Rating: Advanced high school and post-secondary
Summary: The combination of wind, solar, and battery storage will soon produce clean electricity so cheap the marginal cost (the cost of producing the next unit of something) will be almost zero. Abundant and clean electricity will transform our society – business models, how and where we work, where we live and play, and so on – just as cheap petroleum and the internal combustion engine did beginning in the 1920s. This episode of the Energi Talks podcast was about the new study, “100% Solar, Wind, and Batteries is Just the Beginning” by Tony Seba and Adam Dorr.
Tony Seba biography: Seba’s work focuses on technology-based disruptions: the convergence of technologies, business models and product innovations that are disrupting the world’s major industries including energy, transportation, infrastructure, real estate and finance. He has taught thousands of entrepreneurs and corporate leaders at Stanford University’s Continuing Studies. Seba is also the co-founder of RethinkX, an independent think tank that analyzes and forecasts the speed and scale of technology-driven disruption and its implications across society.
Energi Media stories about Tony Seba and related topics:
1. 100% Solar, Wind, and Batteries is Just the Beginning – Tony Seba and Adam Dorr, RethinkX study
2. Interview with Tony Seba: The man who would destroy the global oil industry – Parts One & Two
3. EVs approaching ‘iPhone moment’ and that changes everything – Tony Seba
4. City of Calgary preparing for the (not so far off) autonomous electric vehicle future
5. Electric vehicles emerging as a ‘material risk’ for Alberta oil producers?
NOTE: Other related news stories, analysis, and studies are linked to throughout the article.
The transcript of Markham’s conversation with Tony Seba has been lightly edited.
Markham Hislop: Welcome to another episode of energy talks, the podcast where we discuss global energy issues and trends with experts from around the world. My guest today is Tony Seba, world-renowned thought leader, Silicon Valley entrepreneur, educator, and the author of the best-selling book, “Clean Disruption of Energy and Transportation.” Tony’s work focuses on the convergence of technologies, business models, and product innovations that disrupt the world’s major industries. He’s also the founder of RethinkX and the co-author of seminal RethinkX studies on transportation and the future of agriculture. Today. We’re going to be discussing his latest study. This one on energy titled a hundred percent solar wind and batteries is just the beginning. Welcome to Energi Talks, Tony.
Tony Seba: Thank you for having me on.
Markham Hislop: I first interviewed you three and a half years ago for your transportation study and I’ve taken a little heat from colleagues and fellow journalists for being fairly positive about that interview and subsequent things that I’ve written about you. And that made me think of what is Tony like, is he a futurist? Is he a forecaster or what is he? The description that I’ve come up with is that you are a rethinker. You’re not predicting. You don’t have to predict down to the month and the day when things are going to happen and how many of those things are going to happen. You’re inviting us to rethink huge systems of our economy, how we live, how we work, how we do things, and that I think is a very valuable thing. So, is that a fair characterization of your work?
Tony Seba: I would agree with that. I mean, my work on technology disruption is about looking of this speed and scale of disruptions. And of course there are implications for society. So when I say, you know, by 2030, EVs or solar or whatever are going to be 85 or 90 or a hundred percent of energy, the point is not accuracy, the point is it’s going to happen plus or minus [a few years]. It’s not going to be 2040. It’s not going to be 2050, which is what the mainstream would have you believe. I’m concerned about the speed and scale of disruption and so far, so good.
Markham Hislop: When I interview a guest, I usually make copious notes with questions so that I can hold up my end of the conversation. But frankly, with your new study, I didn’t know where to start. So what I’m going to ask you to do is give our listeners a short summary of that study, and then we’ll have a conversation and I will do my best to keep up.
Tony Seba: So the question that we asked ourselves was, is 100% – is an electricity system composed of just solar wind and batteries possible. So that was the question: is it possible? And if so, what are the characteristics? What’s the cost and so on and so forth?
We found the whole number of things. Um, the first one of course is yes, it’s possible by 2030, we could have a whole electricity system composed of just solar, wind, and batteries (SWB). Not only that, by 2030 that SWB system would be the cheapest possible electric power system bar none. It would be cheaper than anything else. Oil, gas, nukes, you name it, on top of that.
Not only would it cover 100% of our current demand, but it would produce anywhere from a hundred to 200% more energy than we need. This is what we call “super power.” So essentially it would be at a cost that approaches zero. So imagine a system that gets about three times the energy that we produce today at a cost approaching zero. That is unheard of.
Markham Hislop: Now, from my point of view, this is extremely important because as we confront the challenge of climate change, and as we switch to these electric technologies, like electric vehicles and electric buildings and so on, the amount and cost of electricity that we can generate becomes really, really important.
For instance, I’ve done some work reviewing the studies around electrification of the British Columbia economy and the estimates are that two to three times as much electricity may be needed by 2040, and that’s a huge expansion of the existing system. So, if you take that example and apply it to other jurisdictions and big economies like the US, this is not a small change.
Tony Seba: That’s right. It’s not. Energy is one of the foundational sectors of the economy throughout history. So we’ve studied 10,000 years of humanity. And every time you have a 10 times change, you have a fundamental change in the energy system, materials and information, you get a new world power. It’s a foundational sector. And we’re on the cusp of that.
An interesting finding from studying 10,000 years of disruption is this: the new system is a fundamentally new system. And I will tell you what I mean by that. When we went from horses to cars, the car transportation system was not a retrofit of the horse. The car was not a faster horse. The new transportation system was fundamentally different from the horse transportation system. We built a new road system based on the car, not the other way around. We changed the way we live, we work, we date, we mate, and so on, based on the car disruption.
Same thing happened with the smartphone. The smartphone was not the same old, landline or even flip phone. It was a fundamentally different information system, right? So the new system tends to be a lot larger than the old one – two, three, five, 10 times larger than the old one and a lot cheaper per unit. So those two things happen with disruption.
Markham Hislop: Now, I want to illustrate what you’re saying, Tony, because coincidentally I did my master’s thesis in the mid-eighties on the transition from horses to power farming in Saskatchewan 1900 to 1930. I studied these very things you’re talking about. And all of what you said is true.
There are any number of other changes to the system that were unintended or unforeseen in some cases. For instance, in Saskatchewan a hundred years ago, every quarter section (160 acres) had a farmhouse with a family and now 3,000, 4,000, or 5,000-acre farms are common because of the equipment that’s changed, the technology. And now rural areas have emptied out, right? They’re, not quite uninhabited, but very close as my 94 year old mother-in-law who grew up in Saskatchewan on a farm, very often reminds me. But that illustrates exactly the point you’re talking about.
Fundamental change, foundational change, has all sorts of implications for other systems.
Tony Seba: And that’s what we study. We study the implications, not just the disruption itself, but the implications of the cascading ripple effects across society. So, all of these disruptions – food, transportation, energy, have dramatic ripple effects across society, geopolitics, the way we build cities, the way we work – and we’re already living some of that. So, yeah, it’s studying those implications is really important.
Markham Hislop: Let’s talk about a couple of things that are related. One of them would be the effect of this revolution on the hydrocarbon industry. We’re primarily talking about oil and gas. I think we can already see the death of coal, but future end of the hydrocarbon industry. That then leads us into a discussion of geopolitics because, of course, a lot of today’s geopolitics are dictated by the politics of oil. So what are your thoughts on that?
Tony Seba: Transportation and energy alone will dramatically change society, and if you add [the food system], it’s going to be even bigger. And all of these disruptions tend to a similar direction. They’re mostly based on information technology. The economics of food, energy and transportation are going from extractive based on mining to essentially create it.
Instead of using steel and cement and oil and so on, we’re using photons and electrons and DNA (to make food, for example) and so on. Put all those things together and it points to the direction of autonomous cities and regions, meaning that whether it’s San Francisco or California or Shanghai or Accra, they’re going to be able to have everything they need in terms of transport, energy, food, and so on to meet all their basic needs. Not all their needs, but all their basic needs, which means that they’re going to become more autonomous.
If we produce everything we need locally autonomously, then what do we need the centre for? What do we need Washington or Beijing or Ottawa for or Brussels? So all of those relationships within countries are going to change and of course, across countries are going to change dramatically.
The geopolitics of oil is the geopolitics of the 20th century. I told you three and a half years ago that oil demand would peak 2020. That sounded insane, right? But it already happened, right? So we expect oil to go down by another 30 or 40 per cent over the next 10 years. What’s that going to do? The flow of oil, which is the biggest traded commodity around the world is going to go down dramatically.
And we’re not going to be dependent on the politics of oil.
Now the implications for oil exports, of course, it’s going to be huge because volume is going to drop dramatically. but price is also going to drop dramatically into the [$20 range] and it’s not coming back. And we already showed that. I mean this year we saw oil going down, not just by $20, but to negative $20. We saw negative prices briefly, which is not unusual in these cases. So the geopolitics of oil mean that the geopolitics military investments are going to change, right?
Who’s going to patrol trade around the world. We’re not. We’re going to patrol the trade that is in our best selfish interest. This is how energy impacts your politics.
The cost of trade is going to go up internationally because the US, which patrolled the world’s waters since the Second World War, essentially is going to stop doing that over the next few years. So the implication, the ripple effects to your politics, military are going to be substantial over the next 10, 15 years.
Markham Hislop: I want run something by you that I wrote in a document here a few months ago back called the Hydrocarbon Vision. Here’s what I argued: Probably 75% of Alberta’s oil production is bitumen from the Alberta oil sands. It has a very high carbon-intensity, which when you make it into [gasoline or diesel] fuel is a disadvantage. But when you make it into carbon fibre, it becomes a significant competitive advantage.
Scientists are busy in Alberta trying to make bitumen into a precursor for carbon fibre, which would bring the cost down by 50% and provide a super abundant supply of it so that carbon fibre could be used more widely in electric vehicles. I’ve argued that Alberta and, I suppose this applies to other jurisdictions that produce hydrocarbons, should begin thinking about a post-combustion strategy now. And if [Alberta] has the opportunity as it does with bitumen, it should jump on that with both feet in and accelerate it as much as possible because not only can it add more value [to a barrel of bitumen], but it’s a hedge against the future that you’re rethinking.
Tony Seba: Oil, if you can’t compete at $20 per barrel, you should get out of that business. Every new investment in fossil fuels and nuclear is irrational from a purely economic perspective from now, period. Any new investment in gas, oil, coal, nuclear is already irrational.
[Our study describes] a 100% SWB system, free energy. It’s going to generate two to three times the energy we have now with marginal costs approaching zero.
And there’s another fascinating finding, which is that once you build the hundred per cent SWB system, if you add another 10% or 20% investment, you get 200% to 300% more energy, more superpower. We have never seen that in energy. So there are these disproportionate returns on investments in solar, wind and battery and that has never happened in resource-based extractive energy.
So the question that governments and industries and communities need to be asking themselves is, how can we redevelop or develop new industries, with super power, with superabundant, essentially free power?
The question that you ask yourself is what other business model innovations, what other products, can we add to the equation when we have superabundant free energy? Make diamonds, host data centres. There are so many industries. Repatriate industries that consume heavy energy, lots of energy for cheap. Bring a car manufacturing for instance.
We did the numbers for an internal combustion engine VW. They would save $2,000 per car if they had access throughout the supply chain to this kind of free energy to cheap energy. So that’s what countries should be thinking about, not how do we repurpose one fuel into another one fossil into another. That makes exactly no sense. I mean, you have to think, what do we do with superabundant, almost free energy? That’s the real question.
Markham Hislop: This is fascinating, Tony because the political discussions in Canada and the United States that I cover all the time around energy are very often rear view mirror kinds of kinds of conversations. And it’s “Oh, how do we save this? You know, how do we save the Alberta oil sands with all of these changes?” When the question should be, what’s the economy going to be like in 2050? And what do we have to produce to be competitive in that 2050 economy? Maybe it’s bitumen and maybe it’s not, but we should be looking, we should be planning for the industry, the economy, that we want 30 years in the future instead of trying to preserve what we have now.
Tony Seba: Exactly. [Thinking again of the] car and the horse, that’s a little bit like preserving horse barns, right? How do we preserve horse barns or the newspaper industry or whatever. I mean, just the number one thing in this – I told you three and a half years ago, and I’ve said it for years, the 2020s are going to be the most disruptive decade in history. So I’ve been right and we should protect people. So not industry, not sectors, protect people, give people stability.
The government should get out of the energy business and it should design and make markets competitive. It should grant individuals and businesses to right, to generate, store and sell electricity for instance and let the market work.
This is a disruption the same way in which landline telephony basically turned into the internet. It was not a bigger landline, telephony business. It wasn’t changes at the margin. It was a fundamentally different system. That’s the way we should be thinking.
This is an internet of energy. How do we design a new society? And new development process, a new education system based on an internet of energy or internet of transportation and so on,
Markham Hislop: I was smiling. Our listeners of course can’t see this, but I was smiling while you were talking, because I’m very fond of saying these days on social media and being beaten with a club for it, is that buckle up because the 2020s is going to be a wild ride. It is, as you say, the decade of disruption. But Tony, if this is the decade of disruption, then we’re already behind. Many jurisdictions and industries and governments are already behind. And the window to adapt and change is rapidly closing.
Tony Seba: It is. And one of the insights from my work on Rethinking Humanity, which I published recently, is that this is not another industrial revolution as the mainstream world would think. This is a fundamentally new system for the world, a new age for the world. It’s as dramatic as the transition that humanity did 10,000 years ago from foraging to cities and agriculture. It’s a fundamentally different order or age.
We should be thinking in that way, not another industrial revolution, not how do we retrofit hydrocarbons into this economy. That’s gone. Any investment in hydrocarbons is already stranded. If you want to milk it, if you will, cash cow, that’s fine.
Markham Hislop: I want to recount a conversation I had with a Canadian oil and gas executive seven or eight months ago when the Saudi Russia oil price war broke out, followed by COVID. and energy companies were panicking. He said, “Oh my God, we need a plan”, and I said, “no, you need new ideas. You need to, you need to think differently about your industry. And then once we’ve come to a consensus on what that new future should look like, then you can create a plan.”
And not only think differently, but talk differently because you need to bring along the voters and the business community and others. So you need new ideas, new narratives, and plans come after that. To me, plans are difficult, but doable once you’ve got those other two things sorted out.
We’re already seeing, for instance, the company in the US with the biggest solar and wind company in the US Nextera has already bigger market capitalization than Exxon. I mean, even a couple of years ago, that would have sounded insane. Tesla has a higher market cap than, three, four bigger automakers.
We’re already making that transition. Wall street is already telling these companies, the new companies here, “I’m giving you a lot more abundant, cheap capital to keep growing your business.” And some, not all oil companies, are headed in that direction.
But here’s the caveat. It’s not just about technology, right? You have to change your organization has to be changed.
What made you successful in oil is not going to make you successful in solar, wind and batteries. It’s a different business model. It’s a different organization that you need. So just because these oil companies say, “Oh, I’m getting into, into solar doesn’t mean that they’re going to succeed at all.”
We have seen the fact that a car company says “I’m going to get into EVs” doesn’t mean that they’re going to be successful. They need a dramatically different type of organization in business modelling, which is very hard to do.
The challenge is not technology. The challenge is the linear mindset. What worked in the past is not going to work in the future. In fact, and that’s what we call ‘the baggage of incumbency’. In fact, what worked in the past, what used to be an asset, that’s now a liability it’s actually going to dig, a deeper hole, no pun intended. You need to change across the board.
A historic example is Kodak. They were the biggest investor in digital cameras, more patents than anyone else in the business. They developed the first digital camera, and yet they could not make that transition. Why? Because of their organization. It was not designed for the new business models that would come out of digital photography.
Markham Hislop: I’ll give you an example from North America of that. And it ties directly into your energy and SWB model. And that is electricity markets. I’ve been interviewing dozens of experts lately, for some work I’m doing, and the electricity markets, the ability to price it, generate it, distribute it.
We had an existing system called “cost of service.” Now, the existing system is being transformed, more quickly in some jurisdictions than others. But when you start discussing adapting to this new future that you’re talking about, the devil is in the details. And there are a lot of details and a lot of devils. It is a very difficult thing.
In British Columbia where I live, it’s dominated by a government-owned crown corporation utility that does everything distribution, generation, transmission, and to talk about, bringing in a more market-based system that would allow multiple players and, and, and real time pricing and markets it’s unthinkable at the political and public level. You have to have that conversation first, before you can begin the difficult work of re-engineering your system to make it future-fit, as it were. for the kind of future you’re talking about.
Tony Seba: Absolutely. Rent seeking monopolies, which is what utilities are, and if you add to that governments that act as utilities, it’s a double rent-seeking monopoly. Monopolies are not going to bring this new SWB system, or the new transportation as a service system, or the new food system. Monopolies are going to stand in the way of this new system.
The idea that we need the existing utilities and monopolies to help us get to the new future, basically, it’s insane. It’s a bit like saying that AT and T, the “Ma Bell” monopoly, was well-positioned to bring the internet, social media, smartphones. They were not. They were good at what they did, which was landline telephony. But this is a total new system for the internet with new business models, new products and that’s what we need for the new world.
Take Walmarts as an example. Come to my physical store and, if you bring a Tesla with 75-kilowatt hours of battery, I will give you the electricity to fully charge that Tesla for free while you shop here. So it’s the idea that electricity is going to be so cheap, but it’s going to enable other things. So the idea of selling basically made making a bundle, of dollars by selling electricity that’s gone. That’s only gonna last a few years.
But what we need to ask ourselves and what companies are already doing that is how do I take it away of superabundant energy in cheap to enable other products to enable other business models at all levels, whether it’s a region, whether it’s Walmart, whether it’s a mall that wants to attract, you know, folks giving away electricity, like companies like Google or Facebook or whatever, give free information, which would have been unthinkable to newspapers, right? 30 years ago.
Markham Hislop: Tony, you talk to executives and politicians, policymakers all the time, and you do it in different countries, not just the United States. Based on that experience, how open is our leadership to rethinking energy?
Tony Seba: The baggage of incumbency is very heavy. The world powers in energy, you know, including Canada and the US, are having a hard time rethinking energy. Disruptions usually happened from the edge, not from the centre. It’s the Teslas of the world who are disrupting transportation. It’s the Nextera of the world that are disrupting energy, solar and so on. So, it happens from the edge, not from the centre.
We are seeing disruptions that happen from countries that are not energy wealthy and they have to do it for pure economic reasons. We’re seeing policymakers in many countries that are going in that direction – fully solar and batteries and so on.
What we’re finding, even within the US, and even in a lot of energy-rich countries is that, it’s the states that are leading, not the federal government. California is leading in the US for instance, it’s not in Washington. It’s not necessarily, in North Dakota or whatever.
Having said that, if you look at Texas, essentially 100% of what is being built in the electric power system, net a hundred percent is solar wind and batteries already, even if, they’re, an oil power, and that’s because they, essentially created a system that is competitive at, at some level.
The baggage of incumbency is really really heavy. So the leadership, I would expect both in Canada and the US and abroad, is going to come from the provinces from the states and from the regions, not from the federal government.
Markham Hislop: Well, Tony, on that note, we’re going to wrap a bow around this conversation. Always a pleasure, my friend, really enjoyed chatting with you and we’ll look forward to having you on future episodes of Energi Talks,