Within a few decades, large-scale, centralized electricity generation from fossil fuels could be a thing of the past in Europe.
That’s the word from investment bank UBS, which just released a new report anticipating a three pronged assault from solar power, battery technology, and electric vehicles that will render obsolete traditional power generation by large utilities that rely on coal or natural gas. According to Renew Economy, which picked up the report, the tipping point will arrive around 2020. At that point, investing in a home solar system with a 20-year life span, plus some small-scale home battery technology and an electric car, will pay for itself in six to eight years for the average consumer in Germany, Italy, Spain, and much of the rest of Europe. Crucially, this math holds even without any government subsidies for solar power.
“In other words,” the report says, “a German buyer should receive 12 years of electricity for free” for a system purchased in 2020.
CREDIT: Renew Economy
That would mean that after 2020, the economic incentives will align to encourage the average European household to stop relying on the traditional utility model for their electricity needs. “Not all [power plants] will have disappeared by 2025,” the report concedes, “but we would be bold enough to say that most of those plants retiring in the future will not be replaced.”
The analysis also suggests that for utilities to survive in this new world, they’ll need to focus on providing smart distribution networks to better manage demand on a much more decentralized grid, and providing small-scale local back-ups for storage and power generation to that same effect.
The way this would work on the household level is that the electric car could charge at night, solar would provide electricity during the day, and excess solar generation stored up in the battery could be discharged in the evenings to cover most of a household’s remaining power needs. Power supplied by the grid likely wouldn’t go away completely, but would be relegated to plugging some small remaining holes, primarily in the early morning. And smarter grid systems for homes will allow energy demand to be met with supply much more efficiently.
CREDIT: Renew Economy
UBS thinks it will take a while longer for electric vehicles to knock out reliance on oil to fuel transportation. But the total cost of ownership over three years for a Tesla Model S is already equivalent to comparable combustion-driven car like an Audi A7. And Tesla is planning to release a new $35,000 electric car for the consumer market in 2017.
So UBS thinks the rate at which electric cars are taking over the market will increase substantially after 2020, and that 10 percent of the market is a conservative estimate. That said, despite the remarkable growth in electric vehicle and plug-in hybrid sales, they remain an extremely small slice of the global car fleet — and the International Energy Agency believes they’ll need to take up three-fourths of global automobile sales by 2050 to stick with the goal of keeping the world’s average temperatures from rising more than two degrees Celsius.
Under UBS’ analysis, the combined effect of solar, batteries, and electric cars all intersecting at once is crucial to this tipping point. They anticipate advances in battery technology and pushes to scale up battery production — like Tesla’s anticipated gigafactory — will drop battery costs by more than 50 percent by 2020. That will make electric vehicles and stationary battery storage for homes cheaper, driving up demand for both. Then expansion of the electric car market will drive further improvements in battery technology, and a virtuous cycle will set in.
Meanwhile, power will be consumed more efficiently, because it will be consumed in lots of dispersed local settings, rather than being consumed by broad areas served by a single power source. That cuts down on the need for electricity transmission over long distances, and the accompanying power losses.
The headline has been edited for clarity.