IEA: Invest in Conventional Energy
The International Energy Agency recently released a report calling for $40 trillion in new investments to meet the world’s energy needs until 2035 .
There are three main components in the IEA investment scenario:
- Oil would get $13.7 trillion
- Gas would get $8.8 trillion, and
- The Power Sector would get $16 trillion.
In other words, according to the IEA, the future of energy is basically like the past.
Their alternative “New Policies Scenario” offers a few minor adjustments for nuclear, carbon capture and storage (CCS), and ‘renewables’. Even in this worst-case scenario, neither solar nor wind is large enough to get its own line item. They’re both lumped together as just ‘renewables’.
Losing $40 trillion
But the future of energy will not be like the past. Not even close.
If the IEA had made a 20-year projection of the phone market starting in 1995, they would have said that landline phones would dominate the market by 2015. In this investment report, the mobile phone market would not have been large enough to deserve its own line item. Voice over IP would not even be mentioned. Mobile and VOIP telephony would have been lumped together in the ‘other’ category. Disruption? What is that?
Overwhelming evidence points in one clear direction: the industrial age of energy and transportation will be over by 2030. Maybe before. Exponentially improving technologies such as solar, electric vehicles, and autonomous (self-driving) cars will disrupt and sweep away the energy and transportation industries as we know it. This disruption is inevitable and it will be swift. This is the Clean Disruption of Energy and Transportation.
The same Silicon Valley ecosystem that has created bit-based technologies that have dematerialized and disrupted many atom-based industries (like book publishing and film photography) is now creating bit- and electron-based technologies that will dematerialize and disrupt atom-based energy industries (like oil, gas, coal, and nuclear).
Exponential growth usually goes undetected and disrespected by the mainstream market (and media) until it’s too late for incumbents to react.
The global market for solar panels has been growing at a compound rate of 43% since the year 2000.  Should solar continue on that growth path and it will essentially provide all of the world’s energy by 2030. Solar costs keep going down while conventional energy costs keep going up. The cost of solar PV has dropped by a factor of 154 since 1970. At the same time every single form of energy has gone up in costs. Solar costs have dropped by more than 5,300 times relative to oil and 1,500 times relative to nuclear since 1970. Even ‘cheap’ natural gas costs in the US have gone up by more than 2,200 times relative to solar.
From “Grid Parity” to “God Parity”
Unsubsidized solar is already cheaper than subsidized conventional energy in hundreds of markets around the world. And solar PV will drop by another two thirds by 2020. “Grid Parity” is a done deal. You might even consider it old news.
I’m now looking forward to ‘God Parity’. By 2020, rooftop solar in sunny areas like the US Southwest will generate electricity onsite at less than the cost of transmission and distribution. This bears repeating, a house, a business, or a Big Box store in Los Angeles, CA, or Phoenix, AZ, will generate solar for less than what their centralized generation utilities charge the ratepayer for transmission and distribution costs. This means that it won’t matter how much these conventional generation facilities cost. The cost of generation plus the network (transmission and distribution) will be more expensive than onsite solar generation. How many utility executives are losing sleep over Walmart generating its own solar electricity, let alone getting into the electricity retail business?
Even if the utilities miraculously invented a new technology that used the ‘God Particle’ to generate electricity at a cost of zero (remember the nuclear promises of ‘too cheap to meter’?) they will not be able to compete with solar self-generation. When the cost of the network (transmission and distribution) is higher than the cost of rooftop solar generation the market will hit “God Parity”. This will start happening around 2020. Watch this video for the logic behind these numbers.  Centralized generation utilities will not have a business model at that point. Most utility generation assets will be stranded. Coal power plants? Stranded assets. Nuclear power plants? Stranded assets. Bankruptcies and conventional energy assets will go hand in hand.
The only way utilities might even stay alive after that is to work through the regulatory system to maximize short-term cash flow at the expense of ratepayers. Utilities may not like distributed solar, but they will sure try to make money from this exponentially growing market without investing a single dime. Solar taxes, anyone?
The Electric Vehicle and Autonomous (Self-Driving) Car Disruptions
The 185-page IEA report on the future of energy investments mentions the electric vehicle once: the EV gets a small slice of the ‘low-carbon technologies and energy efficiency’ scenario (plus a whole footnote!) The autonomous (self-driving) car is not mentioned at all. Not once. Do you want a comparison? If the IEA had been hired in 1995 to develop a 20-year projection of the future of information technology, it would have mentioned the Internet just once (with a footnote). The IEA report would not have mentioned the Web at all. Not once. The future would have been just like the past. The IEA also would have wanted you to invest in Kodak, Borders, and Ma Bell.
In Clean Disruption I write about the reasons why the electric vehicle and the autonomous car are disruptive and when the disruption will take place. It’s all based on exponentially improving technology cost trends. My conclusion based on that data is that by 2030 essentially all mass-market vehicles will be electric. Furthermore, all cars will be autonomous or semi-autonomous.
Internal combustion engine (ICE) car companies will get their Kodak moment sooner than they think. Gasoline will be obsolete. Trillions of dollars in fossil fuel investments will be stranded.
The trillion-dollar Canadian Oil Sands? Stranded assets. The Keystone pipeline? Stranded assets.
Energy and the Stone Age
The Stone Age did not end because we ran out of rocks. It ended because a disruptive technology ushered in the Bronze Age.
The era of centralized, command-and-control, extraction-resource-based energy sources (oil, gas, coal and nuclear) will not end because we run out of petroleum, natural gas, coal, or uranium. It will end because these energy sources, the business models they employ, and the products that sustain them will be disrupted by superior technologies, new product architectures, and business models.
This is a technology-based disruption reminiscent of how the cell phone, Internet, and personal computer swept away industries such as landline telephony, publishing, and film photography. Just like those technology disruptions flipped the architecture of information and brought abundant, cheap and participatory information, the clean disruption will flip the architecture of energy and bring abundant, cheap and participatory energy. Just like those previous technology disruptions, the clean disruption is inevitable and it will be swift. It will be over by 2030. Maybe before.
Don’t believe in the Clean Disruption? The IEA wants you to invest $40 trillion in conventional energy (nuclear, oil, gas, coal) and conventional utilities. It’s their Kodak moment. It’s your money.
 “World Energy Investment Outlook”, International Energy Agency, You can find the report here: http://www.iea.org/publications/freepublications/publication/WEIO2014.pdf
 Tony Seba, “Clean Disruption of Energy and Transportation: How Silicon Valley Will Make Oil, Nuclear, Natural Gas, Coal, Electric Utilities and Conventional Cars Obsolete by 2030″, June 2014, http://www.amazon.com/gp/product/0692210539