Kevin’s Daily Digest for 6/25/16, Weekend Deep Takes Edition

The Great Western Water Crisis cometh, my take on Tesla’s potential role in Grid 2.0, and the debut of The Water Cooler.

The Daily Digest, published Monday-Thursday plus a deep take weekend edition, focuses on the latest news and perspectives in climate, renewables, storage and electric vehicles. For more follow me on Twitter @kkchristy. The Digest archive and the rest of my Medium content is here.

The footfalls of the Great Western Water Crisis are getting louder. But trust me, as bad as things seem now, they can and will get worse. We have yet to truly hit the limit stops of water use, particularly on the Colorado River watershed, but we very soon may. Water managers believe that by 2017 we will see Lake Mead hit a historic low despite El Nino’s rainy relief. How much lower it can go beyond that is really just a question of timing, because the fundamental nature of the problem isn’t changing: we are using more of the river’s resources than it can possibly replace through nature.

This isn’t a problem that can be fixed by browbeating people not to water their lawns. This is an industrial problem, driven by agriculture primarily and thermal electric plants secondarily.

California water usage (source: http://www.csgwest.org/policy/WesternWaterUsage.aspx)

And this is surprising in a country that prides itself on its free market spirit, because this problem would be easily solved by bringing supply and demand back into balance through price signals. But Western water pricing and allocation has become a political third rail, where farmers and ranchers with supposedly free market, libertarian ideals desperately cling to outdated, centrally-planned government water giveaways as birthrights.

And amongst the agricultural water users, nut growers use an alarming amount: far more water than the cities of San Francisco and Los Angeles use collectively gets consumed by almonds intended for export.

Source: Mother Jones (http://www.motherjones.com/environment/2014/02/wheres-californias-water-going)

And then there’s livestock. It takes about 1800 gallons of water to bring us one pound of red meat, so imagine that when you buy a Quarter Pounder from McDonalds, you’re pouring 450 gallons of water into the street. And don’t get me started on the cow farts and their impact on climate change.

Source: Business Insider (http://www.businessinsider.com/real-villain-in-the-california-drought-isnt-almonds--its-red-meat-2015-4)

It’s maddening to me, as a California homeowner, to continually be pressed to conserve my family’s water usage when it’s patently obvious that my family and my neighbors are not the problem here. We will not conserve our way out of this problem by parching our lawns or bathing every other day. In fact, I suspect I’ve done far more personally to conserve water just by giving up meat this year than I could accomplish by not using my garden hose.

I have simply run out of patience with “solution theater,” where government appears to take action that in the end does little or nothing to solve the problem (see: the Transportation Security Administration).

Yes, if we increase the price of water to agriculture and thermoelectric plants, it will cause dislocation but it’s the kind of dislocation that frankly we need right now. Marginally productive farms will go out of business and become the kind of lower-value land that is ideal for renewable energy development. Thermoelectric plants will become less competitive, which will result in less greenhouse gas emissions as they are ramped down or retired in favor of cheaper, emissions-free renewables. This is creative destruction, and we have only postponed the inevitable by sheltering these sectors from market forces.

I took an informal poll among a few of my coworkers — energy professionals all — and asked: do you know what your average electric rate is? Nobody knew, myself included. We are all aware of what our bills are each month, and a number of us have PV systems, electric cars, energy efficient appliances and such, but I would not go so far as to say that we have a high level of awareness of energy use and tariff price signals. All that is to say that if energy professionals are not paying much attention to home energy use and pricing, then it’s safe to say that your average homeowner isn’t either.

This undergirds my point that the coming complexity that it will take to reap the benefits of Grid 2.0, Grid Edge, or whatever you care to call it is not going to be relevant to your average homeowner until it can be simplified and productized. Simplification is actually one of the factors I called out as being a potential advantage of a Tesla acquisition of Solar City: it allows Tesla to wrap Solar City services in the Tesla brand and have a single point of contact, single sales experience and single smartphone interface (especially if they acquire or expand into home energy management). That’s real value for consumers, who in my experience usually don’t care to be pestered with energy management. But make it easy and sexy and many more will jump in. Make it something they can buy, as opposed to something they have to do.

Another potential benefit I called out to the Tesla transaction was that it would immediately vault them to the front of the line for DER aggregation, with a ready-made fleet of EVs, charging stations, solar PV systems and stationary batteries available for bidding into local capacity/demand response solicitations. I do believe that the bulk of the action on DERs is going to happen at the aggregator level, not at the individual user level, so Tesla should be able to access a significant source of new revenue from its existing installed base as it hangs out its aggregator shingle.

Yet another advantage, one I haven’t mentioned before, is that the solar + storage product space is wide open across all customer segments. If Tesla can solve its capital issues (only magnified with a Solar City acquisition), it will face a field ripe for innovation and they stand a very good chance of blowing away the market on innovative products. Here’s why:

In my experience in the solar space, innovation hasn’t kept pace with growth. I suspect this is because the solar market has, first and foremost, been desperately deal-hungry. Firms have been focused on market share in a hotly competitive space with increasingly compressed margins, and since growth has been very dependent upon third-party finance there has been limited appetite for truly new technologies — especially from small balance sheet venture-backed suppliers. And so the pace of technological change in solar has been comparatively slow, hampered by cash-hungry developers and conservative investment capital.

Case in point: when I started in solar in 2002, you could buy polycrystalline modules, monocrystalline modules, cadmium telluride modules, amorphous silicon modules, and CIGS modules. On the inverter side, you could buy central inverters and string inverters. Single-axis, azimuth and dual-axis trackers were available for sale. Today’s landscape is no different. Of course costs have come down, efficiencies are up, and we have more sophisticated designs and installation techniques, but a 1 MW PV system installed in 2002 is not going to look very different from a 1 MW PV system installed in 2016.

This is actually remarkable when you consider the pace of change in other technology sectors, like mobile phones:

The best selling cell phone of 2002.

This is not to say that Silicon Valley didn’t take its shot at innovating in solar. Opti-Solar, Solyndra, Miasole, GreenVolts, Evergreen, Prime Star, e-Solar, Ammonix, SolFocus… the list goes on and on (if you want to see the bloody details, Eric Wesoff from GTM maintains the single source of truth on the matter). Many hundreds of millions of dollars down the rat hole, every enterprise’s pick shattered on the hard soil of resistance to change and miscalculations on cost.

In fact, the first truly meaningful PV system design innovation that I’ve seen in almost 15 years is First Solar’s medium voltage DC collection concept, unveiled just a couple of months ago. I feel like we should have seen a dozen of these kinds of fundamental innovations over the last decade, given PV’s stratospheric growth.

But I believe that Tesla has the potential to truly move the needle on that front, if it is able to successfully integrate Solar City and if it can manage its increased, more complex capital requirements — no small ifs, to be sure. But if they can, I believe they will have the human capital and the vision to meaningfully increase the rate of innovation in the solar space, especially when it comes to solar + storage integration and DER aggregation that incorporates solar + storage systems. They already have very significant experience in the battery energy storage and power conversion space gained through their electric vehicles (every one of which has energy-dense lithium ion batteries, compact, sophisticated DC/AC inverters and energy management software), some of which has found its way into Tesla’s stationary storage systems with more, I’m quite sure, on the way. And we will soon see some of that technology in solar + storage products.

Which brings us to Grid 2.0. For the new grid to work, change and new technology will be a necessity, not an unnecessary complication. Our existing suite of software and products is not enough to deliver Grid 2.0. For the first time in decades, we will need more than just UL-listed equipment and 1741-compliant inverters to make a sale. We will have to innovate, which is why a successful Tesla + Solar City integration has the potential to capture mindshare and market share in a Grid 2.0 world far beyond what solar companies have been able to accomplish so far.

This edition of the Digest introduces The Water Cooler, a section where I share topics of interest unrelated to my normal content. Today I’d like to refer you to “The New Norm” episode of the Invisibilia podcast from NPR, which deals with the human psyche in its manifest forms.

In the first segment, co-host Hanna Rosin follows the story of grizzled Louisiana Shell Oil men falling in with a mesmerizing, diminutive French woman who in her consulting sessions with them convinces these taciturn Southern boys to open up, share their feelings, learn to cry, and even massage each others’ feet. In the end, safety on the rig improves 84% and productivity benchmarks are shattered — reminding us that we are, first and foremost, human beings when we show up to work, and mastering the human operating system is the key to superior results.

In the second segment, co-host Alix Spiegel tells the tale of the opening of the first McDonalds in Moscow, and the challenges of teaching dour Russians how to smile and be pleasant as they served Big Macs to other dour Russians.

Link below… enjoy!

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