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UBS: Time to join the solar, EV, storage revolution

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Leading investment bank UBS says the payback time for unsubsidised investment in electric vehicles plus rooftop solar plus battery storage will be as low as 6-8 years by 2020 – triggering a massive revolution in the energy industry.

“It’s time to join the revolution,” UBS says in a note to clients, in what could be interpreted as a massive slap-down to those governments and corporates who believe that centralised fossil fuel generation will dominate for decades to come.

UBS, however, argues that solar panels and batteries will be disruptive technologies. So, too, will electric vehicles and storage.

By the end of the decade, it says, the combination of will deliver a pay-back time of between six to 8 years, as this graph below shows. It will fall to around 3 years by 2030. Right now, the payback is probably around 12 years, enough to encourage the interest of early adopters. You can read more here on Why EVs will make solar viable without subsidies.

UBS solar payback

The UBS report is focused on Europe, where it says that Germany, Spain, and Italy will be leaders because of their high electricity and fuel costs. But it could equally apply to Australia, which has both high electricity and high fuel costs, and a lot more sun – so solar is much cheaper.

UBS forecasts that  EVs and plug-in hybrid will account for around 10 per cent of the market in Europe by 2025. “While the initial growth should predominantly be driven by incentives and carbon regulation, the entry into the mass market should happen because EVs will pay off,” it says.

UBS EV“The expected rapid decline in battery cost by (more than) 50 per cent by 2020 should not just spur EV sales, but also lead to exponential growth in demand for stationary batteries to store excess power. This is relevant for an electricity mix with a much higher share of (volatile) renewables.”

In this decentralised electricity world, UBS says, the key utilities’ assets will be smart distribution networks, end customer relationships and small-scale backup units.

Those utilities that are able to move with the times – and the technologies – should be able to extract more value in (highly competitive) supply activities, as customer needs will be more complex.

Those that favour the past face impending doom.

“Large-scale power generation, however, will be the dinosaur of the future energy system: Too big, too inflexible, not even relevant for backup power in the long run,” UBS writes.

The timing of the report is noteworthy, given that what used to be Australia’s cleanest and greenest energy utility, AGL Energy, on Wednesday doubled its bet on coal remaining the dominant fuel in a centralised system. The Abbott government, meanwhile, is betting the whole Australian economy on a similar assumption.

UBS says centralised fossil fuel generation  will become “extinct” – and it will happen a lot sooner than most people realise.

“Our view is that the ‘we have done it like this for a century’ value chain in developed electricity markets will be turned upside down within the next 10-20 years, driven by solar and batteries.

“As a virtuous circle, lower battery cost will also spur EV sales, which should bring further economies of scale to batteries, also for stationary applications. Power is no longer something that is exclusively produced by huge, centralised units owned by large utilities.

“By 2025, everybody will be able to produce and store power. And it will be green and cost competitive, ie, not more expensive or even cheaper than buying power from utilities.

“It is also the most efficient way to produce power where it is consumed, because transmission losses will be minimised.

“Power will no longer be something that is consumed in a ‘dumb’ way. Homes and grids will be smart, aligning the demand profile with supply from (volatile) renewables.”

This will put enormous pressure on utilities and centralised generators.

“The closer utilities are to the electricity user (both residential and commercial/industrial), the better they should fare in a decentralised electricity system,” the analysts write.

“We think large-scale power plants are the structural losers from this trend, as they are too big and most of them are too inflexible. ”

It predicts that most large scale centralised plants could be gone within a decade. “Not all of them will have disappeared by 2025, but we would be bold enough to say that most of those plants retiring in the future will not be replaced.”

And it torpedoes the theory that the retirement of some more expensive plants (the merit order effect) will cause a rebound in wholesale prices.  “The last survivors will be the low-marginal-cost plants ,” it says. “We believe that what is perceived as an ‘optionality’ in conventional power generation by some investors will never materialise.

“Large-scale power stations could be on a path to extinction.”

 

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  • adam

    “It predicts that most large scale centralised plants could be gone within a decade.”

    There is a lot of headline chasing nonsense out there these days and I think this fits that category.

    On a serious note, has anyone got any good modelling on charge cycle simulation/cost benefit on this type of thing? I mean, if it’s solar charging during the day, then we drain it at night and have an “empty” vehicle in the morning, how does that work. What about if we drive to work and come home at night?

    I mean it’s great in theory to say we have a free battery sitting there because we all drive EV’s but real behavioral patterns might not really suit the theory.

    • WR

      An example of what might be available within the next 5-10 years would be something like the following:

      A household uses 12kWh of electricity each day.

      The house has 5kW of solar panels. These will generate an average of about 18-20 kWh of electricity per day. The array is oriented so that the generation is fairly even throughout the year, with a slight emphasis on the season when average daily demand is highest.

      The house has an intelligent control system that tries to use the power as it is generated, that is, during sunny days. Examples might be running the washing machine midmorning when electricity supply is high and other demand is low, operating a heat pump hot water system during the day when other demand is low, etc. Doing this type of thing will minimise demand for electricity at night and, therefore, demand for battery storage.

      The house has about 15 kWh of usable battery storage to store excess energy generated during the day for use at night. Some of this will be used to supply the house while the remainder can be used to recharge an EV. Note that this amount of storage will only allow the house to run one day without power from the solar panels.

      The total cost of the panels + storage will be about $10,000 (or less, hopefully) in today’s terms.

      The EV has a battery capacity of about 100 kWh. This is probably an underestimate as current model Tesla EVs already have up to 85 kWh of storage. The 100 kWh of storage the EV has can be used to recharge the house batteries during times of cloudy weather or at times of exceptionally high demand. The EV’s large storage can effectively keep the house running for up to 8 days of average power use. If necessary, the EV can recharge at commercial stations and then bring that energy home to recharge the house batteries.

      The bonus of the massive storage that EVs have is that they would make it unnecessary to have a lot back-up generation/storage for those few times a year when there is a week of cloud cover and your solar panels aren’t generating much power. This should greatly reduce system price. Of course, the main point of EV development is that they it is going to increasingly drive cost reductions of battery production, which should flow through to large reductions in battery price for residential energy storage.

    • Ronald Bruce Jones

      I think a grid is still essential and so are power station, maybe smaller and more efficient than the ones we have now. As far as EV’s go you can charge them at work, home or public charge stations, it’s only a guess on my part but I think that is they way things will progress. Home should have it’s own seperate battery supply and once the home is charged the power can then back up EV. The grid is your back up incase if insufficient solar power

      • WR

        Whether or not the grid supplies backup for a residential supply comes down to a question of price.
        I live in Queensland where a low population density means network charges are high. Formerly those charges were mostly recouped by a charging a high c/kWh rate. So if you had low demand, you were charged a relatively low price.
        Since the advent of rooftop solar, the regulator has allowed the utilities to change their pricing strategy. Now they are charging a high fixed daily network charge with gradually decreasing c/kWh rate charges.
        There is nothing stopping network providers from continuing with this strategy except for political pressure, and who can say if that will ever be applied.
        It is entirely feasible, based on current prices, that people could end up paying $3 a day in fixed charges with a rate of about 12 c/kWh for the main tariff power. So people could end up paying in excess of $1000 a year without using a kWh of electricity.

        • Ronald Bruce Jones

          I know what you mean I live in NSW lower hunter valley and the service fee a quarter is $144.00 there abouts, and 36 cents a kw. I have a 3 kw solar system and recieve 8 cents a kw. We are being screwed by big power. The down side to them is when batteries become more viable they will loose thier customer base unless the government brings all parties together to formulate better policies.

          • Miles Harding

            … or puts more ‘screw the customer’ provisions into the legislation.
            Australia is showing all the signs of this sort of regressive behavior.

            By my estimation, PV and battery is about 30cents per kwh at present, making a grid exit a real possibility in your area.

  • WR

    This is a link to a youtube vid of a recent seminar by Tesla Motors’ head of battery development. He addresses the some of the topics covered in this article.

  • inductancereluctance

    Here’s a new energy storage and high efficiency PV combination that’s going to put an end to Li-ion and conventional silicon PV technologies.

    http://vimeo.com/103621981

    http://vimeo.com/100770934

  • George Michaelson

    If the Customer Net has this much storage capacity, is it arguable that some of the ‘gold plating’ actually makes sense? I don’t want to let the buggers off, but if it turns out we need a customer net which can handle variant voltages nicely, and avoid burnout and phase problems thats capitalization I want.

  • Stuart_Levine

    Query: Could you provide a link to the full report?