My blogs, now 12+ years old, my 6 books and much of my consulting in those years have cataloged and celebrated cloud computing, renewable energy and digital transformations. I have been a big booster of each, but think we are at a point with each where we need to ask for much more.
In Part 1 I covered cloud computing. Now let’s look at renewables in the energy sector. While clouds have been targeting on-premise systems for a couple of decades, renewables have been targeting fossil fuels for much longer. After the 1973 oil crisis, Brazil began promoting bioethanol from its sugarcane as a fuel for driving. Even after a much later start, the US has been the largest producer of ethanol from its corn since 2005. The first electricity-generating wind turbine was invented in 1888. Photovoltaic cells for solar energy started even earlier in 1876. Yet, by many metrics, renewables have not done as well as clouds replacing the incumbent.
Renewables missed out on a significant wave of utilities which went from coal to gas in the last decade. They have also not made much of a dent in energy consumed by the transportation sector – airlines, shipping, trucking etc. They have missed out on blanketing with solar panels the US south and southwest with its plentiful sunshine.
Renewables have historically depended on an emotional sale and governmental support. Their competition is not exactly popular – try to find many fans of OPEC, Big Oil and Dirty Coal. But the renewable industry harps on that. Elon Musk, widely respected for his work on electric vehicles and solar batteries, recently said on a trip to Australia “And we will have the choice of the collapse of civilization and into the dark ages we go, or we find something renewable.” Dark Ages? Sounds like he is trying to match US Energy Secretary Rick Perry for sensational comments. Or the usual scare talk around Climate Change. Living in Florida, I hear talk of more frequent and ferocious hurricanes. Reality check: we had a decade where No hurricane made landfall. Disruptive as this year has been to Texas, Florida and Puerto Rico, this hurricane season may not even crack the top 5 most active (the season ends in November). Or the positioning of Electric Vehicles as “clean”. They are clean in Norway or Canada where hydro sources contribute most of the fuel for their utilities. In the rest of the world, utilities we depend upon to charge the EVs still largely depend on fossil fuel.
And renewables have always depended on subsidies – corn subsidies in the US, utilities paying consumers above market rates for solar generated energy in Germany, EVs needing massive charging infrastructure investments around the world.
Renewables are getting another major shot. Companies like Google have been signing over the last decade Power Purchase Agreements (PPAs) – large-scale, long-term contracts to buy renewable energy. China and India are adopting solar and wind power in large chunks. Puerto Rico making a fresh start on its electric grid after Hurricane Maria is seriously looking at renewables. There are many other big opportunities.
Renewables are getting this chance because the price of solar and wind has dropped very nicely in the last few years as this graph shows.
You can argue whether the chicken or egg came first. Or whether falling renewable prices are leading to greater demand or the other way round. I give credit to the US shale boom. That has not only kept global oil and gas markets in check, but also put pressure on renewable pricing. That’s healthy for a balanced energy (and national security) policy for fossil and renewable fuels to counterbalance.
You hear a number of people talk about Peak Oil and raise the specter we are running out of hydrocarbons. I prefer to see it as a phase of Steady Energy. We are enjoying an equilibrium in the market. Renewables need to sell competitively in this market and get away from the emotional talk and over dependence on subsidies. Take advantage of the recent momentum and convert markets they did not in the last go around.
Next up, I will cover the hype and promise around Digital Transformations.
(Cross-posted @ Deal Architect)