Peter Kelly-Detwiler, Co-Founder of NorthBridge Energy Partners, on 2020 Energy Sector Changes & the 2021 Outlook

Peter Kelly-Detwiler joins us on the Bigger Than Us podcast for the third time to reflect on the past year in renewable energy and predict what lies ahead for wind, solar, batteries, and hydrogen. He draws upon 30 years of experience in the electric energy area and a career in various areas of competitive power markets. He is currently writing a book on the transformation of electric power markets, to be published by Prometheus Books in the Spring of 2021.

COVID’s Impact & The Future of Renewable Energy

(1:51) We were looking at 2020 as being a year where we expected a lot of progress in the renewal space and then came slamming square into that COVID phenomenon that sort of wrecked everybody’s expectations. But only for a while.

Solar

(2:15) The thing that was so astonishing to me was that the solar industry, for example, picked itself up. Especially residential, solar, but utility-scale as well, developing tools around virtual sales, for example. So actually, the pipelines were fuller, because people weren’t driving around meeting folks, they were able to call people and catch them at home. Pipelines actually swelled bigger than they were before for some of the larger players.

Some of the companies like Sunrun said, “Oh, we were planning on digital investments for ‘21-’22, and we advanced those to 2020 out of sheer survival. Sunrun did something this year, which blew my mind. It’s a residential installer, largest in the country. They sold the deal in the morning, digitally permitted it by say midday, and had the panels on the rooftop that night just to prove they could do it.

I was listening to Philip Shen from Roth Capital this morning and the SolarWakeup Crew as well, and they were talking about how batteries are also coming into the residential solar space. In fact, they expect 30 percent year on year growth coming into the first quarters in 2021.

The biggest challenge with storage right now is the attach rates. For example, in California, the attach rates are as high as 50 or 60 percent. If you’re selling solar in some markets, you’re attaching storage, it’s fifty or sixty percent of your sales. They said they can’t get the inventory. The batteries simply aren’t out there right now. So that was kind of an interesting and positive surprise.

The Solar Forecast

(31:37) They are improving by about a half percent per year on conversion efficiency just because of things they’re doing with the cells in the manufacturing, then they’re making the form factor is bigger. So that, you know, we see these 300 to 350-watt panels right now. Well, some of the companies are now looking at 800-watt panels, bigger panels, which means the balance of the system gets cheaper because you’re racking in all your other things, inverters you don’t need as many of them. So that ecosystem is going to get cheaper over time.

(28:23) SEIA, the Solar Energy Industries Association indicates that they expect the number of solar projects to double between 2021 and 2023. You’re going to just see this enormous explosion of activity.

Wind

(3:52) The turbines now onshore Vestas, GE even on six-megawatt platforms offshore. Now GE is how it was supposed to be, the cat’s pajamas, and then Siemens Gamesa with its 107-meter blade, then Siemens Gamesa comes in and says now we get a 14-megawatt machine extensible to 15 with a 108-meter blade.

The Wind Forecast

(32:12) The turbines are just getting bigger. And if we look at offshore wind, where I mentioned the 15-megawatt turbine from Siemens Gamesa, that’s fixed to the ground. Now, what they’re looking at next is floating wind. You’re already seeing these eight-megawatt floating platforms floating around off of Europe. But with floating, you don’t have the stresses of a fixed structure anymore.

Batteries

(4:17) If you have a chance, go and check out the YouTube of Tesla’s Battery Day. It’s absolutely astonishing how they have planned to drive down the cost of batteries, and it’s emblematic for what’s going on across the whole industry.

The Battery Forecast

(30:30) Battery chemistries are getting better. And the costs fall because of this thing called rights law, where every time you double global cumulative output for manufacturing prices fall by X. It’s roughly in the 20% range for batteries, 25% for solar panels. So just the efficiencies get better for manufacturing, but then the chemistries get better.

(28:45) Then look at EV charging. There’s only a couple of cross country networks right now, for electric vehicle charging. These things are going to be up to 350 kWh, which is the size of a grocery store instantaneous drive at peak demand.

Policy

(4:33) Despite federal policy, state policy pushed really hard, as did local goodwill national governments. Here’s China saying zero carbon by 2060, Japan, I think their number was 2050. UK and Boris Johnson saying they’re going to take an internal combustion engine ban and advance it from 2035 to 2030. So all across the landscape, both politically and technologically and with steel in the ground projects, there was tremendous progress made.

I saw something from the research firm IHS Markits that by 2025, they expect cue of investments in renewables to top $1.3 trillion. So you can see that the clouds are not only gathering here, it’s already starting to precipitate good news.

The Emerging Hydrogen Economy

(33:53) Why hydrogen is so critical is that last 30 percent of storage in the power grid for the days when the wind doesn’t blow for a couple days, and the sun doesn’t shine, and you need that backup storage that four hours of batteries won’t give you. But then the next question is, what’s the hardest nut to crack in the whole energy ecosystem and its industry in its application or thermal processes?

We’re really good at huge infrastructure projects, steel in the ground, massive platforms, pipelines, all that. So let’s take what we know, and convert that over to that little hydrogen molecule.

So for example, the steel company SSAB out of Sweden, they represent 10% of total emissions from the country of Sweden and 7% of Finland’s emissions, one steel company. They’re under tremendous pressure around carbon because they see taxes on the horizon, etc. The EU just announced they’re going to get real serious about carbon and the price, actually, the price of carbon just jumped in Europe last week because of some announcements out of the EU. So these guys at SSAB, they’re looking at using hydrogen. They’ve already tested it rolling steel to see if it could be applied to steel as evenly as natural gas can when you roll it out. Then Thyssen Krupp the company I mentioned before, they’ve already used hydrogen in the injection ports in their blast furnaces.

Then there are a number of gas distribution companies that have said they’re going to reformulate or rejigger 25,000 kilometers, so roughly 18,000 miles of gas pipelines with 75 percent existing gas, 25 percent new, to hydrogen. There are some challenges because hydrogen and brittles hype pipelines and hydrogen is a simple molecule, so it likes to escape because H2 can go anywhere and CH4 can’t.

These are all sort of pie in the sky formulations, but we’re starting to see the first huge hydrocarbon mining companies. Others know the end game is visible already for oil and gas, and a lot of that’s going to be left in the ground. But what are we good at? We’re really good at huge infrastructure projects, steel in the ground, massive platforms, pipelines, all that. So let’s take what we know, and convert that over to that little hydrogen molecule. And that will help us decarbonize industry and the rest of transportation. Airbus, for example, is working on a hydrogen plane, because we know we have to decarbonize flight as well.

Look to 2021 to see the drumbeat get louder, and louder and louder around the emerging H2 economy.

Ample Green Job Opportunities

The next 10 years are going to be off the charts fascinating because that’s where we essentially lay the groundwork, from both policy and tech dev to get us to where this thing sort of unfolds and we see it in all its complexity, majesty, and challenges.

(25:51) Just as an example, let’s look at offshore wind. There are 29,000 megawatts of state-level commitments. 9,000 from New York, 5,000 from Virginia. To build offshore wind, we don’t have any of that infrastructure yet. We don’t have the ports. We only have one jack-up ship to go out there, put their feet in the ground, lift themselves up off the ocean, and sit there in space and help you put the turbines together. That entire ecosystem, where the first installation started going in, in the next year and a half, two years, that all has to be built from scratch.

They estimate that roughly $70 billion industry right there, right with the projects and the acreage that’s already been leased out by the Bureau of Ocean Energy Management. So that space has to grow a lot.

Now, let’s look at something entirely different: FERC order 2222 which basically says to the wholesale market operators, New York, ISO, California, PJM, etc, “thou shalt create an operating model that allows distributed energy resources to participate on par with wholesale generating assets.”

So, what does that mean? When Chairman Chatterjee was talking about it, he cited studies suggesting the size of that resource could range from 65 gigawatts or 65,000 megawatts to north of 380,000. That’s a 387,000 estimate from Wood Mackenzie by 2025 of potential demand response and distributed energy resources that can interact with the grid, and flex in response to grid conditions and prices.

That is arguably one of the largest data plays in the history of humanity. Because all those assets, all those hundreds of thousands, and millions of assets are going to have to interact with the grid. Ultimately, I’m finishing up a white paper for a client right now where I estimate the numbers to be in the roughly 5 billion transactional levels within the next decade, and potentially more if you think about an EV or a battery that’s interacting with the grid every day. First of all, it’s always on. And then there are all these transactions. So data scientists, AI, big data, engineers, solar installers, solar energy information.

Then there’s the whole hydrogen economy, which is just starting to get some legs as well. And so right now, you can kind of look and see we are remaking the entire energy industry globally. Again, some estimates are $30 to $50 trillion by 2050. My point being almost any place that electron touches humanity right now, there is significant room to make change.

If you’re interested in this space, have a look and see what’s out there. That change is happening across the entire ecosystem, from the customer side of the meter to these massive platforms offshore. The entire planet’s going through this conversion. The next 10 years are going to be off the charts fascinating because that’s where we essentially lay the groundwork, from both policy and tech dev to get us to where this thing sort of unfolds and we see it in all its complexity, majesty, and challenges.

Moving Forward With Love and Abundance

(37:10) This last year was a year that was full of sadness and deprivation. And it was also a year of tremendous hope. In the late 80’s it was all about “What are we going to have to do without?” And now for the forest time, I think this year it becomes visible to me that we actually stand a very good chance of pulling off a sustainable economy where we can create more abundance and more wealth.

It’s like what CEO of Green Mountain Power Mary Powell says, “You have to do this with love, and you have to do it out of a sense of abundance.” And this is the year I sort of moved into that mindset in my head and in my heart, and really believe in my marrow that we actually can pull off this the greatest transformation humanity has ever collectively tried to accomplish.


www.peterkellydetwiler.com

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