A recent article in The New York Times reallystruck a nerve with me.
Titled “A Flood of Green Tech From China Is Upending Global Climate Politics,” it describes a wave of clean-energy growth racing through the developing world.
According to the article:
Countries like Brazil, India, and Vietnam are rapidly expanding solar and wind power. Poorer countries like Ethiopia and Nepal are leapfrogging over gasoline-burning cars to battery-powered ones. Nigeria, a petrostate, plans to build its first solar-panel manufacturing plant. Morocco is creating a battery hub to supply European automakers. Santiago, the capital of Chile, has electrified more than half of its bus fleet in recent years.
All of this is true.
It’s also true that China keeps exporting endless amounts of cheap solar panels, wind turbines, batteries and electric vehicles to the developing world. And this is causing energy systems around the globe to go green faster than many expected.
Take a look at IEA’s expectations for rapid growth in solar and wind here :
Source: rejobs.org
But where I take issue is with the way this article is framed.
The first sentence reads:
As the United States torpedoes climate action and Europe struggles to realize its green ambitions, a surprising shift is taking hold in many large, fast-growing economies where a majority of the world’s people live.
But that misses the reality of what’s actually happening on the ground.
You see, China’s green tech exports are causing dozens of fast-growing economies to start running on intermittent energy. A major problem with green energy like wind and solar is that it can fluctuate wildly based on weather and time of day. That can cause blackouts and sudden drops in power when demand is still rising.
And that’s creating an entirely new opportunity for the U.S. to help these developing countries take on climate action.
Because they need systems that can manage all this green power.
They need storage that lasts through the night. They need software that keeps the grid stable. And they need cleaner, reliable energy sources that can run at scale when the wind slows down or the sun disappears.
And this just happens to be the part of the clean-energy race where the United States has a solid advantage.
Manufacturing Isn’t Everything
I’ve spilled a lot of ink in the Daily Disruptor about the manufacturing gap between the U.S. and China.
Frankly, China builds hardware at a scale no one else can match. The Times reported that Chinese manufacturing investments around the world have reached nearly a quarter trillion dollars since 2011.
Adjusted for inflation, that is more than the United States spent on the Marshall Plan after World War II.
And all the cheap hardware coming from China has made a global energy boom possible. For example, solar and battery prices fell far enough that developing countries could begin skipping the fossil-fuel stage entirely.
It’s why India now says half of its electricity demand can be met by renewable power from wind, sun and water. That’s five years ahead of the clean-energy target India committed to under the Paris climate agreement.
But here’s the thing about all of this cheap hardware…
It didn’t remove the energy bottleneck. It just shifted it elsewhere.
These countries might be thrilled with their new solar panels, but they still need a grid that can handle all the intermittent power these panels create.
That’s why I’m convinced that the next wave of clean energy won’t be driven by cheap manufacturing. It will be driven by intelligence.
In other words, today’s new energy systems have become software problems.
To keep them stable, you need real-time forecasting and automated load balancing. You need distributed storage so the grid has power even when the sun goes down. And you need industrial electrification because factories and heavy equipment can’t run on intermittent energy alone.
This shift creates a new center of gravity in the clean-energy race.
And this is the part of the market — the systems that make renewable power reliable — where the United States has a real advantage.
After all, we are already rolling out the tools to handle rapid swings in power across the country.
Texas and California are using grid-software platforms that can shift power demand by the minute. These systems monitor weather patterns, electricity usage and battery levels, and adjust the grid in real time to compensate for fluctuations.
Tesla’s Autobidder software runs large battery installations automatically. It moves power in and out of the grid every second, based on demand.
Google’s DeepMind team has been testing carbon-aware computing that shifts energy use away from peak hours.
Image: Google
Form Energy is rolling out multi-day iron-air batteries that can power communities when solar generation drops.
A company called Fluence — which we own in our Strategic Fortunes model portfolio — has become one of the world’s leading providers of energy-storage software. Its platforms operate in more than 40 markets and are already managing gigawatts of storage for utilities.
AES, one of America’s biggest power companies, has built some of the first virtual power plants at scale. These networks combine thousands of home batteries and rooftop systems so they act like a single power plant.
And the Department of Energy is funding dozens of long-duration storage pilots across the country, including flow batteries, thermal storage and compressed-air systems designed to provide power for days, not hours.
It’s this kind of technology that’s needed to make large renewable systems work. And it’s what all of these developing economies will need next.
But there’s another piece of the puzzle that’s just as important.
The U.S. still leads in advanced nuclear and fusion research. Several American companies have small modular reactor designs moving through federal approval right now. And Helion, based in Washington, is building its first fusion plant. It expects the plant to be running in 2028, and Microsoft has already signed on as its first customer.
Of course, it’s highly unlikely that these technologies will replace solar or wind. But they will support them by providing stable power when the grid needs it most.
And that combination of storage, software and dependable clean energy is where the next decade of growth will happen. According to some estimates, the energy storage software market alone could 7X in the next eight years.
Source: globalgrowthinsights.com
That’s a huge opportunity for America to lead the next global clean energy wave.
Here’s My Take
The Times framed what’s happening with clean energy today as a global role reversal.
A decade ago, the United States and Europe pushed developing countries to move faster. Now those countries are moving on their own. They want clean power because it makes economic sense.
But that doesn’t mean the U.S. has lost the clean energy race. It simply means the race has changed.
China supplied the hardware that brought renewables into the mainstream. And the developing world is installing this hardware at record speed.
But now it will need the systems that make all this hardware reliable. That requires software, storage and advanced power.
And that’s where America shines.
Regards,
Ian KingChief Strategist, Banyan Hill Publishing
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