Energy retailers and distributors are being blindsided by market disruption bubbling away under the surface of their industry.
Just as Facebook and Twitter disrupted newspaper and traditional media companies, Silicon Valley is now up-ending the energy sector.
And if traditional players don’t adapt, their business models will be made largely redundant over the coming decade.
So who are these future disruptors? Well, they actually come from the transport and auto sector – led by archetypal disruptors, Uber and Tesla.
The same energy source that drives their automobiles, could soon power households and even entire cities.
Let’s break down Tesla. There’s a reason Elon Musk says the energy business could be bigger than the car business.
Tesla has delivered almost one million cars. Let’s also assume that the average Tesla sold has 70 kWh of battery capacity. This means on the road right now Tesla has 70 gWh of battery capacity driving around.
In LA the daily demand for electricity is around 26 million kWh per year or 71 gWh per day.
Meaning we could take all of the Teslas in existence and use them to distribute or deliver electricity in LA and we’d only be one gigawatt hour short.
Let’s take this LA analogy further and look at the total number of cars in LA, 6.5 million, and assume that in the next 5 to 10 years the average Tesla or electric car has 100 kWh of capacity and controls 30 percent of the LA car market.
This means that electric cars would have approximately 200 gWh of storage capacity.
There would be so much extra capacity that a car (with autonomous capability) could drive to the point of generation, fill up, and come back to the city completely eradicating the need for wires and long distance transmission.
If we move forward to the near future where every single car is electric and has a 100 kWh battery pack and we assume that the household average consumption remains around 30 kWh per day this means that the car could drive up to 280 miles in a day (4 miles per kWh) and still have electricity to power a households entire day of usage.
Said another way your car could drop you off at work, drive 100+ miles round trip to a solar, wind or hydro generation point and bring cheap renewable energy back to you.
So how much would this cost? Elon Musk’s estimates that he could get the cost of the car down to $20,000 USD. (Note: Ark Investment estimates that in the near future Tesla could get the cost per kWh of a battery down to $100 USD meaning the battery itself would only cost $10KUSD)
That means for a car, robo taxi, and electricity, end consumers would pay $333 USD per month for 5 years.
In this world what happens to the energy ecosystem?
The role of retailers, distribution, and transmission could be eliminated for retail energy consumers.
This means that those players should begin to provide more focus on industrial partners that will have extremely high demand.
Other players in this space should look to partner with adjacent industries.
For example in the interim is it cheaper to partner with the postal service and or sanitation department to build out this delivery model?
These are the questions the utility industry will need to answer in the near future if it wants to adapt and be able to compete in the future autonomous and energy dense world.
Scott Salandy-Defour is founder of Liquidstar and former management consultant with Booz Allen Hamilton and PA Consulting.