#180 Peter Kelly-Detwiler 2021 Energy Review & 2020 Outlook
Peter Kelly-Detwiler has 30 years of experience in the electric energy arena. He writes for Forbes.com and other publications on topics related to disruptive innovation and its impact on the electricity infrastructure. He provides strategic advice to clients and investors, helping them to navigate this transitional period. Peter is also the author of The Energy Switch — a book about how companies and customers are transforming the electrical grid and the future of power.
Mr. Kelly-Detwiler has spent much of his career in various areas of competitive power markets. As Senior Vice President at Constellation Energy, he oversaw creation of VirtuWatt — a market leading platform to facilitate real-time awareness of electricity pricing and consumption and bidding of assets into competitive markets. His book, The Energy Switch: How Companies and Customers are Transforming the Electrical Grid and the Future of Power was published by Prometheus Books in the Spring of 2021.
Bigger Than Us #180
This transcript has been lightly edited.
Host Raj Daniels 00:46
Peter, how are you doing today?
Peter Kelly-Detwiler 01:19
I’m doing quite well, thank you Raj.
Host Raj Daniels 01:21
Peter, how’s your year been?
Peter Kelly-Detwiler 01:23
You know, it’s been an interesting year — as he coughs — with everything going on with COVID in the global economy and some of the strangeness at that global level. But within my own life, things went really well. You know, I work from home, my wife works from home. We get to see each other all the time, on the phone constantly with with our kids and loved ones. And so that’s been great. It’s been a good year that way. And then, you know, I was fortunate to have the book come out and had great responses with that. And I had some really interesting professional relationships as well. So for me, 2021, I feel kind of guilty in saying was actually a pretty good year in many ways.
Host Raj Daniels 02:06
I understand what you mean by the guilt. I also felt that this year. I felt it more prevalent last year, when everything was locked down. And I mentioned probably because I enjoy time with my family. So that always felt good. And then to your point about being able to not only keep our current professional relationships and commitments, but also increase them while others are probably struggling. And so I felt the same guilt also.
Peter Kelly-Detwiler 02:31
I think it’s a natural thing.
Host Raj Daniels 02:33
I agree. And for those of you listening, we are recording this on December 21, 2021. And I kind of want to go through, Peter, what you saw happen this year. You mentioned the book. I read the book; it’s a great book. There’s a couple of quotes that I want to go over here later with you. But what did you see from a broadly speaking, cleantech greentech evolution here in 2021? And then we’re going to switch over into 2022 and what you see coming down from a forecast perspective.
Peter Kelly-Detwiler 03:01
Sure. So 2021, I think, you know, starts with that nasty little carbon atom, and the issues related to climate — I think it was pretty clear this year that there were a lot of anomalies in the US, Europe, around the planet. And so I think more recognition among many people that we have a serious problem that we have to marshal an increasingly large number of resources to address, and then obviously, Cop26: while it wasn’t perfect, I think the level of intensity around those conversations was heartening.
And then with respect to actual happenings on the ground, if you look at, for example, electric vehicle sales in Europe, the numbers are really quite significant. And even here in this country, more than double what they were last year. So in places like France, where one every six new vehicles has a plug in it. We’re not quite at that level yet. Norway has 80% of its new vehicles that are registered or electric. So you know, some pretty good trends there, more models out there.
And then the other piece of that, the storage side, batteries driven by electric vehicles. Costs are coming down. More batteries are being deployed across the entire energy landscape, particularly here in the United States, and often accompanying solar. And that trend will just continue. Then we saw a lot of announcements around offshore wind projects going forward, even floating leases likely to happen on the West Coast — Oregon, California the leases have been issued; they have to be floating technology.
And then more community solar, more solar in general, and that industry, the especially the reason and behind the meter solar industry getting really smart after COVID In terms of figuring out the digital tools to make the design and installations much more efficient. So it was pretty heartening to see that, even though we had the massive stutter step in 2020, when COVID first came on, in 2021, society generally figured out relatively quickly how to adapt and keep on moving.
So we’re still dealing with this acceleration of acceleration where tech gets better. And yes, we have some short term perturbations in supply chain and so on. But I think the long term prognosis still looks pretty good for cars falling across all these clean energy sectors.
Host Raj Daniels 05:33
Now, you mentioned floating wind. For those that aren’t quite familiar, you know, probably understand the ones that are on the terrain and with the big long poles. But can you explain what floating wind is and how it’s different?
Peter Kelly-Detwiler 05:45
Sure. Let’s talk about that for a minute. Okay, so first of all, on the North Sea, we saw the first turbines going in, and they were relatively small, four, six megawatt machines. Now we see machines, 12 megawatts, testing 15-megawatt machines — these are all fixed structures offshore, with monopiles, or triangular jackets attached to the ocean floor. Where there’s a continental shelf, that makes a lot of sense.
But where there is no continental shelf — West Coast of the United States, parts of Asia, etc. — the idea is you take some kind of a floating structure, and you put the wind turbine on top of that, and it sits out there and floats, and then it’s tethered to the ocean floor via cable. The beauty of that is these machines can potentially be enormous because the fixed structures have to withstand all those offshore stresses from storms. With a floating structure, you impart a lot of those stresses simply to the water around you. So these machines could be — we saw one, Vestas has a plan for a 27-megawatt floating offshore wind machine.
Now, I think I’ve seen some writing also around combined floating wind and solar. Are you familiar with that? Some. There’s floating solar in shallow bays and that sort of thing. And floating wind is usually further offshore. Where I’m seeing the biggest combination right now, Raj, is wind and electrolyzers, to make hydrogen out of the electricity from the wind turbines, and then shipping that back. And so those combos, you’re starting to see a lot of conversations and diagrams around how that’s likely to unfold.
Host Raj Daniels 07:31
And I recently read an article about wind and data centers too.
Peter Kelly-Detwiler 07:36
Yes. Data centers, Bitcoin mining, which is one perturbation of that. A lot of efforts right now to link up more and more renewables directly to those energy processing data factories, if you will. And companies like Microsoft, and Google saying, we’re going to try and do 24/7 hourly match of our demand to the output of a combination of wind turbines and solar panels and batteries. So we can legitimately say we are being supplied constantly with renewables.
Now, they’re not quite there yet. AES has a contract with Google in Virginia. That’s that 90%. But the planning is definitely there. And wind will be a critical piece of that because it has much higher capacity factors in general than solar does. It just turns out a lot of energy for the installed capacity that it has.
Host Raj Daniels 08:32
Now wind and solar, obviously, generation. Where are you seeing storage?
Peter Kelly-Detwiler 08:37
Well, the first place it goes is with solar. There’s two reasons: One, the investment tax credit. So if you supply a battery with over 75% solar energy that’s metered, you get that percentage times the available investment track, tax credit, that doesn’t exist for wind. And so that’s one reason you see it. The other one is, solar has a very, very predictable production profile, assuming no clouds from eight in the morning to say four in the afternoon. And so there’s this real value in time shifting the energy from that solar panel and moving it to the peak hours of the day.
So you’re starting to see even retrofits that now, they’re eager to see many, many projects going on solar and storage, solar and storage. But now you’re seeing more and more companies say, “We’re going to go and retrofit existing storage installations because of this thing called negative covariance,” which is, it’s kind of like drinking beer. The first beer is good. The second one’s okay. By the fifth one, not so much utility left there. Same thing. As you add more and more solar into the system, you decrease the value of solar overall. And so prices come down the net value of the next unit coming on board because you start to saturate the system.
But if you can move those solar rich hours of the day, that energy to the evening, now there’s a lot of value you there again. So those two dynamics, the tax structure, and the predictable load shape of solar that allows you to load shift is really helpful when you see some storage matchups, but not as much as solar. But in both cases, typically, the durations two to four hours in that range.
Host Raj Daniels 10:19
So speaking of duration, have you seen duration increase? And what kinds of storage are you seeing come to the market?
Peter Kelly-Detwiler 10:25
Well, so lithium ion, you’re typically seeing the four-hour, somewhere in the two to four-hour range. A lot of the bigger solar projects have four hours of duration, because that’s kind of a length of peak. So that’s where your value tends to be concentrated. But as you start to bring in more and more batteries and renewables into the grid, you start to solve for that short-term problem of moving four hours.
And now you have to start to solve for these issues where, what happens when there’s a lot of cloudy days in a row, or the wind isn’t blowing with the intensity that one expected or needs? So then you start to see the need for these 8, 10, 12-hour duration technologies. And so the flow batteries come in. I think San Diego Gas Electric there was just announced a project with the flow batteries with ESS that I saw this morning. You’re starting to see companies like Highview Power that freeze air. And when the air expands again, it increases 700 times in volume and drives a turbine. And so those are like 10-hour duration machines.
And then you’re seeing companies like Energy Ball, which stack 35-ton bricks and raise and lower them to deliver energy into the grid. And they’re capable of, say, a 10-hour duration product. There are others as well. There’s a big set of projects going into California which would be compressed air under reservoirs. And those things are also a longer duration. And then you see companies like Form Energy with a reversible rust battery technology, which is pretty cool. That might have 100 plus hours of duration.
So you’re starting to see the first pioneers this year, but a lot more deployments to come in the years to come of this longer duration stuff that picks up the baton from the lithium ion, which gets less cost effective as you get to four to six hours. And then these other technologies come in inherit this longer duration need, which we’ll eventually evolve into as we see more saturation of renewables and lithium covering the shorter duration needs.
Host Raj Daniels 12:32
You mentioned the flow battery; how does that work?
Peter Kelly-Detwiler 12:34
Okay, so what you have there is you have a fixed membrane in the middle that fixed the capacity. And then you have these electrolyzers and tanks on each side. So the beauty is let’s say you have 100 kilowatts, and you want all kinds of megawatt-hours. You just add more and more tanks of electrolytes. And then you flow the material of the electrolytes through that membrane and you generate a flow. And so you have economies of scale around the energy, where if you want to add more energy, just add more electrolytes. And they’re pretty simple. In terms of the main stuff that can break is the the pumps. And yes, the electrolytes need to be replenished occasionally, but depending on technologies, but they can be pretty cost-effective for for a longer duration as well.
Host Raj Daniels 13:18
And you mentioned the battery reversing rust. Do you know how that one works?
Peter Kelly-Detwiler 13:22
Yeah, so that that’s one of the technologies that spun out of Tesla and they’ve been in Greentown Labs in Somerville, Massachusetts, outside of Boston, in an incubator, and they’ve been pretty quiet about it. They announced, a couple of years ago, a project for great river energy in Minnesota to help firm up wind as river migrates away from their coal plants and wants to retire those. So they made this announcement, but they hadn’t talked that much about the actual chemistry, the reverse-rust, iron base chemistry, the beauty of it is, it’s got no cobalt in it, doesn’t have any lithium. So it’s iron. Cheap stuff, right? The question is — and we don’t know this yet — how well will perform, how cost-effective it will be, and how well it works over time. We’re still waiting as a industry to watch the founders of that company pull the wraps off and announce real hard contracts with prices. But there seems to be a lot of promise there, and I hate to use that phrase game changer, but if we can find a cost effective storage technology, that could give us 100 hours, that would solve a lot of these real challenging issues of the second wave of integration of renewables when you saturated the landscape and put in as many four hours of batteries as you can and then you have to figure out that longer term stuff.
Host Raj Daniels 14:48
I think Form came out of stealth this summer. I’ve been trying to watch them too, but I wasn’t sure how the technology worked. And for those of you listening, I’ve been watching Energy Vault since 2019. And It’s worth just going to their website just to watch how they pick and stack those Lego blocks.
Peter Kelly-Detwiler 15:06
Oh, it’s marvelous. And they I just wrote about them for Forbes about a month and a half ago. They’ve changed the configuration. So they used to have that 35-story crane that’s in Lugano, Switzerland, and now they’ve moved to a building structure. It helps with the permitting, because really, you’re just permitting a building. And then inside they have gantries, and they’re lifting these 35-ton blocks of dirt infused with polymerize. So they can even put fly ash in it from power plants. In fact, they imported into Europe, tons of fly ash from the US and integrated into the dirt and then infused the Seamex. It’s a Mexican company; material scientists developed this polymer. So as they build up the foundation, they’ve got the raw materials. And the beauty of these things in the polymer is, they can stack these on top of each other pretty high without having the ones down below break apart under the weight. And so they raise and lower them, and what they found over the last year or two talking with utilities is they actually liked the duration, but they wanted more capacity. So what they did was they spread more blocks out horizontally and fewer vertically. So they can still give you all the energy that you need, but in smaller capacity chunks.
Host Raj Daniels 16:16
So when I was watching the video back in 2019, it was a circular and it reminded me of — almost like they’re building a turret.
Peter Kelly-Detwiler 16:24
Yes, yeah. Well, the concept is a battery that can construct and deconstruct itself, right. So that’s a really neat idea.
Host Raj Daniels 16:33
That really is a neat idea. Now, going back to generation for a moment, where do you think we are with a modular nuclear?
Peter Kelly-Detwiler 16:42
Great question. So this week, there were two announcements made. One, GE Hitachi just announced that they’re going to put in up to ten — with with some other partners — ten 300-megawatt units in Poland by end of the decade. And then, so that was GE Hitachi. And then at the same time, almost the same day last week, Nuscale, which has the 77-megawatt units that they daisy chained together, so about a quarter of the size. They announced that they have, they’re going SPAC. Fluor is a big construction company is a large holder of theirs, and they made the announcement. So they’re going to go public via a special purpose acquisition company, to bring more capital to the game. And they have one project that’s slated for Romania for 2027, 2028. And then they have that Utah project, which still seems to be chugging along, which would be deployed a little bit after that. So this, I’m very hopeful still, that modular nuclear can make it into the market cost-effectively. They’re gonna have to cut their costs; the last ones I saw were 57 bucks a megawatt-hour, but they’re still moving along. They’re still there at this point in time.
Host Raj Daniels 18:03
How do they deal with the public perception around nuclear, especially since Fukushima, still quite recent in memory?
Peter Kelly-Detwiler 18:12
Yeah, but I mean, the thing about the modularity is, they tend to be higher quality control, because it’s kind of like modular homes, instead of a stick built, where you’re building a house on-site and subject to the elements, the rain, the snow, and whatever. And nothing’s exactly square versus a modular home built in a factory where everything’s plumb. These things, you build them in a factory to with a high degree of QC, and then you ship them on-site with trucks and trains and that sort of thing. So in theory, you’re going to have higher safety standards. Now you still have this whole perception issue from Fukushima and Three Mile Island and so on. I don’t know how we get away.
We’re gonna have to do a lot more education around that. But at least there are some communities that have said, “Yeah, we’re willing to site these things here.” Certainly some out in Utah. And then I think the last one was announced was either Montana or Wyoming. I can’t remember which. And that one was for TerraForm. Yet another company where Bill Gates has backed the company. So still some more than a little bit of life left in that industry. But yes, we’re gonna have to deal with those perception issues. The other cool thing was that was announced recently was Commonwealth Fusion, here in Massachusetts just got $1.6 billion of funding for fusion power, because they’ve figured out how to create the magnetic bottle, a small one that with magnets that could contain a fusion reaction. And so their goal is to have net energy output by the end of the decade.
So some really interesting stuff going on, on that fusion fission side of the table.
Host Raj Daniels 19:49
Now, you mentioned timeline when it comes specifically to modular nuclear. Quote in your book, page 136: “The investments people have to make are very large, and they don’t pay off immediately.” In a culture that values fast returns on everything. How do you make long-term investments?
Peter Kelly-Detwiler 20:09
Yeah, it’s a really good question. I think part of that is, you have have to recognize that a lot of what we have done as a society, mostly unintentionally, but now we know what we’re doing is whether we’re flying a jet plane or whether we are generating power with emissions, we’re not paying full freight. We’re asking future generations to pay costs that we’re unwilling to pay, which is carbon output, global warming, and all the economic damage that creates in a future scenario.
And so the first thing you do to create a more stable planning environment is say, let’s figure out some cost of carbon. And hopefully, from one administration to the next you have continuity. I know that’s a pipe dream. But in a perfect world, what you do is first say, let’s figure out what kind of damage we’re creating, and put a price on that so we can start to avoid it. And then that would give investors and nuclear plants and others a clearer view as to where this goes.
The other thing that can obviously happen, and has happened in the past. In fact, the plant in Georgia was the only one that he got the DOE loan guarantees last year, if I’m right, is what the US has done for a long time with nukes, which is to create loan guarantees and some kind of certainty that the government will stand behind this tech development and actual deployment as it moves forward. Because we’re trying to solve this carbon problem. So I think a lot of this actually has to emanate at the federal level, in terms of these different sets of policies that create the certainty in the minds of investors.
Host Raj Daniels 21:45
Now, I’m going to go through a book a few different questions from there. I’m looking at a quote here on page 61. “You can’t train a model only on success.” Unfortunately, there’s no journal of failed experiments, and nobody would publish it anyway. What are some of the experiments you’ve seen this past year that you think may end up in that journal of failed experiments?
Peter Kelly-Detwiler 22:08
Oh, you know, I love that quote from Kristin Persson at LBL. She’s a material scientists there. And she’s talking about how robots are actually better at synthesizing materials than humans are because they can do it 24/7. They’re trying to make new compounds that have never existed in the history of the world. So their types of failures are, “We tried to synthesize this material and it didn’t work.” But we leave this data exhaust behind us, which then AI in theory could mop up and use to triangulate and get closer to finding those better molecules, which we’re working to create, to make better wind turbines, better solar panels, etc.
I think the the failures that we see more visibly tend to be things like Solyndra, with the DOE loan guarantee program a few years ago. And what we typically do as a society, Raj, is we use those to say, see, the whole thing doesn’t work, often for political reasons, and so on. And so I think one of the things we have to think about when things fail is, first of all, we need to understand that we, as a learning society, and a group of individuals and companies and countries trying to solve this carbon thing, that failure is inevitable, and in fact, should be embraced as part of the necessary outcome of what we’re trying to do.
Rather than say, “Oh, let’s jump the whole endeavor.” It’s a different way of thinking about it. Um, I can’t see that this year, there are any really critical technological failures or companies that went bust where I looked at him and said, “See that that didn’t work.” I mean, you see companies like the flow battery companies that are struggling to stay alive in this space, because they’re competing against that behemoth of lithium ion batteries coming out of largely China, but Asian companies, and now gigafactories in the US as well. We’re just talking about huge scale, and some of these other companies having to compete against that, but specific failures, there’s really nothing that comes to mind this year, other than maybe the legislative failure that we we’re not moving forward with Build Back Better making the investments that I think are going to be critical in decarbonizing the economy now rather than later.
Host Raj Daniels 24:27
You know, it’s interesting. You mentioned our view of failure. I think there’s a concept of failure that I like personally, and it’s the idea of failing forward. And I had someone put a good image in my mind recently, that walking essentially is falling forward. And I thought, what an interesting way to look at you know, perhaps failure.
Peter Kelly-Detwiler 24:50
Yeah, runnings falling forward faster.
Host Raj Daniels 24:53
There you go. Absolutely.
Peter Kelly-Detwiler 24:55
I just think, in some senses, I sometimes watch the dialogue and listen to the conversations and and just say please give me a little bit more maturity. Let us have a higher degree of trust, that we are well-intentioned trying to solve these problems. And therefore, let us have a little bit more patience and willingness to tolerate things that don’t work.
For example, the outages in California a couple years ago because they had issues with imports and some solar and then under scheduled and so on, or what happened in Texas, where the very first knee-jerk reaction with the with the the cold snap was to say, see, it was the wind turbines. That to me is such an immature, unformed conversation that — I think I’m getting too old, Raj, because I lose patience for conversations that don’t have wisdom behind the desired outcomes we’re trying to achieve. I get tired of that over time.
Host Raj Daniels 25:56
Likewise, Peter, and I think you know, those fallen to the category if it bleeds, it leads, yes. And those kinds of headlines give people the opportunity to point their fingers and almost hang their hat on that particular situation,
Peter Kelly-Detwiler 26:11
Unfortunately, but you just have to step back and say, look, what is it we’re trying to accomplish? And that is to create that Goldilocks climate of the future that we are to maintain, that Goldilocks climate that we’ve been able to live in and thrive in over the last couple 100 years as a society not too hot, not too cold. You shift everything three degrees, you know, to the warmer side of things, and you potentially face a lot of geopolitical instability, a lot higher costs, insurance costs get higher, a lot of economic uncertainty. So if you step back and say this is what we are trying to solve for, that requires a awful lot of patience and forgiveness and tolerance for risk that we are not always evidencing today.
Host Raj Daniels 26:58
I agree, specifically around geopolitical risks and had a conversation recently, specifically around climate refugees. So I asked this young lady, when you think of a climate refugee, who do you think of, and they started mentioning countries around the world, and I tried to bring it closer to home. Recently, the tornadoes in Kentucky. We had the Katrina many years ago, fires in California. And I said, if these weather patterns continue, your climate refugee is not going to be someone on your side of the world. It’s going to be someone in a neighboring state.
Peter Kelly-Detwiler 27:34
Yes, I just saw some something an article about two weeks ago, where some communities are talking about planning, an orderly retreat from the coastline. Here in the United States.
Host Raj Daniels 27:47
An orderly retreat from the coastline. Is that a permanent retreat?
Peter Kelly-Detwiler 27:51
Yeah, because with sea level rise. I’m looking at right now. Out of my window, I’m looking at a lighthouse, and a spit of land that every three or four years during a nor’easter. If you haven’t left, you’re not leaving. They’ll send Humvees in to try and evacuate people, but they can’t get them at a certain point when a nor’easter comes in because it’s too dangerous. I was talking with a woman there one day and I said, “Did you spend the night here last night?” I’d come down, there was two inches of ice plastered on the side of people’s homes from the spray that are frozen. And she said, Well, we decided to stay and then when the kayak hit my kitchen window, where the water was,
I decided it was time to leave. So I opened the door and the ice and those salt water were up as high as the step and I realized, oh, no, it’s too late. And if they’d had like a gas main break, or some kind of fire, they all have been stuck out there with no assistance whatsoever. I know people who live down there who have already sold their homes and moved, because they think climate change is going to make that a more difficult place to live within the next few decades. So and we’re looking at $30 million for the seawall repairs in my local town. So yes, I think this is something all these coastal communities up and down the entire coastline are going to be facing in real terms. Insurance costs, other things like that over the next couple of decades. Within our lifetimes.
Host Raj Daniels
So back to the book. How has the book done this year? What are some of the comments you received regarding it?
It was really fun. Well, first of all, it was a little bit scary. It was one of the hardest things I’ve ever done. But the cool thing was I had over two dozen subject matter experts volunteer to review every chapter and they helped keep me from stepping in it but still that day it was published the 15th of June. You’re still like oh, what if there’s some fatal flaw in there that reveals me to be the idiot I fear myself sometimes to be? Well, luckily, that hasn’t been the case, so far anyway. I got a LinkedIn today from someone who said to me, “This person recommended your book. I’ve been in the artificial intelligence space for a long time for decades. And I wanted to figure out whether I could get involved in the power industry.” And this person said, “Read Peter’s book because it’ll give you a primer in terms of how all the pieces fit together and the challenges.”
And so he said, it was really helpful in that regard. And he said, “What I was really surprised about was how fragile the grid is, and how interconnected it is,” he said, “but now I’m thinking about trying to bring my big data AI background into the grid to try and solve some of these problems, especially around distributed energy resources.” I had another woman who was she came into the industry from outside. She was just hired by a consulting company. And she said they gave her the book as her onboarding. And she said, “Thank you, you allowed me to consolidate my knowledge really, really quickly, which would have taken me a long time.”
And that was really the point of this whole thing was I looked around the whole space 10 years ago, Raj, when I left consultation as a former SVP there, in demand response. And arguably, I knew a lot about that space, but I didn’t know how the rest of it fit. And so that was the goal was to try and take this patchwork of really disarticulated knowledge in my head and try and synthesize it and figure out where all the connections were, so that other people didn’t have to go through the process. And thus far, I’ve been really pleased by the response, both from professionals in the space, but also from newcomers who who know that the power grid’s really essential, and it’s really cool. They want to get into this because they know this is where the action is. And the book has helped them figure out maybe where they want to be in that space.
Host Raj Daniels 31:40
You know, I think that comment regarding the consolidation is spot on. I like the way you’ve woven the entire book together. If you had the opportunity to add something to it, what would that be?
Peter Kelly-Detwiler 31:54
I’d put more in now about hydrogen, because that’s evolved just in the last year, since I’d almost finished up the manuscript that’s just moving ahead at enormous levels of investment, I mean, there’s a half a trillion dollars with the projects that have been announced in hydrogen over the last two years or so. So I would have covered that more, some of the complexities and the challenges there, and lay that out so readers could understand it. And maybe given a little bit more of a nod to fusion, but just because of the facts on the ground that have occurred since the book was published. I don’t feel like I missed a lot at the particular point in time when I submitted the manuscript. But this is, I used to joke that the first line in the book should be, “By the time you read this book, half the information will be outdated. But fear not, reader. The trends the underlying trends and dynamics won’t be.” And that’s going to be the case for a long, long time to come. I could rewrite the whole book in three years, the basic precepts would still be there. But the stories would be different.
Host Raj Daniels 33:00
Well, let’s do a quick, three minutes on hydrogen. Blue, green, gray. Differences and where you see the opportunity there.
Peter Kelly-Detwiler 33:07
Gray is with steam methane reformation. You take basically that CH4 molecule, and you drive out the carbon, and you’re left with hydrogen. And the problem is that carbon goes up in the atmosphere of CO2. And unless you’ve unless you capture it — then it makes it blue hydrogen — you’ve got the gray hydrogen. So that’s about a buck a kilogram right now. The blue hydrogen costs multiples of that. There aren’t that many blue projects, although I think it was Air Products announced a multi-billion dollar blue hydrogen undertaking in the Gulf Coast of the United States, and there are a lot of European companies doing that.
Green is the concept of taking renewable energy with electrolyzers and splitting water into H2 and O. And the challenge there is, when you take the electrolyzer, you take, let’s say you take 100 units of energy. You run them through the electrolyzer, you separate out the hydrogen, then you either have to compress or liquefy that hydrogen, then store it, transport it and then put it through a fuel cell or put it through a power plant. And by the time you get to the other end of that equation and turn that back into energy, again, you’ve lost roughly two thirds of the raw energy you put into it, which is a pretty difficult challenge a hurdle to overcome economically. Not impossible, but difficult. It certainly puts you at a cost disadvantage, but my thesis is based on what I’m seeing out there. The power lead can wait a little while for this because we still have to figure out the shorter duration stuff that still there’s a lot more lithium ion storage to come in.
Then there’s the Form Energies and the Highview Powers and all those companies like that. But in the meantime, the real challenge right now for decarbonisation is in heavy industry, particularly steel, which is 7% to 8% of global CO2 emissions. And that’s from burning coal and coke to smelt iron ore, which drives out that oxygen atom or molecule in the iron ore. That oxygen combines with carbon CO2. What you can do is you can take hydrogen through a direct production process, infuse hydrogen into the iron ore, it combines with O2 and separates out as steam clouds, water, which is what SSAB and ArcelorMittal and Teesing, Krupp, and a lot of companies are now working on, they’ve already developed the pilots in Europe. Hybrid, for example, is a multi-megawatt facility, north of the Arctic Circle and Sweden. Now they’re going to do like a 50-megawatt DRI one.
After that, you get sponge iron that comes out of that process, you put that into an electric arc furnace the same way you do with steel scrap. The great news here is costs are coming down. Yeah, they’re still expensive. But you have a lot of the car companies, Volvo and others, that have said, “Whatever you can produce, we’ll take it because we want to have carbon free chassis for our electric vehicles.
And so what will probably happen as we’ll scale the whole electrolyzer space with the investments around steel and cement manufacturingm heavy industry, those hard to abate sectors. And then as those costs come down, you’ll see more cost effectiveness in the power industry, very similar what happened with electric vehicles, which is the batteries got cheap, not because we were putting them in the grid, but because we were putting them on wheels. And then as we get more and more volumes of EVs, costs come down. Now it makes more sense to put batteries in the grid.
So I think the same thing happens with hydrogen, only it’s heavy industry, costs come down, the electrolyzers get cheaper, balance of system investments, and technologies get better, and then it’s more ready for the grid of the future.
Host Raj Daniels 36:49
I appreciate you breaking that down. I want to switch on to something else. You said earlier. You mentioned new skill. You mentioned a SPAC with Fluor, I believe. This year, many of the companies that went public via SPAC, specifically in the cleantech greentech sector, if you look throughout the entire year, they’re down significantly from January, February. As we shift into 2022, not looking for stock advice, I’m looking for — I’m asking because I’m want to get a sentiment of individuals that have invested in these companies that kind of feel like maybe in the conversations I’ve had some feel like we’re approaching a cleantech two bubble. What are your thoughts on what happened this year? And where do you see us going in 2022?
Peter Kelly-Detwiler 37:38
Well, I think there’s a real vast difference between speculation and investment. Right? The former I define as people who sort of take a flyer for high risk, high reward. And so a lot of people bought in the SPACs, because for a while, they just weren’t falling to Earth. And it seemed like they were defying gravity. And so, “Oh, might as well take a flyer on that.” Right. And so most of those did revert back to some kind of a norm. So not so good. But that’s the short term stuff.
I mean, if you step back, and this is what I do with my portfolio, and assume this, that the underlying investment principle for me is I don’t argue with atmospheric chemistry. Hey, I don’t argue with what the International Panel on Climate Change says, I don’t argue with the report the US assessments for climate change. There’s an issue there, it’s getting worse, we’re gonna need to fix it. And somewhere on the order of $100 trillion dollars will be spent between now and 2050 in decarbonizing the entire global economy, the most challenging thing humanity’s ever collectively tried to accomplish, when you understand that there are very few tailwinds in life that are that clear. One is that the baby boomers are getting older. So you might as well invest in all kinds of drugs, because they’re going to need them, right?
That’s a pretty clear investment thesis, and it’s pretty incontrovertible. Same thing with atmospheric chemistry. So my belief is, yeah, there are these short term perturbations, hype, lot of hope, that sort of thing. But ultimately, the underlying fundamental value is going to be there in this broad basket of cleantech stocks, because we don’t have a choice as humanity. We have to decarbonize our economy. Therefore, as long as you’re not picking one particular sector, or one particular company, if you think about the whole space and and balance your investments accordingly, you probably can’t lose.
Host Raj Daniels 39:32
So where do you see us going? 2022?
Peter Kelly-Detwiler 39:35
Um, well, interest rates are going to get tighter. Overall, I do have some concerns just about the the entire investment portfolio overall. I think obviously, if the Build Back Better thing gets approved in some way, shape or form, — notwithstanding the hiccups of this past weekend, when Senator Manchin said he wouldn’t support it in its current form — I’m optimistic. You see, though, for example, Wood MacKenzie and Solar Energy Industries Association saying, “Okay with high cost of shipping and costs of polysilicon and all the constituent elements, steel and everything, solar costs for the first time in the last 10 years have actually increased, cost of modules and installed solar.” And so they’ve cut their forecast by what I think 25% for next year. We had really healthy growth this year. And now it’ll be still some growth, but not like it was expected to be.
I think we’re gonna see those kinds of challenges. I think we’re going to see battery costs under some pressure, especially as we get more models and more demand out there, supply chain will have difficulty catching up just the simple amount of lithium, and cobalt and class-one nickel that we’re going to need, etc. I think those things are going to start to rear their ugly heads and see some price pressure there. So wouldn’t surprise me if equities are under a little bit of pressure in 2022. But I think the reversion to the norm is ultimately, when society invests a lot of money in certain spacious spaces, efficiencies evolve, and profits tend to increase over time. So 2022, maybe a little bit rough, I’m sort of buckling up for that. But I don’t hold for 2022. I hold for 2025, or 2030.
Host Raj Daniels 41:24
Like you said in your book about making long term investments.
Peter Kelly-Detwiler 41:27
Host Raj Daniels 41:28
Now, we’ve covered many sectors, which sector most excites you and why?
Peter Kelly-Detwiler 41:35
You know, the storage one does because it’s the inevitable or necessary dance partner of renewables. You need more storage to integrate more wind and solar into the mix. So that one, I’m really intrigued. I was pleased to see, for example, what do we put in 3500 megawatt-hours of storage in the United States in Q3. I think in 2019, the total for the whole year was 777 megawatt-hours for the entire year. So that trajectory looks like it’s really going to take off. We’re going to do really well in Q4, and then 2022 looks pretty solid there.
I’m also super excited about electric vehicles. I think, next year, they will truly come of age. The number of makes and models coming out there with decent range and nice looking cars. So that Tesla’s not anymore like this incredible outlier in terms of the technology and the beauty of what they’ve created. I think a lot more companies are coming into the space with really nice product, the Ford F-150 Lightning, that one knocks my socks off the fact that a car can power a home for three to five days, depending upon the size of the battery. I think that vehicle to act capability by the way, it’s going to be inevitable; once you see it in the market, everyone’s going to want it. So excited about the EV space.
And then the hydrogen space, I’m looking to 2022 to see the first real steel in the ground projects that show us that this is more than hype. There’s reason for hope here and that we start to see the trajectories that we expect. We see the first footings in the ground, if you will, for that industry to move forward and demonstrate the potential that may be able to read so storage, electric vehicles and hydrogen are the spaces that are most interesting watch to watch in 2022. You know, it’s interesting, you mentioned EV. I really enjoyed the story in your book about you buying your EV sight unseen. Well, how could you not? First of all, I had a tree fall on my Prius. And then I’m flying down to New Orleans. And there’s an ad on the JetBlue TV that says, you can get one of these cars for $1,000.79 a month. I ended up paying 130 because I wasn’t military or a recent college grads, but I knew there were a limited amount of them.
And so I called around and finally found one dealership that was getting a shipment because another dealership had gone bankrupt. And so afterwards, Raj, I got that deal. And then I started to research it and see who else had gotten the deal. And I think there were only a couple dozen people in the country that availed themselves of it because it was one of these compliance, zero vehicle compliance type things. And so it was a real strange little short term perturbation in the marketplace that — I never win the lottery. But in this one I did. The other day I was driving into town and I said, “wait,” to my wife. I said I thought we had 140 miles in the range on the car, now it shows 106, and she goes “Yeah, that’s because I just turned the heat on.”
Host Raj Daniels 44:42
In the book you share some of your stories about your apprehension about going long distance.
Peter Kelly-Detwiler 44:47
Yeah, I was like kind of like that Kramer — in Seinfeld, where he drives the car, he gets that, goes to the car dealership, gets the car which only has a little bit of gas and keeps seeing if he can make it to the next exit before it runs out. I did a couple of my trips, the one in the wintertime to the wind technology testing center, and then in one in the summer to go and see my panels in community solar farm and another direction.
In both cases, I was getting down a little bit to the wire in terms of how much electricity I still have left in the car. In both cases, I turned off the climate control to extend the range. But for me, it’s less of an annoyance and more fun because I’m a techno geek. The average consumer is not going to stand for that nonsense. The good news is now more and more cars are putting in heat pumps, like Tesla has done, which is a much more efficient way of heating and cooling the vehicle than drying on the battery itself for the technology, that we’ve been doing so far.
Host Raj Daniels 45:49
I had David Slutzky from Fermata Energy on the show last year. That idea, that concept, to me, is phenomenal. And you mentioned also the Ford Lightning with the three days. I’m super excited about that sector, too, and just seeing you know what we can do again. I’m in Texas here, and we experienced what we experienced in February. But the idea of being able to run your home off a vehicle that’s parked in your garage for maybe a day or two. It’s just phenomenal.
Peter Kelly-Detwiler 46:19
Yeah, it is. And also vehicle to grid. Jim Farley from Ford, the CEO, he had a tweet recently where one of their hybrids saved a wedding, because the power system had gone out at the wedding. And they were able to generate electricity from the hybrid. And apparently people did that in the Texas event as well. And so, you start to see these new value propositions. So I think what’s going to happen is, my belief is that all vehicles will eventually be vehicle to home capable. And then at the same time, starting with school buses and other fleet vehicles, vehicle to grid.
So everyone’s like, now, it’s not going to happen. Well, a couple of data points. This summer, a school bus in Beverly, Massachusetts was playing with National Grid interacting. And they delivered, it was your classic big school bus that you see on the road all the time, they delivered over 50 events, three megawatt-hours back to the grid this summer when it was needed. Montgomery County, Maryland is leasing 320 plus school buses from a third party. They’re all vehicle to grid capable. And then other companies are now figuring this out. But most interesting to me so far was this announcement a couple of weeks ago. There’s this Midwestern transit company that leases school buses to schools, and they just signed an agreement with SCA Electrification, to retrofit thousands — I think it was 10,000 — diesel school buses, rip out the diesel, put electric in and make them all vehicle to grid capable.
And so if you think about it, it probably starts with school buses. Why? Because they’re on a fixed schedule. They pick up kids from six in the morning to eight or whatever. And then they’re dormant until one or two in the afternoon. Perfect for the California duck curve, you could tummy tuck the duck all during the middle of the day absorbing that energy. And then if your vehicle to grid, you drop the kids off, you’re done by four or five. Now you release all those electrons back into the grid in the evening in a place that’s solar saturated, like California, then charge later on, midnight, or one o’clock in the morning or whatever, for your morning run, and then recharge in the afternoon, again, taking that solar off the system.
And so I think there’s some really interesting opportunities for vehicle to grid in the fleet sector, starting with school buses. And then ultimately, if you fully electrified every white truck and passenger vehicle in this country, you’d have roughly 30% of today’s consumption. So that’s an awful lot of electrons sitting there in vehicles that today are utilized 3% of the time, 4% of the time; the rest of the time, they’re sitting idle. So it strikes me that anybody who’s driving to work, there’s going to be VDG chargers there, I just think there’s this enormous opportunity to provide services to the grid and flatten the grid. The grid today, Raj, the top 1% of demand that we have to meet during those peak periods, costs about 8% of our total infrastructure. So if we can find ways to use vehicles and other assets, other distributed resources to push down that top 1% of demand, that’s a lot of waste we can eliminate which can then be invested elsewhere in the grid.
Host Raj Daniels 49:34
You know, you’ve painted a very exciting future and I want to start wrapping up, be respectful of your time. So I have to end with the same question. I’ve asked you a couple other times maybe a little bit different. Why? What keeps motivating you; what keeps you excited?
Peter Kelly-Detwiler 49:49
Oh, you know what keeps me excited is the sense of possibility. Look, this is a serious thing we’re up against and some days you think maybe we really can’t get out of this decarbonization box back fast enough. But every single day, I’m gifted to have conversations like this or something similar with new graduates out of college or university or grad school, or you know, someone working on a really interesting business model or technology. This is such a fundamentally challenging three dimensional game of chess. And every time you look at that three dimensional board, someone’s put new fingers on there that you don’t even recognize.
So from an intellectual challenge, it’s just enormously fun. And then we’re gifted to have so many really talented and passionate people in this space. It is a self select domain of just a lovely group of people that I feel super blessed to work with every day. And I love going on LinkedIn, and just seeing what’s the new conversation, what’s the latest thing that people are trying to solve the sense of possibility that people bring to this is just wonderful and keeps me energized in ways I just wouldn’t have thought possible.
Host Raj Daniels 51:04
Well, likewise, Peter, I’m feel very fortunate to speak to you and to have you in my corner. It’s been a great year. I look forward to 2022 being another wonderful year. And catching up with you again soon.
Peter Kelly-Detwiler 51:15
Well, thank you. I love what you bring to the energy conversation, your passion and your sense of humanity is just a great thing to be engaged with. So please keep it going.
Host Raj Daniels 51:28
Thank you, Peter. And also want to end with, if you reach out to me on Twitter, Raj_Daniels. First, let’s say five people, I will get a copy of Peter’s book signed and to you.
Peter Kelly-Detwiler 51:40
Which we forgot to mention is called The Energy Switch.
Host Raj Daniels 51:43
That’s right, the Energy Switch. We talked about it, we didn’t mention the name. But there you go, the Energy Switch by Peter Kelly-Detweiler. Peter, thank you for your time.
Peter Kelly-Detwiler 51:51
It’s my pleasure. Thank you, Raj.
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