electric companies, issued a report warning that disruption was coming. “One can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent,” the report said, likening the speed of the coming transition to the one from landlines to cellphones 10 years ago. Suddenly regulated monopolies are finding themselves in competition with their own customers.

Last April, Peter Rive, SolarCity’s CTO, wrote that the company had no interest in prompting mass defections from the grid. “When batteries are optimized across the grid, they can direct clean solar electricity where (and when) it is needed most, lowering costs for utilities and for all ratepayers,” he wrote. Utilities are in the best position to direct that electricity, he said, inviting utility operators to contact him. Will Craven, Solar City’s director of public affairs, calls it “infrastructure as a service.”

Utilities aren’t doomed, but they may undergo a radical transformation

It would be a tricky transition, but some utilities may be open to it. During an earnings call last year, Straubel, Tesla’s CTO, said they were working with utilities. “The long-term demand for stationary energy storage is extraordinary,” he said. “We’ve done a huge amount of effort there and have talked to major utilities and energy service companies.”

Another potential bright spot for utilities is Tesla itself. If electric vehicles take off, demand for power will go up, helping compensate for people whose homes are relying less on the grid.

These are really exciting things to think about.  The production of electricity – where will it occur, how will it be stored, will it be distributed, and if so, how?  Then there is production of the batteries and all the electricity producing equipment (solar but also wind, and who knows what else down the line).

As a person who lives in a place that’s kind of remote, with not much sun or wind, these developments are a little scary.  Just as government considers the cell phone and satellite access to internet as a success, when really it is an expensive and very limited kind of access, I can see how this might leave people shut out.  Or at least shut out at a reasonable price.

One thing about the future, it requires broadband, and it requires electricity.



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One response to “Batteries and Utilities

  1. Pingback: Batteries and Utilities | For My Benefit | WORLD ORGANIC NEWS

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