The path to scaling up clean energy technologies like solar+storage
sometimes can seem like unchartered territory. It can be challenging to
figure out the best strategies to develop large, mainstream markets for
clean energy technologies. So, it’s good to know that we’ve been on this path before, and that energy transitions of the past can provide some lessons for the future.
This comforting conclusion is provided by Arizona State University professor, Christopher Jones, in his recently released book Routes of Power: Energy and Modern America.
In it, Jones largely focuses on how various energy transportation
routes, like pipelines and rail, were some of the most important reasons
why fuels like oil and coal became cheap enough to create America’s
major energy transitions in the 19th and 20th
centuries. He writes about how the U.S. transitioned its power from wood
to coal, for example, and then later from kerosene to electricity. In
his book, Jones, and historians before him such as Thomas Parker Hughes
in Networks of Power and David Nye in Electrifying America, also provides important lessons and insights for those who want to bring about the next energy transition to a clean energy world.
Here are some key historical takeaways that are likely to guide the
energy revolution away from fossil fuels to cleaner technologies like
solar+storage:
- People don’t demand new energy solutions, businesses create the demand for them. Steve Jobs wasn’t the first entrepreneur to figure out that companies don’t wait for customers to demand new products. Instead, companies create innovative new products like iPhones and computers, and they then create consumer demand for the new technologies. It happened with coal, and it happened with electricity.
In 1820, companies had sunk huge investments into new ways to mine
coal in Pennsylvania, but customers in major markets such as
Philadelphia were happy burning wood for heat. So coal companies “needed
to build demand if they were to pay off their debts and return
dividends to investors,” writes Jones. At the time, coal was more
expensive than wood. Company boosters took a different marketing tack by
not promoting the cheap price of coal, but selling instead its
convenience for home heating.
As strange as it might seem today, at that historical time and place,
coal was the more convenient and cleaner choice for fuel. The companies
pointed out how it was easier to use coal than cutting cords of wood,
how it was cleaner than sooty wood burning, and how it would create more
heat. Hundreds of new patents were issued for new coal stoves spurring a
decade of technology innovation. In the end, the convenience of coal
and its declining costs resulted in the displacement of wood as the fuel
of choice for heating. In the first ten years of heavy coal marketing,
ten percent of the Philadelphia’s population had converted to wood. In
thirty years, the transition to coal for home heating was complete.
The same thing happened with electricity at the end of the 19th
century. When it was first introduced, electric power lighting was more
expensive than kerosene. It also required new wires and new equipment.
Nobody wanted to convert to it.
A New York Times article from that era said flatly that the
incandescent bulb could not compete with the cost of gas, a fact which,
they wrote, “Mr. Edison has repeatedly acknowledged.” To some, Edison’s
choice to develop a central generating station for electricity was “an
invitation to throw money down a rathole.”
To gain market share and acceptance by the general public, Edison
sold electric lighting at a loss that was subsidized by his more
lucrative sales of electricity to power motors and new appliances. He
knew that he faced the challenge of “market creation” – getting
customers to demand a product they didn’t know they needed or wanted,
and one that cost more than their current source of lighting. When it
was first introduced, people did not at all appreciate the need or value
of electricity. But over time, the safety features and the better
illumination capabilities of electric power and light bulbs convinced
people to switch from gas and kerosene lamps to electric lighting.
Just like solar+storage or other new cleaner energy technologies
today, the introduction of electric power in its day presented problems
that were substantially without precedent and that required new methods
of deployment. One historian, who has chronicled the origins of the
electric industry wrote, “Although today we consider electric lighting a
necessity, we must remember that there was no obvious need for
electricity lighting in the late nineteenth century, especially because
it was more complex and more expensive than the existing alternatives of
gas or kerosene…By emphasizing that electric light was scientific,
modern and progressive [the early innovators] helped persuade
businessmen that it would be appropriate to risk money on the new
technology…They had to be educated to its use…Suitable manufacturing
methods as well as adequate ways of distributing the manufactured
product had to be devised…Customers did not exist; they had to be created.”
After enough customers were convinced of its value, electric power
for lighting was adopted, but it was not truly cost competitive until
well into the 1920s.
- Cities Have Been the Early Adopters Driving Energy Transitions. Today, as we debate the role of public investment and public markets for clean energy as well as the role of cities and states to promote new technologies, it’s also useful to reexamine the actions that cities took in the early 20th century transition to expand markets for electricity. The first major adopters of cleaner energy during that time were public entities. They created the market momentum for electric power at the turn of the last century; based on that initial market push, the remaining segments of society then adopted electric power until it maintained a majority share of energy use by the 1920s.
There are two lessons from the past that are relevant today: First,
cities converted to electricity over a hundred years ago not for cost
savings but to promote public safety. Second, these new public markets,
like those for street lighting and streetcars, were the principal
drivers for electrification of the rest of society — the cities went
first, along with big businesses, and then individual customers
followed.
Hundreds of cities at the turn of the 20th century
converted to electricity largely for public safety purposes. Cheaper
cost was not the reason. For businesses such as department stores and
for shows in New York City (it’s still called the Great White Way, due
to the white arc light), electric lighting was used to attract customers
to the newly emerging downtowns and to make those public places safer—a
public protection and business development strategy. The cities
invested in street lights powered by electricity to keep the streets
safe. And they invested in electric street cars to replace horse-drawn
transit, with its detrimental manure pollution problem, to move people
around the city using a cleaner technology—an environmental protection
strategy.
To get a sense of the impact of public investment in electricity by cities, the streetcar industry represented nearly half of all electricity used in the entire country in 1902,
in over two hundred cities that built electrified systems. This was at a
time when only one in ten people had electricity in their homes. This
is a similar market to where clean energy is today.
- Philanthropies Help Provide Access to Energy Technologies for the Poor. We tend to think that non-profit work in the energy area, helping the poor adapt to new technologies, is a new concept; but it’s not. It all started in Philadelphia in the 19th century, when the city was the epicenter of the emerging fossil fuel industry.
In the 1820s, a local philanthropy in Philadelphia, the Fuel Savings
Society, was set up to reduce the fuel costs, first for wood and then
coal, to help the city’s poor. First, acting as a coop or bulk
purchaser, it bought cords of wood at wholesale prices and then sold it
back to the poor at half the market price.
As for coal a decade later in the 1830s, the Society acted similarly
as a bulk purchaser and then sold coal to the poor for a dollar less per
ton than the retail rate. At the same time, it also subsidized the cost
of new coal stoves, and it contracted to build cheaper coal stoves for
the poor, since the upfront capital cost of conversion from wood to coal
was the primary barrier to adoption of what was then considered a
cheaper and cleaner energy source.
In effect, the Fuel Savings Society is an early example of a
nonprofit helping to advance energy technology innovation and adoption
in disadvantaged communities, and helping to alleviate some of the
upfront cost barriers to encourage the adoption of a new, disruptive
technology.
- Transitions Can Be Swift but Full Turnover Takes Times. People bemoan the fact that the penetration of solar electric generation by homes and businesses is now about 1 percent of national energy production. That’s true, although the statewide numbers in solar-rich states show much higher percentages of market penetration. Nevertheless, those small numbers tend to ramp up very quickly in energy transitions after the first decade.
As noted, the turnover from wood heat to coal was about ten percent
in the first decade after the push for adoption of coal burning
technologies. A complete turnover to coal power took a few more decades,
about thirty years. Electricity also had only about a ten percent
penetration rate in the first two decades of use. The wholesale turnover
from older forms of local power to centralized electricity took thirty
to forty years. In each transition, the first decade saw slower growth,
and then scale up occurred exponentially over the next few decades.
So how do these lessons play out today, when we are making another
energy transition to cleaner, solar+storage technologies for power
resiliency, for reducing demand charges, and to provide clean electric
power 24x7, 365?
It goes without saying that history is never repeated, but the
lessons from these transitions should be studied for how we shape and
direct our 21st century clean energy transition. It is very likely that new technologies like solar+storage will follow the same path.
For resilient power — clean energy power that is continuously
supplied and is independent from the grid—we are in the very early
stages, the first decade of adoption of this new technology hybrid that
has to potential to offer immense environmental, public safety, and
economic benefits. The initial push is happening now, with states
pouring money into solar+storage and other resilient power technologies,
solar companies teaming with battery vendors to offer complete systems,
FERC orders transforming electricity markets, and a growing state
movement toward grid modernization that relies heavily on distributed
energy resources.
Because we see that renewables and storage are superior to
carbon-based electricity generation technologies in many ways, we
sometimes think that adoption should be a no-brainer, and this can cause
frustration when the market transformation does not happen quickly. The
historical lesson is that regardless of how good a new technology is,
wholesale turnover from the preceding, entrenched technology relies on
certain forces to give it the initial push — but once a tipping point is
reached, a complete turnover can happen quickly.
As history shows, the cost barrier of solar+storage systems will be
overcome by the benefits of convenience, safety, and other environmental
benefits that this new technology will bring. In the case of resilient
power, key benefits will be greater power reliability and the ability
distributed energy systems to operate in times of grid outages. Energy
storage will bring in other revenues as solar+storage systems provide
other revenue streams and reductions in utility demand and capacity
charges. As the market develops and costs come down, a more widespread
transition will occur. That transition should be helped by greater
public investment at the community level, which as we saw with
electricity, was critical to development of widespread electric power
throughout society.
In the end, if history is a guide, cities, public investment,
technology innovation, philanthropies, new business models and patience
will win out, and we will usher in a new energy transition as complete
and cleaner than those that have come before.
http://www.renewableenergyworld.com/articles/2015/07/the-lessons-coal-and-electricity-markets-of-the-past-can-offer-solar-storage-markets-today.html