On August 17th, lightning strikes ignited wildfires across Northern California that have so far burned over 1.3 million acres. Separately, a heat wave led the state regulator (CAISO) to warn about rolling blackouts as electricity demand exceeds both electric supply and the ability of the state’s antiquated electric transmission lines to handle increased loads. This 1-2 punch of negative natural phenomena has caused some to point the finger at California’s renewable energy mandates, and the impact they’re having on load management. The rest of us simply stand back up, dust ourselves off, and work the problem. Nobody said disruptive change is easy.
Fossil fuel advocates claim the state’s focus on renewable energy has led to the forced closure of the most reliable power plants (natural gas) and an underinvestment in electric transmission. The power sector can’t meet the state’s electricity needs during periods of high demand like during a heat wave, and an inability to re-route electricity due to inadequate transmission capabilities. One solution involves the development of renewable energy microgrids. A microgrid is a local energy grid with control capability, which means it can disconnect from the traditional grid and operate autonomously.
Microgrids have been slow to develop because they historically cost more to operate than a macrogrid that benefits from economies of scale. Consumers will always prefer the cheapest version of any fungible product. Increasing solar efficiency and localization (particularly rooftop) combined with expectations that battery costs will continue to decline has led to renewed calls for developing renewable microgrids. Perhaps it’s humorous to only us that the one thing both sides of the political spectrum agree on is a desire to disconnect from the grid!
However, we do not believe being disconnected from the grid is the answer, for the simple fact the vast majority of people do not live in areas that have high solar radiation or wind speeds. It makes far more sense for the world to integrate and share the immense resources the natural world provides. The “Macro Grid Initiative” by the American Council On Renewable Energy (ACORE) “seeks to expand and upgrade the nation’s transmission network to deliver job growth and economic development, a cleaner environment, and lower costs for consumers.”
Source: NREL, DOE, IRENA, EPA, Zeihan on Geopolitics
Such a network would incentivize allocators to deploy capital to maximize productivity and efficiency, in other words to construct solar fields where solar radiation is the highest and wind farms where the wind blows the strongest. This would also incentivize the development of an integrated grid that would deliver this lower cost energy to the cities that demand it. It’s proving the age old adage that economies of scale matter, and the societal benefit from integration and interconnectivity is far greater than anything that can be achieved on the micro level. Go big or go home!
An example of going big is Sun Cable, an Australian company that is developing the Australian-ASEAN Power Link. This $16 billion project seeks to deliver solar power from the Australian desert to Singapore and was recently fast tracked by the Australian government. It includes a 10 GW solar farm, a 30 GWh battery storage facility, and a 2800-mile power cable. For context, the solar farm will take up 46 square miles that is just over twice the size of Manhattan. We don’t know if this project will get built, but the low-cost concept requires producing solar energy where radiation is the highest (like the Australian Desert) and then transporting power to where it’s needed (cities).
We believe microgrids make sense from a reliability perspective for those in remote locations or for those who require backup power to provide essential services or functions. However, the reality is urban power demand is way too large for any microgrid to meet. Only a macrogrid that further connects the world with itself can provide the necessary power to drive the world forward. For California and all other states this means upgrading its existing intrastate networks as well as expanding investment in interstate networks. Who knows, maybe over time we’ll increase cross border (international) connectivity as renewable energy doesn’t adhere to national borders. Go big or go home!
“Failure is not fatal, but failure to change might be” – John Wooden.
UK Firm’s Solar Power Breakthrough Could Make World’s Most Efficient Panels By 2021
Chilean Congress Pushes Plan For Accelerated Coal Retirement
Black Turbine Blades Reduced Bird Mortality By 72%
3 Oil Majors That Bet Big On Renewables
The Green Hydrogen Wave, And Its Implications for Renewable Energy
What Do We Do With Too Much Renewable Energy?
*No Warranties. The accuracy and/or completeness of any Eagle Global Advisors index, any data included therein, or any data from which it is based is not guaranteed by Eagle Global Advisors, and it shall have no liability for any errors, omissions, or interruptions therein. Eagle Global Advisors makes no warranties, express or implied, as to results to be obtained from use of information provided by Eagle Global Advisors and used in this service, and Eagle Global Advisors expressly disclaim all warranties of suitability with respect thereto.
You Must Make Your Own Investment Decision. It is not possible to invest directly in an index. Index performance does not reflect the deduction of any fees or expenses. Past performance is not a guarantee of future returns. You should not make a decision to invest in any investment fund or other vehicle based on the statements set forth in this document, and are advised to make an investment in any investment fund or other vehicle only after carefully evaluating the risks associated with investment in the investment fund, as detailed in the offering memorandum or similar document prepared by or on behalf of the issuer. This document does not contain, and does not purport to contain, the level of detail necessary to give sufficient basis to an investment decision. The addition, removal, or inclusion of a security in any Eagle Global Advisors index is not a recommendation to buy, sell, or hold that security, nor is it investment advice.