Essential to modern design, building, development, and economic investment, on many fronts, is an understanding of electricity. Not so much how electricity works, but how it will be created and provided in the future – whether to homes, businesses, whole communities, or industry.
In much of the world today, electricity is of course primarily generated in power plants and transmitted via electrical grids by utilities of various types and sizes (see Ta’u for an example of a new and growing exception). Power plants in our time generally use natural gas, diesel, coal, nuclear fission, or dammed water to turn large generators. However, as you likely know, a small but increasing part of this mix is electricity from solar power plants, rooftop solar panels, and wind turbines.
What may be less clear is that much of this is likely to change, and perhaps soon and quite rapidly or radically. In a decade or two, electricity may be increasingly generated by building-installed solar panels or sheathing, stored in batteries where it is generated, and no longer transmitted by power grids at all. Power poles in residential and commercial areas may be coming down, traditional electrical utilities may be facing bankruptcy, and large power plants and long distance transmission systems may have begun to become obsolete.
A Gridless, Solar-Powered Future May Be Driven By Simple Economics
If this idea or prospect seems uncertain or doubtful to you, let me make the case why it may be likely and even inevitable, and also give you an idea of what more decentralized – or more naturally distributed, autonomous, and democratic – off-grid power systems might look like in the future. Importantly, let me add that these new building-level power systems may, in turn, usher in or become part of a larger movement to modularize and automate building and development more generally, perhaps significantly reducing building construction (or installation) costs, as I will explain.
First, I want to emphasize that the trend analysis I will present is based on technological and economic factors, rather than cultural changes or ecological considerations – either of which might aid or accelerate a trend toward off-grid solar electricity. Second, the analysis is unlikely to apply to heavy industry, industrial areas, and population-dense urban cores, where more intensive power generation may continue to be needed, although long-distance electrical grids may not. Third, my economic analysis is inspired by the work of technology analyst Tony Seba, which I would encourage you to explore. But I have intentionally not relied on, and thus merely duplicated, his work in my trend projections.
CURRENT ELECTRICAL TRENDS
Let’s start with a brief overview of where we are today. As outlined above, most of our electricity is provided by utilities via electrical grids, and electrical costs vary by both region and time of day. In most large geographical areas, there is a core network of primary or base load generators that provide about two-thirds of our power fairly cheaply. Then there are secondary and usually more expensive peak power generators, which provide additional electricity during weekdays, in the evening hours, and at other times of high electricity demand.
While electrical rates vary considerably, a retail utility rate for homes and small businesses of roughly $0.12 per kilowatt-hour (kWh) is not uncommon. Homes and businesses may pay more than this, especially if they use considerable grid electricity during peak hours, or they may pay less. Notably, this rate is typically comprised of about $0.07 per kWh for power generation and roughly $0.05 per kWh for grid transmission. Crucially for our discussion, these costs are not expected to decline substantially in the coming years. The reasons for this are that: 1) many utility production factors are subject to normal inflation, 2) electrical plants and grids generally involve mature technologies that are not easily made more efficient, 3) both utilities and generators face various barriers, impediments, and disincentives to changing both power sources and distribution methods, including that of costly asset stranding, and 4) traditional power systems are likely to become increasingly subject to carbon taxes and related levies in much of the world.
Leaving aside utility or grid power for a moment, but understanding that utilities may be able to make use of the new technologies we will discuss next, I want to highlight that rooftop solar electric or photovoltaic panels are now steadily increasing in supply and decreasing in cost. Overall, installed solar panel costs have been declining on the order of about five percent per year between 2010 and 2015, and they are expected to continue this trend for the foreseeable future. Within this trend, however, it is important to note that panel and other hardware costs have been declining far more rapidly than this, at about ten percent per year since the 1980s. But installation and other non-material costs, which comprise as much as 75 percent of rooftop solar expenses, have declined more gradually or not at all.
Again while costs vary, new off-grid solar power panels – here excluding grid hookup components, in keeping with our larger discussion – can be purchased and installed in early 2018 for about $0.08 per kWh, before subsidies, or at a cost slightly above base load utility generation (but well below peak generation costs). Importantly, actual panel installation costs per kWh depend heavily on the ultimate life of the panel system, which is uncertain today but is often, and perhaps conservatively, estimated at 25-40 years.
Of course, just as utility power needs to be transmitted, off-grid solar power needs to be stored for nighttime and peak use, and in our time this is increasingly done via lithium-ion batteries, a rapidly advancing technology that now notably exists alongside a number of other developing new battery technologies, including potentially far more efficient or energy-dense solid-state batteries and supercapacitors. Like solar panels, storage batteries have been increasing in use and declining in cost, but far more rapidly than panels, reflecting recent advances in both battery production and installation efficiency. While again varying by area and system, installed solar battery costs have been declining on the order of fifteen percent per year since 2005, and these declines may be increasing or accelerating with the new and now rapid proliferation of electric vehicles.
Importantly, current solar panel and battery storage cost reduction trends can be expected to eventually find a floor, or a point of diminishing efficiency and capacity gains, just as even computer chips may when transistors reach the quantum level. But there are good reasons to think that today’s steadily declining costs in solar panel and battery technology may continue for a considerable time. The reason for this is that most of the panel and battery cost reductions so far owe primarily to experience or learning curve gains and production efficiency or economies of scale, especially in the manufacture and to a lesser extent the installation of these technologies.
Still largely untapped are potential cost reductions from basic new panel and battery chemistries or architectures, as well as panel-battery system integration and commoditization. These developments might fundamentally increase the efficiency and density, or processing capacity, of solar panels and storage batteries, and also perhaps their ease of installation and longevity as well. Such advances, while quite likely and the focus of enormous investment today, are still developing and uncertain, but the links above will take you to information on their potential form and timing. An open question is whether such breakthroughs in panel and battery density or capacity will be as dramatic and persistent as with computer chips, and many people are skeptical of this today.
Bringing these solar and non-solar cost trends together, my exhibit at the top of the page projects utility, solar, battery, and combined solar-battery costs into the near-future. As indicated before, I have used a reasonably optimistic scenario of $0.12 per kWh for 2018 utility grid electricity costs, which may not be possible going forward with global efforts to reduce and tax carbon-dioxide emissions. Importantly, I have also shown grid transmission-only costs of $0.05 per kWh as a discussion aid. In both cases, these costs are held constant in 2018 dollars for the projection period, or assumed to track with overall inflation, for the reasons we have discussed.
For solar costs, I have used $0.08 per kWh, in keeping with the unsubsidized off-grid figures I cited above, and assumed a continued 5 percent per year reduction in installed panel costs through 2035. For battery costs, I have used $0.20 per kWh for 2018. I arrived at this figure by dividing an estimate of the lifetime storage capacity of the newest Tesla Powerwall (50,000 kWh) by a rough approximation of its unsubsidized purchase, installation, removal, and recycling costs ($10,000). Based on past efficiency gains and the strong likelihood of simplified, density-increasing, and more long-lasting battery technologies in the next 3-5 years, I have assumed that installed battery costs will decline by 15 percent per year through 2035.
As you can see by the trend lines in my chart, these initial and projected costs suggest that off-grid solar electric with on-site battery storage will match best-case, carbon levy-free utility electricity costs by about 2025, and then reach parity with utility transmission-only costs about nine years later. Crucially, this last point is more than academic, since it suggests that even if utilities generated electricity for nearly free – the ongoing promise and lure of nuclear fusion technology – utilities would still not be able to distribute this electricity to many customers at a cost competitive with off-grid solar, at least not via electrical grids as we understand them today.
Importantly, let me add that even if my initial and annual cost assumptions are optimistic, this overall analysis is unlikely to change fundamentally. The reason for this is that the trends are based on expectations of naturally compounding efficiencies, which are a normal aspect of new technologies, especially where there is the potential for successively improving approaches. Whether in 2025, 2035, or 2045, combined off-grid solar and on-site battery storage is likely to become the lowest-cost electricity option. And when it does, the combination will substantially disrupt our electrical infrastructure, and it is also likely to significantly impact both building practices and our built environment more broadly, as I will explain next.
FUTURE ELECTRICAL PRODUCTION
With these projections in mind, let’s spend the remainder of our discussion considering what local, off-grid, or autonomous solar-battery electrical systems may look like in the future, how they might evolve, and how this evolution could impact design, building, community development, and our built infrastructure more generally. My schematic below is a graphical study in future off-grid electrical production and storage, and may offer a window into how most homes, businesses, and organizations will produce and use electricity in the future. But with these changes, and especially with the advance of panelization technology and factory production methods, the schematic also suggests the potential for more fundamental changes in the way buildings and communities are built.
An Integrated, Extendable Model for Off-Grid Solar Electricity & Building
In keeping with our discussion, and as you can see in the upper right area of the schematic, my electrical system study begins with solar panels or sheathing. But unlike solar panels and other photovoltaic surfaces today, the study proposes that solar collectors in the future may have multiple layers and a variety of functions. These include: 1) a photovoltaic layer, converting sunlight into electricity, 2) a thermoelectric layer, converting solar heat into electricity, 3) a rainwater collection and/or water production layer, the latter distilling atmospheric humidity, and 4) a roofing or wall membrane, preventing incursion of wind, rain, and other elements into the building envelope.
To the left of the panel is the system charge controller and battery, and then the distribution controller or electrical panel. As indicated earlier, batteries in future off-grid solar electrical systems may be lithium-ion or some newer chemical composition, but in either case are likely to turn to solid-state chemistries at some point. Alternatively, future batteries may not be batteries at all in the traditional sense, and may be partly or completely structured as supercapacitors. And with these developments, future electrical storage systems are likely to become far more temperature and weather indifferent than contemporary batteries.
Because of this, my schematic points out that future batteries may be either housed separately from solar panels, as they typically are today, or co-located or wholly integrated with them. Housing batteries away from panels protects them from temperature fluctuations and provides some added design flexibility. But if future batteries become smaller and less sensitive to temperature changes and weather, there may be new advantages to co-locating and then integrating them with their companion panels. These advantages include reduced manufacturing and especially installation costs, the potential for solid-state designs and increased reliability and longevity, reduced intrusion into the building envelope, and freed interior space.
Beyond these core elements of the schematic, my study also explores a number of potential value-adding, cost-reducing, or density-increasing extensions of integrated off-grid solar electrical systems. Moving right to left on the diagram, these additions include: 1) potential integration with vehicle batteries, including bi-directional charging, 2) the possibility of integrated provisioning of lighting, climate control, electricity, internet, and other building services, and 3) perhaps most far-reaching, possible integration with building structural systems.
On this last point, and as suggested earlier, the now waiting opportunity of integrating solar-electrical panels and structural systems could have far-reaching impacts on both the cost and manufacture of buildings of all kinds. After all, if manufacturers become highly adept and efficient in the production of easy-to-install solar-battery panels, consider the potential advantages of extending panel functioning to include structural support, in addition to the above building services.
With this natural development, full-service, bolt or fit-in-place panelized construction could be developed that would radically simplify and reduce the cost of building construction. In the approach, solar-storage-service-structural (4S) panels would be created in factories and move directly to site or use locations, and then quickly produce fully completed buildings as the panels are assembled together. In this method, and as I suggested earlier, building construction would become more akin to building installation. And should this relatively easy extension of factory solar panel production occur, not only would electric utilities be disrupted, so too might the entire design, construction, and development industry or value chain as it exists today.
I would encourage you to consider these important ideas, both theoretically and practically. The trends we have discussed suggest that precursor integrated solar-battery electrical systems soon may become available, driven by steadily improving solar and battery technologies and production economics – with any incentives for green energy and building increasing or accelerating these underlying changes. And should these developments unfold, expect widespread disruption of at least the way we produce and consume electricity, possibly the way we design and create buildings and communities, and perhaps many other aspects of life too. Let me know what you think in the comments section below.
Mark Lundegren is the founder of ArchaNatura.
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