NARRATOR Welcome to the DNV GL Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.
MATHIAS STECK Welcome to a new episode of DNV GL Talks Energy, here recorded on the Global Smart Energy Summit in Dubai. My guest this morning is Dr Martin Keller, the director of National Renewable Energy Laboratory, NREL, in Golden, Colorado, USA. We want to talk about the impact of low cost solar and low cost storage on the world’s energy infrastructure. Good morning Martin.
MARTIN KELLER Good morning, thanks for having me today.
MATHIAS STECK Martin, before we dive into that topic, it would be great if you could introduce yourself, as well what NREL is doing.
MARTIN KELLER So, again, my name is Martin Keller, I'm the director of the National Renewable Energy Laboratory in Golden, Colorado. We are the Department of Energy National Laboratory, our focus is renewable energy, or advanced energy technologies, which goes all the way from wind, solar, geothermal, bio, a lot of energy storage, grid integration, transportation and buildings. So, we cover a broad spectrum of advanced energy technologies in all different forms.
MATHIAS STECK Right, let’s dive into this topic. We see there’s a lot of talk about storage, maybe we come later also to the discussion that there is very different types of storage for different appliances; but nevertheless it becomes a bit of a mass business due to players in the market like Ikea or Tesla, electric cars picking up more and more in numbers. What do you think – how does that change the dynamics of the energy storage market?
MARTIN KELLER Let me go one step before that, because, look, I think we’re living in very exciting time, what you’re seeing, how this whole field is changing, especially, I would say, the last five years. So, we almost have logarithmic growth of deployment of renewables from wind to solar specifically; and this now triggers this, that when you look at the impact that these new technologies bring to the energy market, it’s now at such a low cost that this is, in many areas, the cheapest way to create electricity. So, now the second follow on to this is how do you store some of this electricity. As you know, it’s very simple, at night there is no sun, so you do not produce electricity with solar, or there’s times when the wind doesn’t blow. So, the point is how can you bridge some of these times where we do not have these renewables present, and that’s why storage is getting more and more popular. And now we’re seeing also not only in the energy generation areas, but also now in storage, that the cost of storage is dropping so rapidly that suddenly the combination of storage and renewable energy is getting very interesting.
MATHIAS STECK So, what we see and what we also predict in our own energy transition outlook is that renewables will have the biggest share in electricity generation at some point in time, that obviously also has a direct impact on energy infrastructure, how it looks today will probably not be the way how it looks tomorrow. What do you foresee there? What is required for the energy infrastructure to adapt to take in so much renewables, and then obviously also storage?
MARTIN KELLER So, when we built the grid many, many, many years ago, when it was designed, you know, that they have a couple of large facilities who produce electricity, and then you have a line to your customers, and then, just using it. And now this whole model is completely changing, it gets up to its head, so now suddenly the customers will have more choices. They can pick, well, I want to have more solar, I have more wind, a lot of customers now have solar panels on their rooftops, so, suddenly they’re becoming small producers for themselves. So, this is – the whole grid infrastructure is in a huge transition, and so we’re predicting that the whole system, what we’re doing right now, will go into this change. The grid will go bi-directional, and we will have much more influence how we are managing our grid. Because this state, intermittency of renewables, we also find new ways to regulate the grid. So, this is, for example, where electric cars come into play. So, what if you charge your cars when there is enough electricity in the grid, and then if you need to bridge because of a cloud coming over solar panels, for example, then can you use this where you suddenly have an electric car that then gives to the grid. But again, this requires a completely new design of our infrastructure.
MATHIAS STECK Yes, so, actually you mention an interesting aspect, that energy is used or maybe given back to the grid at points where these exchanges are required – but one question which comes, which is how is that incentivized? So, I guess I have two questions with regards to this, maybe we focus on the first one first. Regulatory frameworks which are required to make the industry, this change is happening, and then we can later talk about the price point, what needs to be done there? So, what would you think to kind of incentivize utilities or cities or whatever to move into that new reality, what needs to happen on the regulatory front?
MARTIN KELLER The regulatory front is also an interesting topic, because that’s just built –where historically, why did we do all this regulatory bodies? Because we just didn’t want to have a monopoly who then has all the saying in the cost and suddenly you can increase the cost to the consumers in a way which was not sustainable. That’s why we developed a lot of these regulatory bodies who control and regulate the cost of energy. Now this is all changing, because suddenly the consumers have more choices, I mean, they, again, have solar panels on their own rooftops. So, suddenly the way we’re regulating these bodies will also much changed in the future in my opinion. How it’s changing – this is interesting. It’s not completely clear how these new power utility regulations will happen, but at the end, it’s very simple – how do you put more emphasis on this? It’s very simple. If the consumer can save money, then you can have the most incentives for doing this. So, what do you mean with this? For example, if you give your utilities the opportunity to influence when you heat up your water in your big vessel which heats the water – So, suddenly if you can use this as a control mechanism, so that you say let’s in the morning you took your shower, it doesn’t matter if you water heater is hot again at 10 or 11 or 12, because you’re at work anyway. So, suddenly if you give your utility the opportunity to play with the time where they heat up your water, suddenly if you make it cheap enough that people say, “ooh, I will take this, because I save on the electricity”. So, suddenly for me the big drive of all this is savings to the consumer. And if you create vehicles that the utility has more flexibility in when you use electricity in your house, this has to be coupled to incentives back to the consumer. It means you’re getting a cheaper rate.
MATHIAS STECK Right. Energy prices is the next topic I wanted to come to, and discuss that. So, we could foresee a future where the kilowatt hour is very cheap, or maybe even for free. Now you mentioned a little bit earlier these intelligent interactions in the grid that can happen. When the consumer needs power, he gets. If he doesn’t, he can maybe give something back to the grid. So, there need to be incentive schemes for this, as you also just said, but would you foresee a future – or would you think it’s possible that there is a future where we don’t pay for the kilowatt hour any more, but rather for not consuming energy or we get money back for this, or we pay a premium for the availability of energy, that we more get maybe into something like a flat rate, what we know from the internet, for the service of having access to energy.
MARTIN KELLER Some people predict that electricity might be too cheap to meter, and this goes down, as you mentioned. But the interesting perspective is what we really don’t understand, how would the consumer react to this? Suddenly – look at yourself, I don't know if this is the best example, remember the time where we bought minutes to do a phone call, and now we just have a flat plan, you never look at your minutes. So, now the question is, are you using your phone more or less? Because some people would predict, well, if you have a flat rate you might not have an incentive to put a new energy saving appliance in your house, or you might just not turn off the lights anymore. Other people say well, if you parallel this from a social perspective, it will not change the use of electricity. It’s not clear where this would go, because if there’s no incentives, then are we saving energy or are we just wasting energy? So, nobody knows. But I personally predict that we’re going down this path where you’re having a flat rate at your house, and I think then you’ll probably have some certain amount of energy you might be able to use per month, and then if you go above this or below this – and if you go below you get some money back, if you go above this then – you remember the old times when you use too much data is slows down the internet, you could imagine that something like this would happen in the electricity field. So, it’s a very interesting, fascinating topic, but it’s not clear where we will go in my opinion.
MATHIAS STECK So, talking about cheap electricity, there is another impact around investments into renewable energy projects. What we hear from investors is because the kilowatt hour has become so cheap now due to options or low feed-in tariffs, there’s also pressure on the finance. So, the yield rates are not interesting enough anymore for equity investors, and so they are sitting on billions of US dollars they would like to invest, but they don’t find the projects to invest into. What do you foresee what these dynamics do to investments in renewables? Is that giving us a gridlock situation where we stop development because of this, or what is your view on that?
MARTIN KELLER So, it goes down to a much larger perspective, in my view, and this has to do with, are there any other ways where we could use electricity? So, say right now, if you are an electricity producer you only have one outlet, and this is to put electrons into the grid. And this suddenly is causing a lot of these problems; because, you know, you are trying to build these utilities, solar and wind activities, even natural gas, you are going lower, lower and lower, and suddenly your profit margins are shrinking more and more, and this is resulting into the problem that you just mentioned – that a lot of investors might say, “well, I don't even know if I want to invest into this, because my return is so low, it’s a huge commodity.” – and well it is a large commodity, and we are going down this path.
So, what if you would create a system where you take electrons to something else? So, what if you can make a decision that you put it onto the grid, or you deflect electrons and you go and, for example, and create hydrocarbons out of this. Which comes into this programme what we call – Germany also calls this Power-to-X, and we call it electrons to carbon / carbon molecules. So, the idea is can you use and deflect electrons and create something else. So, suddenly in the market what you create is that you have an outlet, you can put it onto the grid, or you can go and produce chemicals, for example. And suddenly I see that the investors are looking to a much broader combination of these big factories which have more opportunities than just to produce electricity. That’s research, there is a lot of innovation we have to do right now, a lot of people thinking to go down this path, to go through a hydro chain into hydrocarbons, or fertiliser, or also we call this a platform molecule. But we still need more innovation, more research to decrease the cost and make this cost competitive.
MATHIAS STECK Yes, well, it’s an interesting topic, we hear that also a lot, actually, in the regions where we have a lot of islands who kind of see that as a way of importing, maybe, renewables without having the generation itself. Another interesting aspect, I think, what you just mentioned was somehow maybe to integrating with systems more, and we could do that also in the industrial space. One example I have in mind – and we briefly talked about this earlier this morning – is this Gigafactory from Tesla, where they have internalized more or less the renewable energy production for the use in their own factory. Now, what do you think about this kind of model being a bit more usual set up for industries for utilities, is that a future we could go to which then automatically would also give us more sizeable projects to put money on?
MARTIN KELLER Yes, I'm, what Tesla has done with the Gigafactory was an interesting move, not only to produce batteries at a much lower cost, and, look, batteries is a very good example, when you look at the decrease in cost for lithium batteries over the last five years is amazing. And we see this trend continue, so, now the interesting thing is will the – right now when you see where Tesla goes down into the battery storage for home usage, same architecture. I’m personally not exactly sure if we will use the same architecture on batteries for our storage at home. So, in individual homes it could be very similar, but for large scale grid storage I think we might have different architecture. I'm not even clear if this will be batteries, it might be a combination of chemical storage or battery storage or even more pumped hydro, it’s not clear where we’re going with this right now. But having this Gigafactory concept – I mean, look, we have done this over years, look, this is what a car manufacturer does, they’re integrating the whole supply chain together, and taking all these different parts and then assembling the cars in very large factories. So, I think we will do this more and more also in the energy sector.
MATHIAS STECK Right. Martin, we are slowing coming, unfortunately, already to the end of this episode, but since we are here on the Global Smart Energy Summit in Dubai, looking at the region, what do you see are the opportunities we have around this topic, cheap solar PV, cheap storage, the integration of these, all the matters we just discussed, what opportunities do we have for this region in these matters?
MARTIN KELLER I mean, that’s a very interesting region here, because when you look where they’re located, they have a lot of resources based on the oil and gas they have in this region, but they also have a lot of land. So, they have a lot of sun, and in some areas they have wind, so they have a lot of different ways of tapping into energy. So, I personally do not believe that this region will move away from oil and gas within a pretty significant time period, we always will use hydrocarbons for still a long time to go, especially in the transportation sector, for airplanes, for heavy duty trucks, for ships. We need long hydrocarbons. The energy density is very amazing, and so I don't know how easy it will be to replace these molecules with something else. So, but then also you’re seeing in this region a diversification of the energy sector, and I think it’s very smart, because when they suddenly create the energy here on site, then they don't have to burn their own oil they’re taking out of the ground, and which they can start to export this, they get more revenue by using the oil and exporting the oil versus using it here in their own place to, for example, desalinate water. So, it’s a very smart move. You’re seeing the lowest costs in solar projects here in this region, so, I think that this region diversifies the energy portfolio; it’s, in my opinion, a tremendous opportunity, and it’s very smart.
MATHIAS STECK Thank you very much for these insights, Martin. We are unfortunately at the end, so thanks for your time this morning, thank you for the very valuable insights, and thank you also to the listeners listening to Dr Martin Keller, director of the National Renewable Energy Laboratory, NREL, in Golden, Colorado, USA, about the impact of cheap solar and cheap storage on the world’s energy infrastructure.
NARRATOR Thank you for listening to this DNV GL Talks Energy podcast. To hear more podcasts in the series, please visit dnvgl.com/talksenergy.