Floods, Dams and Batteries
Imagine for a moment that you are responsible for the aqueducts and waterways of California, and that you are held accountable for managing flow and water pressure at measured rates throughout the system. Now imagine a storm front, carrying heavy rains, coming through the Sierra Nevadas.
Everybody’s happy that it’s raining, including you as the aqueduct guy. California desperately needs the water. The aqueducts are flexible enough to handle some extra water, even if it arrives in bulk.
Now imagine that same storm comes through every day. The general populace feels good that there’s plenty of water (assuming it doesn’t rain on them). Unfortunately, though, the aqueducts and waterways saturate and break down if the volume of water swells beyond a certain point.
The above analogy, in a nutshell, is the problem with renewables like wind and solar. Everybody knows they’re a good thing, but they generate a daily deluge of electricity for which the utility is responsible. A problem arises when those renewables cross 10% of total electric production. The rains get to a point where the water becomes an unmanageable torrent.
Hawaii is a great case study. Solar in Hawaii now represents ~15% of total energy production. Hawaiian Electric (HE) is having a hard time dealing with the “torrential rains” that come every day at around noon. Not surprisingly, HE pushed hard to put an end to net metering in the state to slow down adoption of solar.
Net metering is an incentive program that drives adoption of solar by guaranteeing that owners of solar panels get a defined rate for the energy they produce. Most markets currently peg the rate to the retail rate for electricity. In places like Hawaii, the retail rate is particularly high, so net metering has provided exceptional incentives.
After a strong push, Hawaiian Electric earned a victory. Net metering was reset to the wholesale rate, down from the retail rate. Essentially, Hawaiian Electric slowed the rains.
The problem is that we don’t really want to slow or stop the rain. We simply want a better way to capture the rains and manage the rain water.
Heavy rain becomes manageable, turning a liability into an asset, with dams… dams that create reservoirs, store the water, and release it on a regulated basis. As an aside, I’ll note that our system of dams is a national treasure, one of the US’s biggest assets. Developed through concerted effort and investment over the last 80 years, our dams have proven an incredible foundation for economic growth.
Applying the analogy back to electricity, batteries are the dams. If we hope to generate more than 15% of electricity from solar or wind, we need batteries. A lot of them. A whole lot of them, built throughout the fabric of our electric infrastructure.
Further to that point, a viable long-term strategy for renewables should come with a thoughtful strategy for storage. Renewables and storage are like bagels and cream cheese. Interesting alone, but amazing together.
Hats off to Elon for accelerating the prospects for batteries and by extension, for renewables. Tesla’s Powerwall captured the imagination of consumers. That’s hugely important, but Musk and Tesla are also driving down battery costs aggressively through manufacturing efficiencies. From $1,500+/kWh to $125/kWh and down. Both will have a tremendous impact on storage deployments.
But, Musk can’t solve things alone. The $2B commitment from Gates is part of the answer. From where I sit, we should also be talking about an ITC (Incentive Tax Credit) for storage over the next 10 years as a means to focus attention, accelerate adoption and scale, and thus aggressively drive down the cost of storage.
Storage deployments of consequence will be a huge undertaking no matter how we cut it. We need incentives, entrepreneurs and will. The endeavor will be similar in scale to the build out of dams, with similar broad-based benefits. Incredible new capabilities unleashed. Massive gains in systemic controls and resilience. Millions of jobs created.
We should do this. Let’s get going.
Editor’s Note: Analogies are rarely perfect, and this one certainly has pitfalls from being carried too far. Hopefully it serves a purpose though, and offers some instructive value. Understanding the shortcomings of analogies, I had to laugh when Blake Ross recently poked fun at himself for his icecube/iceberg analogy in a great post…
”This is idiotic terminology, but more people share Medium articles when you write with an MBA stick up your ass.” -Blake Ross