America, the Clean Disrupted

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Alex Lightman, Chairman, Everblaze

The United States is ground zero for the Clean Disruption thesis of Stanford’s Tony Seba. Seba is author of a book that is as important as its title is long: Clean Disruption of Energy and Transportation: How Silicon Valley Will Make Oil, Nuclear, Natural Gas, Coal, Electric Utilities and Conventional Cars Obsolete by 2030.

Surprisingly, Seba’s Clean Disruption thesis can be summarized in a single sentence: if the current rates of growth and improvement in price/performance in solar photovoltaics and self-driving electric cars continues, the USA economy, famous for creative destruction, will have destroyed its largest fossil fuel, electric utility and car companies within 15 years.

Since I received the draft manuscript over a year ago, I am in a good position to give a one-year reality check, and answer the question, “Is the Clean Disruption thesis still valid?”

First, there is the solar component. In 2014, solar grew 41%. Seba’s thesis calls for solar to approximately double each year, a growth rate of 36% a year. So the actual results are ahead of the rate needed for Seba’s predictions. In 2014, solar accounted for only 1% of US electricity production (out of about 9% electricity from renewable resources, roughly 2/3rds of which is hydropower and most of the rest wind power, with some geothermal, primarily in California). So solar is indeed on track to be 2% of US electricity production sometime in the year 2016.

Second, solar costs are dropping, and in some cases, costs are dropping faster than would be needed to be on track with Seba’s Clean Disruption scenario. The average cost for electricity in the US is 14 cents, 7 cents for generation and 7 cents for transmission and distribution, on average. The City of Austin, whose City Council is also the board of its municipal utility, has been buying solar for 5 cents a kWh, and Las Vegas casinos are fighting in court for the right to buy solar generated electricity for only 3 or 3.5 cents a kWh, which is below what Seba calls “God parity”. God parity is when the total cost of onsite solar electricity is less than just the cost of transmission and distribution produced by traditional utilities using coal, natural gas or nuclear. God parity is now available in parts of California and Texas, but will be exponentially increasing in the number of states where one can purchase electricity cheaper than the traditional utilities can produce it.

Third, electric car sales are booming. Frost & Sullivan predicted sales of EVs would be 480,000 in 2015, a 50% growth rate, also faster than the rate needed to be on track with Seba’s Clean Disruption scenario. EVs hit a milestone in early October 2015: one million electric vehicles (not counting over 250 million electric scooters and electric bikes, mostly in China). That compares to 1.2 or so traditional ICE (internal combustion engine) vehicles worldwide. By the 2nd quarter of 2016, we will have reached another milestone: 1 EV for every 1000 ICE. However, the average cost of an EV is still much higher than the average cost of an ICE ($31,000) because the batteries are expensive. Tesla Model S batteries are basically scaled up batteries like the ones in laptops. But the Tesla Gigafactory will reportedly start producing in 2016, which CEO Elon Musk has promised will reduce the cost of batteries, particularly since many other companies are also investing billions to reduce the cost of batteries. It’s instructive to look at smartphones. The original iPhone cost over $600. Now LG produces a phone with better specifications that Wal-Mart sells for only $10! That’s a 60 to one reduction in cost since June 29, 2007, less than 8 and a half years ago. Part of getting that cost down was also getting the cost of the batteries way down, so the learning curve is steep.

Fourth and finally, the technology around making cars self-driving continues to improve as fast or faster than Seba predicted. Elon Musk shocked people around the world by offering what was probably the biggest over-the-air upgrade of vehicle capabilities in world history, by October 15, 2015, that allowed high speed (mostly) hands free highway driving. The Model X seems designed to be operated entirely without a driver. And in mid-November 2015, a Google self-driving car was pulled over by a policeman for driving too slow…and there was no person in the car to give a ticket to, informing the public via media that reported this incident worldwide that self-driving cars, which virtually always had a human driver “just in case” something went wrong, were now being legally operated without any humans in the car.

So, in summary, four out of four of the major assumptions made by Tony Seba that lead to the end of seven different major industries (biofuels will also be eliminated, in addition to the six referred to in the subtitle) are not only on track, but ahead of the projections needed for the full Clean Disruption scenario to become reality.

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