The energy sector is currently being disrupted because of the heavy focus on solar and wind energy. Utility companies’ business models for residential customers are becoming obsolete. 90% of the professionals from the energy sector suggested that their business model needs to adapt to new distributed energy resources (DERs) like rooftop solar PV units, wind turbines, fuel cells and various other technologies. Residents are using these devices in combination with home battery systems to power their own houses or even communities. It is hypothesized that 40% of the consumers will use DERs by 2027 and that figure would increase to 60% by 2050. Additionally, 84 coal power plants in Germany are going to be decommissioned and they will gradually be replaced by renewable sources of energy due to the falling costs which make renewable sources of energy more affordable. Vaish also added, “We are approaching the world of zero marginal costs”. Saudi Arabia is now able to generate energy from solar sources at just 1.79 cents per Kilowatt hour.
Lithium-Ion batteries are also experiencing a similar decline in costs, which is having a ripple effect not only on the energy sector but on other sectors too. The vast majority of electric vehicles deploy Lithium-Ion batteries to store energy for power. The reduced costs of energy in conjunction with the reduced costs of Lithium-Ion batteries have major consequences in the transportation sector as we move towards using electric vehicles as a primary means of transportation. Bloomberg expects 50% of the global car fleet (1B vehicles) to be comprised of electric vehicles by 2040. This growing interest in electric vehicles is also reflected through investor sentiment as Bird, an electric scooter sharing company, is currently the fastest company to reach a $1 billion valuation (1.25 years). With these changes, the current transportation market will have to adapt and make way for newer technologies to develop and be implemented on a global scale
There has also been an exponential increase interest in the automation of vehicles as a result of rising fatalities due to car accidents – the number rose from 36000 per year to 40000 per year in the US in the last few years. The automation of transportation is one promising solution, which has gained traction in the form of investments totaling $12 billion. This is because computers and software are either matching or exceeding human capabilities. For example, a recent study indicated that computers are more efficient in classifying images than humans are. Similar technologies are being used in AI-driven cars and solutions are being implemented already – Waymo, a self-driving car project by Alphabet, has partnered with Lyft in Phoenix, AZ to start a robo-taxi service. However, there is a fundamental issue with such vehicles. Each driverless car consumes about 2-3 Kilowatt hours of energy per trip just to drive the AI system. To put things into perspective, an average household consumes this amount of energy in an entire day! Vaish said that it is up to the semiconductor industry to work together with driverless car solutions to build dedicated chips that would help reduce this energy intake in order to make driverless cars a more feasible solution.
Additionally, car sharing is a more efficient solution than owning personal cars according to Vaish. Today, 33% of an urban area is assigned to parking spaces. Nitin added. “Cities are designed for cars, not people” and car sharing seems to be one of the solutions for resolving this problem. Moreover, car sharing is 90% cheaper as compared to owning cars. Therefore, car sharing combined with driverless cars can be a very powerful solution that will help resolve the multi-layered problem of congestion as well as road safety in the near future.
The transportation and energy sectors have prevailed for decades and implementing new solutions will be a challenge, primarily due to the rigidness of the industries. However, there is a need for new and improved solutions given the human race is faced with many constraints like scarcity of natural resources. The solutions on the horizon deploy the use of alternate means of power generation and focus heavily on decentralization and personalization of products and services. Therefore, these industries need to evolve and reconfigure themselves to successfully fulfill the needs of the 21st century.
About Tanay Gupta
Tanay Gupta is a senior studying Economics and Data Science at University of California, Berkeley. He is currently interning with Intertrust as a Market Research Associate - Intern in the Marketing Team.