Tag Tesla

The New Zealand test

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When machines permitting payment by credit or debit card were first developed New Zealand was one of the first countries within which this EFTPOS technology was deployed. Today one can buy a coffee or even a 50c bag of sweets with their VISA or Mastercard. Most businesses do not have a minimum purchase for which you can use your bank card. Few of us carry cash.

New Zealand’s market is often considered something of a test environment for new technologies. Our small island nation is isolated in the middle of the Pacific Ocean, but we have an advanced economy and large middle class. This, our small population and an open, competitive marketplace makes New Zealand the perfect place to trial new products and innovations. If the product meets a certain need it will rapidly penetrate the market. You will soon know if whether it can be profitable or not – and whether you should launch the product elsewhere in the world.

In May, US company Tesla teamed up with Vector, New Zealand’s biggest electricity distributor, to bring their much lauded lithium-ion batteries to New Zealand homes and businesses.

Like cellphones these batteries do not require heavy investments in supporting infrastructure networks. They permit households and businesses to install PV solar panels whilst managing solar power’s intermittency. The main problem with solar power is that the sun does not shine all of the time. When the skies are cloudy or night falls your photovoltaic rooftop panels stop generating electricity. So households and businesses still need to be connected to the main electricity grid to guarantee their supply, in spite of solar panels installations.

You can resolve this issue by stockpiling electricity during daylight hours to use at night. This seems simple enough. However, batteries boasting the voltage and lifespan needed to supply an average household with enough electricity to keep the lights on have not been brought to market. Basically it is too expensive. Prototypes are also massive in size.

In principle if compact, powerful and affordable batteries hit the market then you would not need to be connected to the electricity distribution network. In fact you or your local community could go off grid.

How many households do not bother to install a landline phone these days? Could new houses avoid connecting to the main electricity grid in the near future? It is only a matter of time before battery technology hits that sweet spot. You can read about how Tesla plans to achieve economies of scale that surmount the current cost problem here.

To take a residence off-grid you would also need a smart monitoring system that conserves energy and warns you to turn off unnecessary devices when the household is running low on juice. Vector is investing in energy management systems that would provide this kind of service. They’ve also been investing in photovoltaic solar power and micro wind turbines. The company is future-proofing its main business – just in case distribution services are no longer needed in New Zealand.

If a decentralised electricity supply model works in New Zealand it will probably fly elsewhere. I still can’t pay for a coffee by credit card in Europe though.

Future electricity grids: the rise of the prosumer

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Unlike other commodities such as gas and oil, electricity cannot  be easily stored. It must be consumed almost as soon as it is produced.

Consumer demand follows a fairly predictable pattern. Electricity prices are higher on weekdays when “peaking” power plants come online to satisfy increased demand. The first demand peak occurs in the morning – when a high proportion of the population is getting ready for work or school.  A second peak occurs in the evening when consumers return home and start cooking dinner, or turn on the television.

Conventional power generators such as coal and gas turbines can respond quickly to variable consumer demand by increasing fuel input and ramping up output during the day. Nighttime is a cool-off period.

Intermittent renewables changed this model. We must now factor in unpredictable supply peaks and increased price volatility. In the UK and Germany consumers bear the brunt of these new costs. You can read more about how renewables are shaking up the traditional power model here. 

There are several ways to manage this new supply intermittency and smooth prices.

One is more interconnections. These reduce bottlenecks and diversify supply sources so that electricity-rich areas can service electricity-poor ones. Nations hoping to boost electricity production from renewable sources will need a well-connected grid, as an oversupplied area can experience shortages as soon as the weather changes. New power lines require public support and investment.

Short-term (spot) electricity trading can optimise electricity flows between areas and facilitate price arbitrage. Spot trading services are offered by EPEX Spot in Central Western Europe or ERCOT in Texas, for example. These services also permit renewable energy producers to rebalance their books if the weather forecast was inaccurate and they produce much more or much less electricity than predicted.

Smart grid technology uses real-time information about supply and demand to automatically adjust electricity flows curtailing price peaks (or negative prices). Again public money is needed to roll-out this infrastructure at the national level.

Another means is electricity storage.

Pumped hydro-storage has existed for a long time. It is the only large-scale storage technology used commercially. It involves pumping water uphill when electricity prices are low, then running water downhill, through turbines, during peak-price hours to generate electricity. Pumped hydro projects are nevertheless hugely dependent on local geography and rainfall, as well as regulations regarding water-use.

The lithium-ion batteries used in electric cars pack a lot of energy density for their size. They cost around US$10 000, even for a small vehicle, and can only run for about 175km before recharging. This could be better. Crucially, lithium-ion batteries do not suffer from “memory” issues. Meaning that don’t need to be drained before being recharged.

Battery manufacturers across Asia and the USA are struggling to cut costs and upscale their technology to plug into the electricity grid. Yet, electricity generation is decentralising. Small-scale industrial and household solar production is on the rise. Rather than selling their excess power back to the grid some could go off-grid.

Most experimental batteries would need to be bigger than a house in order to store enough solar electricity to power one household for a day. And they remain prohibitively expensive. However, Tesla caused a lot of excitement last month when it announced plans to market lithium-ion batteries at prices starting from US$3500. It costs a household a further US$5000 or so to install solar panels. Nevertheless, this much-anticipated battery is priced lower than any other technology on the market. The Tesla battery should be small enough and safe enough to install in your basement. Plus, you don’t need to be a rocket scientist to operate it.

How did they do it? It’s not new technology. Rather, Tesla is building a US$5 billion gigafactory in Nevada’s desert, where it hopes to realise enormous economies of scale. While the market is still waiting for a technological revolution – the step-change that would make batteries as portable and powerful as microchips which are continuously delivering ever cheaper computing power – Tesla intends to reduce manufacturing costs for current battery technologies.

There is a sizable market of homeowners prepared to fit out their homes with solar panels, battery storage and adopt other energy efficient technologies. These early adopters need enough cash to  invest upfront, before they reap the benefits in reduced or zero-cost electricity bills in the months and years that follow.

For most middle class homeowners US$8500 is no small fee. Companies such as SolarCity in the US provide another piece of the jigsaw. Financed by high net worth individuals, as well as Google and Goldman Sachs, the company pays for solar panel installations, aggregates the earnings from energy savings and grid buybacks, then sells bonds based on a predicted revenue stream. Such creative financing will hasten the prosumer revolution and eventually take some of us off-grid.

No one technology will solve all the problems intermittent renewable energies have introduced into electricity markets. A patchwork of different solutions looks likely to emerge – with some consumers taking matters into their own hands.