An energy industry exec asked me the other day if I thought we had reached peak electricity. My answer: “Not even close.”
Perhaps it’s a question with a non-obvious answer. It’s true that energy efficiency has done an amazing job at slowing growth in energy consumption. What we’ve accomplished in building efficiency alone is staggering. Thankfully, that trend will continue over the next couple decades. I’m sure will see continuing, remarkable advances, and I hope we exceed even my wildest imagination on that front.
So why would I say that we’re nowhere near peak electricity? Because demand is going to grow so dramatically that it will offset efficiency gains. Simply, there are multiple megatrends that will drive accelerating demand for electrons.
- Light duty electric vehicles. It seems clear, at least to me, that we’re heading down the road of an EV future. If even a small percent of drivers and miles driven migrate from internal combustion engines to electric, it’ll add significantly to the demand for electricity. Think for a moment what it’d mean for 5% share to migrate from oil industrial complex to electrical industrial complex. Now imagine 25% or more. Hint: That would be A LOT.
- Autonomous vehicles. Autonomous is an extension of EV growth, but the convenience of it will expand miles driven per consumer… whether the consumer is in the car or whether the trip is on their behalf, without them. Parking, charging, errands and deliveries need not have a human present. While human-driven EV’s will migrate existing miles from oil to electricity, autonomous vehicles will create new miles that demand electricity.
- Internet of things. Among technology megatrends, IoT ranks near the top. No conversation can be deemed buzzword compliant without referencing IoT. The upshot of IoT is that sensors and services will be broadly distributed and woven into our lives by putting smart things EVERYWHERE. Turns out, one cannot bring the I to the T without the E. A million drips of water have an impact on stone. A million smart sensors and devices will have an impact on electrical load.
- Blockchain and bitcoin. Many IoT devices and next generation services will transact or otherwise require an accounting. Enter blockchain and bitcoin. (Apologies. The buzzwordiness of this post already has even the author reeling. Strap in and brace yourself. It ain’t over.) These ledgers promise to provide the foundation for the world of tomorrow, but they have a consequence. The highly distributed and redundant nature of these technologies requires an enormous amount of processing and hence power. (You can read about that here: Bitcoin Could Consume As Much Electricity As Denmark by 2020.) I’m sure the technology will become more energy efficient over time, but it’ll undoubtedly add load.
- Artificial intelligence. As technology gets smarter, acting on behalf and in advance of users’ explicit requests, it will automate and explode the number of digital and physical service run on behalf of each consumer. In fact, Google is betting on AI as the basis for its strategy over the coming years. AI will run queries, execute home management functions, deploy delivery services and more. The convenience and utility of these features will lead to hockeystick trajectories in automated services. All those will require power. Some a lot. Some a little. It’ll add up.
- Drones and microdeliveries. Other than HomeDepot projects which require multiple trips to fulfill a single need, households currently bundle purchases to fulfill multiple needs. In our house, for example, we come home with 4 or 5 bags of stuff when we do a big shopping run to the grocery store or Target. Think about what happens when each item is transacted and delivered individually when needed: Qtips. Bring ‘em now. Gum. I’ve got a date tonight. Bananas. I need a smoothie. Beer. I don’t want to miss the game. TP. Can’t put that off… You get the idea. They’re all “urgent”. The convenience and gratification of immediate delivery will be seductive. If each item I desire requires a unique dispatch, the number of supporting electrons will add up. Fast. We may be 5 or 10 years from this future, but it’s coming. Amazon is laser focused on it. So is the Senate: Amazon's drone deliveries will be just two years away, if Senate-backed bill has its way
- Mass transit. Let’s bring things back to the present. Cities are already deploying electric mass transit at scale, building new and replacing old. Buses. Light rail. commuter trains. That’ll undoubtedly continue. More electrons necessary.
- Heavy duty vehicles and shipping. Trucks and B2B shipping are in the early stages of moving from internal combustion to electric vehicles. It’s happening, though. In Germany recently, three autonomous trucks drove down the Autobahn. The effin Autobahn! With the autonomous tech, they drove together so closely that they drafted off one another and generated heretofore unseen efficiency per mile. That’s compelling and a good indicator that much of existing trucking may go electric as charging infrastructure is solved. Read more about it here: Daimler Launches Autonomous Platooning Technology.
- Desalination. Maybe there’ll be rain in CA next year. Then again, maybe there won’t. If the pictures and press are to be believed, it’s getting dire. We’re past the point where “hoping for next year” is a strategy. Even if big rains come next year, underground water reserves are depleting faster than they are refilling in places like the Central Valley and Palm Springs. Simply, the state needs to invest in big desalination operations to provide water for the the major population centers over the coming years. Desalination is an exceptionally energy hungry process. Queue the need for a lot more electrons.
- Home heating. Home heating solutions are mostly a story of oil and gas now, but there are growing motivations to deploy home and water heating that is electric. Why? Because electric heaters create new economic opportunity, and they also become tools to elegantly manage grid loads. Heating can be thought of as a “hidden battery” that is an exceptionally useful grid asset. Incentives are coming. So is demand for electrons to support the accelerating conversion of heating to electric-based.
I could go on, but you get the point. We’re going to witness massive growth in electrical demand. It’ll come from two places. 1. New platforms generating new electrical demand (IoT, AI, drones, blockchain). 2. Old infrastructure migrating from oil or gas to electricity (cars, heaters).
Electricity is becoming the common energy source. It’s the common grade of rail. Electricity is to energy networks as internet protocol is to communications networks.
Standardization drives growth, and energy will be no different. The coming growth and expanding market presents massive opportunity for smart entrepreneurs and investors. I’m excited to be a part of that.
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