On good days, your car is a glorious speed machine, but most of the time it's just an overpriced shopping cart. But consider the possibility that within a decade, that lump of steel, plastic and rubber in your garage could become a vital component of the national electricity grid. We are approaching a tipping point at which the falling cost of solar energy and improving battery technology will transform the way we power our lives, turning homes into generators and cars into moving power storage units. It will hugely disrupt the business of producing and distributing electricity and it will bring about the gradual eclipse of the age of oil.
The know-how is already here, says UBS, and the cost, which once seemed prohibitive, now looks manageable. The investment bank has developed an economic model to show how solar panels and batteries will within this decade become competitive and disruptive technologies. The cost of solar panels has collapsed, falling by 85 per cent in the last seven years and UBS expects the cost of lithium batteries to halve by 2020. Driven by the availability of cheaper and more efficient energy storage and inexpensive solar power, electric vehicles will begin to attain cost parity with cars driven by internal combustion engines.
According to UBS, in a market with high road fuel prices, such as Germany, the total cost of ownership of an electric vehicle such as the Tesla S is already comparable with a gasoline-powered car, such as the Audi A7. By 2020, the UBS analysts reckon that in Europe, the all-in cost of electric vehicles will be lower than conventional ones.
The key to the UBS model and its interest is not in the projections of falling technology costs , but in the combination of three technologies – solar panels, batteries and electric cars – which behave in a symbiotic way, each providing a boost to the economic opportunity created by the other. Batteries provide the solution to the problem of solar intermittency; inexpensive solar power lowers the cost of charging an electric car. The three pillars of the system solve the problem of fluctuating demand on the grid, including the excess demand created by the charging of electric cars.
For example, a stationary battery in your home, apartment block or neighbourhood might store power from domestic solar panels during peak daylight for discharge at night. Grid electricity would fill the remaining night or early morning supply gap. Meanwhile your car's battery could fulfill an additional storage function and the cost of recharging your car at your place of work would be offset by the value of the power generated by your solar panels at home.
In UBS's model, by 2025, power will no longer be something we buy exclusively from big centralized utilities; everyone will generate and store power. It will be a world of smart, local grids linked to each other, mutually interdependent and maximizing the utility of locally-generated solar power while at the same time connected to larger commercial generators. Your home and your car will be an integral part of the grid – consuming, generating, storing and discharging power.
The UBS vision is not fantastic; it is entirely plausible in parts of the world, such as the U.S. Southwest and Australia, where there is ample sunlight and the potential for large economies of scale in the creation of microgrids. If it is to happen, we need to acknowledge and accept a major disruption to the current electricity model. This will require not just aggressive carbon pricing but a shift by incumbent utilities to a new business model of local grid management. It may also require legislative intervention to unbundle those utilities unwilling to invest in microgrids.
There will be corporate casualties. In Europe, the business of manufacturing and distributing road fuels is contracting every year. The automotive market is saturated; French oil giant Total is even threatening to shut the doors on its French refineries. Electric vehicles linked to smart grids could be the final nail in the coffin. But it would also be a strange new world for individuals in which most activities would be monitored, metered, costed, and ultimately controlled by an integrated grid. It sounds like a scary Hollywood movie but then, again, the prospect is economically compelling and quite plausible.