Impact of renewable energy on energy companies
Our expert's opinion
"Lately, the CEO and founder of Envision Energy, Lei Zhang, has been worrying about the dropping cost of renewable energy. More precisely, the cost of energy will be almost reduced to zero in the future. Besides this, renewable energy is becoming more dominant in the market and thus the CEO has been worried for his own numbers and business in general.
Fortunately, he found that opposed to the low cost of renewable energy in itself, the cost of its synergy will be huge. This cost lies in variability (also spoken of as intermittency), which can undermine grid stability. When energy companies can find opportunities to manage grid stability, they can benefit from renewable energy in the end."
- Lisa Blockx, Associate Consultant
How Energy Companies Will Survive When Renewable Energy Is Free
Envision Energy founder and CEO Lei Zhang likes to look at the numbers. And when he looked at the numbers behind the falling cost of renewable energy, he began to worry.
"We are convinced renewable energy is going to be dominating," said Lei, who heads the Shanghai-based energy company. "It is going to give us almost, close to zero cost of energy, eventually. So we started to be worried. What’s the future of the energy company if you actually have almost-zero cost of energy?"
Utility-scale solar is reaching 3 cents per kilowatt hour, Lei said, and in Mongolia, wind energy is about 1.5 cents per kilowatt hour.
"Renewable energy is basically like a teenager," he said at the Stanford Global Energy Forum. "It started in 2000. So already a teenager is being so dominating, so invasive. I started to worry."
Fortunately, teenagers can be problematic, and as Lei searched the numbers to find the most expensive aspect of a renewable-energy system, he found it in intermittency, which can undermine grid stability. So energy companies can find opportunities by managing grid stability, Lei said.
"You could have zero cost of energy, but you are going to have a huge cost of synergy."
As renewable energy expands and transportation electrifies, the grid will become increasingly fragmented. Energy companies will have to manage fluctuating amounts of power generated by solar panels and wind turbines and fluctuating demand not only from homes, businesses and industry, but from electric vehicles charging and discharging at will.
"How do you synchronize your demand with the supply is the key. That’s why I say we are shifting from the cost of energy to the cost of synergy."
It's not a new idea, though American utilities have a less poetic term for it: energy services. The solution, according to Lei, lies in artificial intelligence and "the energy internet of things."
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