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Episode-2103- Business Model Innovation Equals Disruption

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This is Only the Beginning, The Real Question is How Fast will Things Shift?

Recently a listener sent me a video presentation by Tony Seba called Clean Disruption – Energy & Transportation.  It really causes one to think a great deal watching this.  I want to point out today that I don’t feel this guys is 100% right, in fact early in today’s presentation I am going to read a quite harsh criticism by our own John Pugliano on this presentation.

I tend to fall somewhere in the middle on the three things Mr. Seba Brings up in the presentation between Seba and Pugliano.  These four factors are the cost and availability of…

  • Cost and efficiency of solar electric generation
  • Cost and efficiency of power storage (batteries)
  • Cost and efficiency of electric vehicles
  • Cost and efficiency of autonomous vehicles

For my analysis of what this all means today I will consider that Mr. Seba is 50% wrong.

Still that makes what is coming in the next 20 years, absolutely earth shattering.

Join Me Today As We Discuss…

  • What is the cross over point where everyone will have “some solar”
  • What is the cross over point where everyone will consider an electric vehicle
  • What is the cross over point where people will choose transportation as a service
  • Why I believe this is all coming, smart people can’t see what is obvious
  • Seba’s basic contention is anything highly underutilized is subject to massive disruption
    • The average car costs 10K a year to drive and sits unused 94% of the time
    • A typical power gen company has a third of its generation capacity used only 6% of the year
  • Some claims Seba Makes
    • Storage of power for an average home will cost a dollar a day by 2020
    • By 2022 a 200 mile range electric car will cost about 22K
    • Solar will double every two years and in 14 years will generation most of the worlds power
    • Solar will hit grid parity then “God parity”
    • Solar will hit grid parity in 80% of markets by 2017s end
    • 69% of large corporations are planning to or already using solar
    • God parity is when the cost of transmission is greater that the cost of local generation
    • Cost of generation on a roof top in a good solar area will be 4cents a kwh by 2020
    • Cost of solar plus storage should be 7-8cents per kwh by 2020
    • Some utility scale solar is now already under 3cents per kwh
    • Tuscon Electric is currently running utility level solar and storage at 4.5 cents
  • What all this really means

Resources for today’s show…

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Below is the Presentation by Tony Seba
Referred to in Today’s Show

Comments

Episode-2103- Business Model Innovation Equals Disruption — 35 Comments

    • Protectionist policies won’t protect utilities forever. Eventually the market will demand change if it’s currently prevented by regulation.

      I hope we can innovate to give customers what they want without having to rely on the force of the state in the meantime.

      Disclaimer: this is my opinion alone and I do not speak for my company.

  2. Hydro Power=cheap electric rates.. This might be your floor.
    Washington State has lots of cheap power so much so that cyrpto mining is happening on large scale in Chelan county.

    Beginning Jan. 1, 2012, Chelan County PUD moved to a flat residential rate for electricity of just 2.7 cents per kilowatt hour. That’s one of the lowest rates in the nation. This new approach to rates will lower bills for most residential customers.

    http://www.chelanpud.org/my-pud-services/rates-and-policies

    • Similarly, Idaho currently generates more of its power from ‘renewable’ sources than any other state, something like 88%, virtually all of which is hydro-electric. Most of the state pays under 8 cents per kWh.

      A problem with solar electric is that even if the eventual cost per kWh is lower than coal, natural gas, or hydro, it will take many years to recover that upfront investment. I have no doubt that this move toward solar power is coming, but I think that Jack’s timeline is a bit too ambitious. Right now, solar power comprises one-half of one percent of the U.S. power supply. Even if that were to increase by a factor of twenty, it would only represent ten percent. That will probably happen but not in a handful of years. The physical infrastructure and financial challenges are too steep to be cleared in a short period of time I think.

      • How did you get that my timeline was too ambitious? Are you confusing my timeline with Seba’s?

        • Yes, I was referring to Seba’s claims; I apologize for the confusion. I’d say that his timeline is at least five years too early.

        • Okay that makes sense, I think you are close on that by the way, with one exception, I don’t think it will be 2027 or 2033 that we are at 100% solar, I think that is total bunk, but I do think solar will grow and continue to double up to about 35-50% before really slowing down.

    • We get power from Avista in eastern Washington as well, but it goes for about 8 cents/kWh here for the first 800 kWh a month, then steps up to almost 9 cents. Still, it’s well below the national average, and power outages here are very rare (only two significant outages in the last 25 years), likely due in large part to the relative absence of severe weather in the area.

  3. I used to work for SEL, which is an electronics company in Washington state that makes control equipment and software for the electric power industry. The local utility, Avista, has been experimenting with solar and wind for several years, even though it is 50% hydro and selling some of the cheapest electricity in the country. SEL was hosting a “flow battery” prototype test facility in its parking lot when I left.

    So it’s happening. I don’t try to get too analytical about it, though. The way I see it, the winning strategy is to stay flexible, and be prepared to help others. The future has a lot of possible twists and turns in it.

    • Hey Larry! I’m down in Lewiston, where the “new” SEL plant went in. Glad to have more industry here in the Valley. I’m in your boat: just stay flexible and eventually we’ll switch over, when the price is right.

    • I finally got around to watching the Seba presentation…so now I can comment a bit on what he actually said, and not just the concept in general. But this is a bit off-the-cuff, as I didn’t take notes.

      First, it was hard for me to tell what point he was trying to make. It was almost like he was giving investment advice; these are the companies that will grow big time in the next 5-15 years…

      I am 63 and lived through several of these “disruptions.” Yet, I didn’t feel that disrupted by any of them. Companies came and went, print went out and electronic came in, but I just followed along. Maybe it helped for me to be working in electronics! I felt a lot more disrupted by the move of electronics manufacturing abroad, which might qualify as a “business model innovation” but wasn’t really a tech disruption.

      There was an earlier period in our history (1990s) during which EVs gained popularity (this is an example – I think it has also happened in other areas). It happened through a GM product called the EV1. That product literally got killed. People were starting to like it. There were LOTS of potential customers, but GM was somehow forced to stop making it. So there is more at work here than cost curves.

      Seba mentioned “no electric airplanes.” That’s not technically correct. Solar Impulse is only one example of an aircraft propelled by electric motors. Lighter-than-air vehicles can also use such motors, and with new designs and materials, can travel quite fast. Traditional aircraft also have some competition from “frictionless” trains, like the Maglev concept. There is also fringe talk of other propulsion systems that have been developed in secret.

      Where technology seems to be headed is towards a greater need for electric power. Not the traditional 120 VAC that comes into your house, but specialty power sources, like high-voltage, or high-current, or portable. Some argue that conversion of mechanical power into electricity wastes energy, and that solar panels are also quite inefficient. But that doesn’t change the basic trend towards electric motors, which as Seba pointed out, are quite efficient.

      But I’m much less concerned about what exact technologies will solve our problems best and much more concerned about how they will be implemented. In recent history we already have on record the forcible introduction of gas automobiles in cities, which replaced a well-developed electric train system, which then later on had to be rebuilt. We hear talk of AI (robots) taking over many types of jobs, and of sinister plans to reduce the human population on Earth. This does not sound to me like a fun time. I doubt that even preppers will be able to totally avoid the consequences of such a shift, should things go in that direction. What we seem to lack and desperately need is more data about the development of societies similar to ours in other times and places, so we can make better decisions about how we want things to turn out this time. Some will laugh and say, “but that data doesn’t exist!” I have reason to believe, though, that it does, and that all we need to do is locate it.

      • “Mag Lev”

        Now this is underutilized tech and it is all about electric. The problem with trains is they go from point A to point B so “no body uses them”. So says the hard right, but the hard right on this issue has its head up its ass.

        Now here in Dallas, DART is a poster child to make the rights case against trains. You have the 9th largest city in the US (Dallas) and the 14th largest (Fort Worth) about 30 miles apart, Both are exactly 20 miles from one of the biggest and most used airports in the world (DFW) and how much of this is connected by train, NONE.

        Any planner with a fucking brain laying out a train system in DFW would have first connected Dallas to Fort Worth, then both to the airport and people would use that like mad, I know I would!

        With Mag Lev though we are talking a whole new paradigm not moving around a metro area but moving around a nation.

        We are talking if they would build it a train that could get you from DFW to Saint Louis faster than an airplane with all things considered. Like not sitting around for 2 hours waiting to get on the plane, etc. Dealing with “oversold flights” etc. The trains can just add cars for capacity and shed them for efficiency.

        And the entire they only go from A to B argument is moot, so do airplanes.

        The key with trains is reduction of the number of stops. They need to run routes just like planes, not stop at ever two bit town, because at the speed they can run they take a while to speed up and slow down without splattering passengers on the windows.

        When I lived in PA I used the trains all the time, because it was less a pain in the ass than flying and they actually went were I needed to get to. Additionally they were a LOT more comfortable, you could actually do work on them, walk to the dining car, have a snack and a beer, etc.

        With maglev we are talking 300 MPH technology. No it ain’t the 500 MPH of a 757 but it is a lot easier to manage and lot more efficient. You can buy a ticket and get on a train for that route ANY TIME. You miss the 4 oclock train, fuck it have a beer, go see one more site and then catch the 630 train. You don’t get “bumped off” no fucking “gate changes”, etc.

  4. http://Www.trunews.com has gone to many expos on the future including AI, autonomous vehicles and the like. The auto industry is positioning itself to be a commodity in the futur. People won’t own, they’ll subscribe for a vehicle. You’ll dial a ride by 2025 so this might be a moot discussion. No one will drive, just sit and watch a movie, fb, or do reports. Whether the vehicle is gas or electric will be a corporate decision.

    • The objection is always but sometimes people want to just go now, sure you can schedule a daily commute to work, but what about when you and the wife just want to go to dinner at the spur of the moment?

      Um, okay while I was in Asheville we took Uber every night we went downtown to dinner, this way would could drink and not worry about DWI and didn’t have to deal with parking.

      In every instance I summoned an Urber when we left the room and got in the elevator, every time the car was there within 5 minutes, twice it was waiting on us when we came out the door. Getting back after dinner we never waited more that 5 minutes.

      Seems pretty on demand to me and it is only a glimpse of where we are headed.

  5. news about garbage disposal problem !
    ist a scam, they just want your taxes and your work !
    why do i know ?
    my local waste dump company as severall fully automated waste separation lines that separates all materials and balle it up for transportation and for resale.
    Organic materials are anerabobic digested and used to power the facility and still sell electricity to the grid.
    the company also collects used cooking oil and transforms it in to biodiesel for the dump trucks and bobcats.
    finally were the kick this machine is almost 20 years old and the company that build it ? from texas…

  6. The regular electric bill in Ulaanbaatar that we get doesn’t have the current cost/kWh on it (it’s just a small slip of paper taped to the door every month and/or a text message with the amount due), but going to the utility’s website it appears it comes out to a little over $0.04US/kWh. How much that low price is due to abundant coal resources and how much due to a somewhat depreciated local currency is hard to say, but I do know some of the smaller cities and towns near coal mining operations have it even cheaper. For a large 2BR apartment (with electric water heater) our average monthly bill ranges from $20-30US, whereas in Denver (with a slightly smaller apartment) it cost us probably around $50-60US (personal bill plus our share of the apartment complex ‘community area’ electricity use). Is the savings worth the dirty Soviet-era coal power plants’ smoke exhaust? Probably not, but it is what it is. I’m not as optimistic as Mr. Seba about solar either, but for our sake I really hope he’s not far off.

  8. Wisconsin
    Energy charge: $0.117/kWh

    Total cost including “customer charge” and taxes $0.148/kWh

    You have very low cost electricity Jack.

  9. There is one thing that all the electric car people are ignoring: there are no electric airplanes. As long as you want kerosene for airplanes, there is a need for oil. When distilling oil, there is a certain fixed amount of each of the different fuels that gets produced as distillates at certain phases of the distillation process.
    Kerosene is only a small fraction of what comes out of one unit of oil. The largest part is heavy bunker for ships (which is also needed as much as kerosene for airplanes).
    What are we going to do with all the petrol and diesel, that comes out of the distillation process before kerosene, when most cars are electric? Flame it off like the excess gas on drilling rigs?
    Don’t get me wrong, the transition to electric vehicles will come, but the time horizon to where it becomes a majority of vehicles is way out still, IMHO.

    Anyway, from an environmental stand point, electric vehicles are pure catharsis, IMO. Changing modern agricultural systems and the related global deforestation would do a lot more to “save the climate” than all of this pseudo-green car business.
    Just my opinion. BTW, I’m an environmental scientist, not some oil lobbyist, just in case you wonder. I’m just really concerned that all this cathartic pseudo-green stuff does more harm to the environment that it prevents.

    • The refineries can change the percentage of given products coming out (to some degree) by changing the cracking process parameters.

      In addition, turbines will run on a lot of fuel. I work for a company that rebuilds them. One of our common upgrades is to convert the fuel nozzle so they can use either gas (Natural gas) or liquid (diesel etc.) fuels. It won’t be wasted, too high of an energy density to waste!

      The NG is mainly flared due to relatively low energy density (compared to oil) and lack of pipeline access to transmit it.

      • I am going to add the US military has been experimenting with aviation fuel from coal, and it ain’t cuz we are “running out of oil”. https://www.flightglobal.com/news/articles/coal-jet-fuel-of-the-future-221766/

        As oil use declines you do end up with some of the issues by the OP, but with coal you can pretty much make anything you want without a ton of crap left over.

        And we are the Saudi Arabia of coal and if coal isn’t really being burned much in power plants well…..

    • Claude, I 100% agree with you man. A lot of this is feel good nonsense.

      Saw a post not too long ago on LinkedIn how the UK is at 25% of their electricity through renewables…. Yeah, where are the VAST majority of their renewables from??? Burning trees imported from the US.

      Cutting down trees in North America, putting on large ships that are powered by fossil fuels to burn in the UK to meet their renewable goals, hey that’s just good for the environment! Let’s really save the environment and do this everywhere!

      But hey, it makes us feel good.

      I’ll continue to argue until I’m blue in the face that if one truly wants to be green he’s going to have to cut his consumption back SIGNIFICANTLY. No more flying. No more cruises. No more this, no more that.

      MIchael Blue Jay and some others walk the walk, but not many more. I certainly won’t.

  10. Great Show Jack.

    On the commercial / industrial side, I can create solar with storage project for a 5 mega watt system for 4 cent per kWh without incentives. This is upstate NY. The problem for the commercial customer is footing the cash for multi-millions of dollars. A PPA for the same system comes in at PAR with current industrial rate (delivery and supply) of sub 7 cents and makes it partially feasible but the escalation clauses are often a concern. There is an opportunity here and I am working on creating a public benefit corp to address it. Specifically, I am going to marry cryptocurrency crowdfunding to finance large commercial industrial clean energy projects.

    Also, I see technology like Rayton Solar and probably others yet to be invented will help with the timelines presented although I think their will be Hydro, Geothermal, wave and other renewable technology for a long time. http://www.raytonsolar.com/ “Aiming to manufacture solar panels 60% cheaper and 25% more efficient than the market standard.”

    • ” Specifically, I am going to marry cryptocurrency crowdfunding to finance large commercial industrial clean energy projects.”

      Do keep me informed about this!

    • 25% MORE efficient PV panels is still less than 20% efficiency. You can lower the price per kWh all you want but with 20% efficiency, I’ll even give you 25% at best, how are you going to have the space to run the average American household without SIGNIFICANT reduction in electricity consumption? And I’m only talking electricity here, not total power.

      In Atlanta we get on avg less than 200w per square meter sunshine. A panel with 25% efficiency(which is extraordinarily high) that’s 50 watts per sq. meter.

      Lets say an avg family consumes 40kWh a day. How many square meter panels will it take to run that???
      A hell of a lot more space that’s available.

  11. Regarding garbage: what do you think of home-scale biogas as a start to a solution? Is that a reasonable solution to much/the majority of our organic waste or is that just too strange to be incorporated in to the average American home? I’d love a little disposal that I drop all of my food waste into (like a traditional garbage disposal, but less water) and automagically produces gas for cooking on my range and/or grill. Couldn’t existing septic companies pivot slightly to incorporate servicing those systems as well? I may be missing something, but this seems like a win.

  12. 1. I work for a non OEM company that rebuilds gas turbines for power plants. I about **** my pants when I put the dots together of batteries being cost competitive with peakers! (Glad I’ve got my side hustles!) In addition to batteries, ABB also has a newer micro flywheel power stabilizer that isn’t much bigger than a shipping container.

    https://library.e.abb.com/public/e13f1d26d87e9167c1257c37002e38bf/9AKK100580A2551_Powerstore_Brochure_EN_HR_(Dic2013).pdf
    http://www.npr.org/2017/10/16/558103413/after-hurricane-power-outages-looking-to-alaskas-microgrids-for-a-better-way

    Peaker turbines will stick around a while until they hit end of life cycle or storage installation is cheaper than turbine rebuild pricing. I will add the OEMs have gotten VERY aggressive in keeping market share for rebuilds of the existing turbine fleet.

    2. The first thing I found on power transmission cost is from Wikipedia saying it is roughly .2 p per kWh, which is roughly .3 cents per kWh. That’s in the UK. I’m sure the US is similar or a bit higher because of lower population density.

    3. I also see the car switchover happening slower than Seba does. Cars are in large part an emotional decision instead of pure financial. I think a $40k electric SUV may be a bigger tipping point than a $22k car.

    4. To add to the cherry picked data on the increasing rate of change, comparing electronic equipment rate of change to automotive, with very different lifespans and MTBF, is apples and oranges.

    5. I also see rural areas hanging on to ownership (gas or electric) longer instead of a subscription model. I could see scheduling pickup times for work, etc., but people like to go NOW even if just one is kept in a household (besides trucks).

    6. Crazy space: 200 mile range for an electric car means most people could charge at home and use the extra power at work to help balance grid. Or charge at work and feed the grid at night reversing the direction of transmission on the grid (even more than net metering).

  13. As to Tony Seba- wasn’t negative on the tech, mostly about his delivery- I was shooting the messenger. He may (or may not) be a libtarb, but his audience was. These are the same fossil fuel haters that a decade ago cried Peak Oil and now are saying that it will be worthless. My thoughts are that it’s ALL GOOD. Tech is going to make everything more efficient- from solar energy to coal mining. We’re going to be awash in cheap energy and technology. It’s going to disrupt MANY established institutions and lots of people will lose their jobs. The “efficiency” or “profit” will be used to create some type of UBI…which will eventually lead to some type of eugenics program…but that’s a whole other can of worms.

    • Yea in a classic sense I would say he was throwing the crowd “red meat” but with those twatwaddles it was more like red beets I guess.

      I had no problem with his tech assessment at a macro level, nor did the cherry picking bother me. Cherry picking here is so and so did X for Y cost in Z number of days. It may be cherry picking but it is proof that X, Y and Z are doable.

      My issue was some of his numbers just don’t make sense! Like his cost of transmission being higher than what I pay for electricity. That phony number brings down the entire time line and simply breaks it.

      I still say when solar hits 7-8 cents a kwh for generation and storage almost every business with the ability to install it will, most Americans of any level of means will as well and it is going to be a shift of shifts when it happens.

      The question is how far out are we from that?

      Electric cars, on that one, it already happened, people just don’t know it yet. That is one thing Seba is dead on about. We see the Nissan Leaf today like the average NYC citizen saw that horseless carriage in 1900, as a novelty.

      What appeared to be a novelty had already changed the world, the effect just had not been observed yet.

      When Red Neck Duck Farming F-350 Driving Jack Spirko looks at a Nissan Leaf for 35K and says, “almost had me, just needs to be a bit bigger, and have a bit more range”, it is already game over before the opening kick off even happened.

  14. I couldn’t help but comment on the trash portion you touched on at the end of this podcast. I am an Electrical Engineer and work in the field of industrial automation. Over the years I have gotten to see and/or be a part of some really cool projects. My local community has long had an incinerator for area trash. There is a lot of industry here, so the trash is used to heat water into steam.

    That steam is then sold off to the local factories which are connected to it through a pipeline. Recently it was upgraded to be more eco friendly. That not only included burning more efficiently, but also adding an automated sorting facility. There is still some level of human intervention in the sorting process, but, for the most part, it is fully automated. The trash is dropped off by truck.

    The trash is loaded onto conveyors and run through the sorting equipment. Cardboard is separated out and automatically banded to be sold off. Metal is separated out and compacted to be sold as scrap. Etc… Change is already coming in this area. Even a trip to our landfill is not the same as it was when I was a boy. Everything there is sorted out and sold off.

    Make sure your trailer is pre-sorted before going to empty it or you will be in for a rude surprise when you pull up to the attendant. Shingles. Metal. Carpet and plastic. Most everything, except biodegradable construction waste, is recycled. Everything has to be sorted.

    This is small town upper-midwest USA. I have to imagine it will be implemented or has been implemented in many other areas. The trash system is not far from being fully automated here, just waiting on those self driving trucks.

  15. I’m in southwest VA. I pay an aggregate of around 10 cents per kwh. It’s about equally split between power (2.5), fuel surcharge (2.5), transition costs (2.5) and taxes (2.5).

    Solar at my house less than 10 cents is a winner…but the power company has these other costs to overcome to get power to my house.

    Solar at home would also lock in the price in today’s dollars. It’s a 20-30 year investment so 2-4% a year adds up.

    If everyone went solar there would be a large ‘tax’ issue.

    They are putting public water to my small town soon and I’ll have to pay a $11 per month non-user fee. Mental I’m framing it that for $132 per year I have water available if my well has a catastrophic issue. This model could appear if too many people unplug from the power grid.

    Great show…cheers.

    • Having solar doesn’t mean you’re off grid. How many people are going to go truly “off-grid”? I highly suspect that number to be incredibly low. Won’t even register a blip on the system.

  16. Who sets the price per KW ? They can make it anything they want it to be ! Checks and balances are just bought off at this level.

  18. Had to post this ab EV.
    http://www.dailymail.co.uk/sciencetech/article-4809570/National-Grid-issues-warning-electric-car-charging.html

    “Writing in the report, its authors said: ‘The average household is supplied with single phase electricity and is fitted with a main fuse of 60 to 80 amps.
    ‘If one were to use an above average power charger, say 11 kW, this would require 48 amps.
    ‘When using such a charger it would mean that you could not use other high demand electrical items without tripping the house’s main fuse.’

    An average size battery charger is 3.5 kW, equivalent to a fast boiling domestic kettle’s electricity usage, would take about 19 hours to charge one of these batteries from 25 per cent full to fully charged.

    An even more powerful 11 kW charger could take a Tesla Model S with a 90kW battery from 25 per cent full to fully charged in just six hours.
    But this would place enormous demands on the power supply of your home.
    And boiling a kettle would be enough to tip this over the edge, resulting in the house’s main fuse tripping.

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