Embracing the Energy Unknown, pt. III

The first two parts of this series (here and here) looked at different ways companies and sectors are navigating the risk and opportunities technology presents.

Now, it’s time for a glance toward the horizon.

Few areas have seen more profound change than the electric grid, especially when it comes to the interaction with producers and consumers. As the broader marketplace positions itself for what’s further ahead, it’s important to understand how shifting energy paradigms will affect decision making in the nearer term.

Battery Storage vs. Wholesale Power

Remembering that today’s “critical” can quickly become tomorrow’s “dispensable” 

Massive improvements in the economics of battery storage technology are evident in the electric vehicle sales surge, but the auto industry isn’t the only area primed for disruption. On a similarly significant scale, the deployment of utility-scale battery storage has the ability to dramatically reduce short-term price volatility in wholesale power markets. These markets have traditionally been subject to price spikes and plunges that make high-risk oil futures seem like AAA government bonds. But that could be coming to an end.

It’s a distinct possibility in light of another energy shift with wind and solar becoming the main source of new capacity in most of the world’s largest power markets. That capacity — and the deployment of utility battery storage — has the potential to increasingly come together. This convergence is an ideal blend of supply, sustainability and security as battery tech looks to make sure unpredictable renewable generation is converted into electrons that can be predictably sold back to the grid.

That’s welcome news for advocates of renewable energy, especially given the changing economics of solar and wind generation. The industry has already seen enough technological advancement to make renewables the most cost-effective source of electricity in countless areas. As batteries become increasingly viable, renewable generation has an opportunity to chip away at one of the last sadvantages of new fossil fuel plants. Today’s fast-peaking natural gas plants are often critical to grid reliability, and to balance the unpredictability of wind and solar generation, but battery storage at scale could make the selling point unnecessary.

Conclusion: So What Now and What’s Next?

In an ideal world, a company could forecast bottom-line impacts and expertly reposition itself while enjoying profits along the way. Unfortunately, reality is rarely so simple. New technology is still advancing right up until the minute it has fully emerged. (Just ask OPEC about U.S. fracking.) At the other end of the spectrum, a company might focus so intently on countering one change and lose sight of an even more important one: think coal’s focus on renewables while natural gas stole its market share.

In reality, businesses that prove sustainable through constantly changing technology are more often those that adapt quickly versus those that adopt early. Not all companies will be the next Tesla. That’s why it’s most important to strike the right balance between technological innovation and integration.

Connect with one of our analysts for support navigating the new-and-ever-evolving energy landscape.

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