Sunday, November 20, 2011

Renewable energy - the path of disruptive technology

All disruptive technologies have something in common. They upset the status quo and by far outpace any growth projection made based on old structural thinking.

A few examples: In 1878 Western Union declared that the telephone has no commercial use and is technologically flawed. In 1977 the CEO of DEC declared that there is no viable reason why individuals should have a computer in their home. In 1980 McKinsey projected for ATT that by the year 2000 we would have 900,000 cell phones in the US. In fact, there were 109 million of them. Now think about Apple and the iPod, iPhone and iPad. All examples of technologies that changed how entire industry sectors are viewed today.

The reason the assessment and projections of early stage technology are so wildly off is that they are done from the view point of the "currently feasible". This old thinking invariably leads to a very conservative and held-back assessment of what could be possible.

Now think about Renewable Energy. In 1977, an expert committee tasked by the German government to assess the potential of Renewables declared that more than 5% of the overall energy consumption is definitely not possible. Not now, not ever. Even in 2005, the conservative German party CDU declared that a target of 20% renewable energy production is not at all plausible. Not now, not ever. Well, in 2011, Germany reached 21% of Renewables in the total energy mix. Just like that. More over, new targets have been set for renewable electricity of 35% by 2020 and 80% by 2050. Realistic scenarios for 100% Renewable Energy are now being discussed by many serious and conservative institutions (see Prof. Jacobson from StanfordMcKinsey & European Climate Foundation EFC,  Greenpeace, etc.). The best part of it: they are all economically viable and in fact cheaper than staying on the current course!

So, it seems that Renewables have the potential to truly surprise us and outpace the most optimistic scenarios issues even only a few years ago.

In 2010, the global total install base of Renewables is growing nicely (by region/technology) to a total of 1,313 GW (from 1,230 GW in 2009).

But there is a large difference between supplementing a percentage of energy with Renewables or replacing fossil and nuclear energy entirely. Old structures of harvesting dwindling energy sources, transporting and processing them and finally re-distributing them to end users in all countries will be rendered mostly useless by the very nature of Renewables. Renewables are free ("the sun ain't gonna charge us"), they are widely available in all countries (rather than rare and difficult to get at in a few countries) and are comparatively immediate in their consumability. This all poses a strong threat to the existing status quo of the energy industry and political establishment. This is quite different from most of the above mentioned disruptive technology shifts and it will be of highest importance to guard what is technologically possible and economically beneficial from the interest of a small group of incumbents. This will be the fight to watch over the next 10-20 years.

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