One of the key characteristics of complex systems, such as the world’s energy and transport sectors, is that when they change it tends not to be a linear process. They flip from one state to another in a way strongly analogous to a phase change in material science. A second important characteristic of this type of economic phase change is that when one major sector flips, the results rip through the whole economy and can have impacts on the societal scale. We are seeing this effect in the electricity system right now. The rapid uptake of renewable generation in the power system, unstoppable now because of cost reductions in wind and solar, has not simply rendered a certain proportion of conventional generation uneconomic. It has fundamentally changed the way power markets work, making new investment in other sources all but impossible; it has changed the control paradigm for the grid from base-load-and-peak to forecast-and-balance; it has altered flows of investment throughout the power system and its technology providers; it is forcing through an accelerated digitisation of all electrical equipment. It is even changing the way buildings are designed, the training needed by the construction trades, and the way infrastructure is financed. Mobile phones have eaten entire industries (cameras, alarm clocks, maps) and are set to do the same to others (newspapers, cash handling, music systems). No sector is immune, right down to furniture design, the size of pockets sewn into garments, even how many single diners a restaurant needs to plan for each night. Over the past few years we at Bloomberg New Energy Finance have been devoting more and more of our attention to the transportation sector. Just as in 2004 we felt the energy industry and its mainstream analysts had failed to understand the scale, imminence and implications of the renewable energy revolution, so in 2010 we started to feel the same about electric vehicles. Electric vehicles out-compete internal combustion cars in lots of important dimensions: they drive more smoothly yet accelerate better, they can be charged at home or at the office, they require much less maintenance, they help solve air quality problems, they improve the energy autonomy of oil-importing countries.
Bloomberg 22nd Aug 2016 read more »