2007 was a technology milestone year. It was the year that Steve Jobs introduced the iPhone.
2017 may be viewed as a similar milestone year. For the first time in history, renewable energy supplied more electricity into the U.S. grid than nuclear power.
Why is this such a milestone event?
It portends a technology mega shift that will lower electric bills, reduce emissions and enable electric cars. It will also mark mass adoption of a destructive value creation process that will reshape the electric utility industry.
Cost less drives renewable energy growth
In 2016 utility scale solar power became the least cost source for electricity. Both utility scale wind and solar power plants can produce electricity for less than coal, natural gas and nuclear power plants.
Reducing battery costs is the next step in achieving a 100% renewable electricity supply. Battery costs are declining across computer, vehicle and grid storage applications. A battery technology “eco-system” is emerging that has achieved such milestones as reducing electric car batteries by 80% in just six years.
Nuclear and coal is losing cost competitiveness due to legacy environmental impacts
Renewable energy’s competitiveness is magnified by its lower externality costs. Zero emissions will only gain competitiveness with the growth in global warming’s economic and human suffering costs.
Alternatively, utilities are being impacted by waste stream cost generated by nuclear and coal power plants. Nuclear power decommissioning costs now exceed the original cost of the plants. For example, the 1960’s Yankee Nuclear Power Plant located in Rowe, Massachusetts was originally built for $39 million. The decommissioning cost is $608 million.
America’s nuclear power plants have generated 75000 tons of spent fuel rods and associated waste. This toxic material has a 10,000 year nuclear half life. Storing or processing spent nuclear fuel is a projected $30+ billion cost. The Federal government (tax payers) has assumed the responsibility for storing this waste because assigning a utility this liability would have made nuclear power non-competitive. Whether it was the right decision to enable nuclear power by pushing waste management onto taxpayers is open for discussion. But the current economic reality is that nuclear waste liability is a major barrier to nuclear power’s expansion.
Coal fired power plants face their own legacy costs tied to their massive physical waste stream. While tall smoke stacks are the current environmental symbol of a coal fired power plant, it maybe a coal fired power plant’s waste “ponds” that will be its lasting cost liability for utilities. Annually, America’s coal power plants generate 140 million tons of ash waste. This waste stream is stored in massive storage containers at coal fired power plants. They contain mercury, lead and arsenic that have no “half life.” Containing these toxic chemicals from the water supply is a growing cost burden that reduces price competitiveness.
Destructive value creation needed to unlock lower electric bills
Destructive value creation is technology’s ability to reduce cost while also increasing human benefits like increased productivity. Destructive value creation now defines our 21st century. For example, in 2007 the Blackberry was the pinnacle of cellular communications. Who owns one today?
Destructive value creation is impacting the utility industry. It is an economic revolution. Fossil fuel and nuclear power plants are losing market share due to a lack of cost competitiveness.
Unfortunately, destructive value creation is being blunted by the utility industry’s unique monopoly powers. They are using their monopoly powers to skew consumer rate designs in favor of their fossil and nuclear power plants. Political influence, rather than economics, is increasingly critical to their ability to preserve their fossil/nuclear power plants. The reality is that there would not be over a billion iPhone in the world today if Steve Jobs had to overcome the monopoly power of the electric utility industry.
Providing a smart grid using renewable energy and batteries is an attractive business. But realizing this opporutnity will require a massive cultural change inside our utilities. It has to start with top management adopting a technology destructive value creation business model just like Amazon, Ford and Walmart. It will be implemented when utilities move from preserving legacy technologies, and their revenues, by aggressively supporting consumer access to technology innovations.