The world needs a company willing to force governments to take action on climate change.
So far, climate tech has been the polite corner of the startup world. All pleases and thank yous, triple bottom lines and shared upsides, plenty of virtue and virtue signaling.
That’s great and all. Saving the world from probable calamity is an honorable mission statement, one that probably bleeds over into the way companies do business. And certainly the world could use more kindness, not less.
But here’s the thing: Right now, the world is moving too slowly, on track for 2.7 C of warming by 2100, far short of the 1.5 C goal that’s in the Paris Agreement. There’s no longer time for niceties. We need a climate tech startup that’s going to throw its weight around and force evolution on sclerotic governments and companies.
In short, the world needs a climate tech startup that’s like an early-days Uber, a company that won’t take no for an answer, one that tackles an entrenched, slow-moving industry bound by regulation, one with deep pockets and an eye toward the long game. Should it succeed, everyone would want to sign up as a customer. The rewards for the startup and its investors could be handsome.
An obvious target would be electric and gas utilities. They’ve largely been slow to embrace the energy transition — or outright hostile to it.
For gas utilities, it’s easy to see why — their whole game is fossil fuels. Electric utilities have done a little better, but they, too, are heavily invested in fossil fuels. Large amounts of their generating capacity burn coal and gas, and some of those plants aren’t very old. Their distribution systems, the wires over which electricity flows, are built around centralized power plants that run best at full blast.
In short, they’re investing in renewable power, though not quickly enough, and they’re dabbling in storage, though not in as many places as they should. That’s in part because of their cautious nature — reliability is important when you’re a utility and taking too many chances could undermine that mission. It’s also because of their tangled relationship with regulators, who are similarly cautious but also somewhat captured by entrenched interests.
The old model is being upended, though, as wind turbines, solar panels, geothermal wells and batteries come down in price. Renewables are often the cheapest form of power available on the grid, and at this point, the only things preventing them from completely taking over are inertia and the relatively high costs of energy storage.
Yet the cost of renewables with energy storage is trending downward, and the combination is inherently deflationary. Most of the costs of installing renewables and storage are upfront, and the price of power is basically fixed over the life of the project. Economies of scale will continue to push prices down further. Plus, the fact that wind, solar and batteries are all highly modular means that can be installed nearly anywhere.
Here’s how an enterprising startup might use those qualities to steal market share from incumbent utilities.
It could start by approaching hospitals, college campuses and other large institutions, offering to manage their energy needs. It could begin by adding rooftop solar, a wind turbine or two and a handful of geothermal wells. That would reduce the institution’s overall reliance on the grid. Think of it as an on-site power deal, with the institution paying per megawatt-hour for a set number of years. Such an arrangement would allow the startup to access more traditional forms of financing, too.
To sweeten the deal and provide some peace of mind in a disaster-prone world, the startup could add energy storage to the mix. Think large banks of lithium-ion or flow batteries, or maybe some compressed air or thermal storage. It’d start small, guaranteeing a few hours of energy in case of an outage.
That storage could then be leveraged as another source of revenue to drive down the overall cost of the project. When electricity demand surges, like on hot summer days when everyone is running the AC, utilities often pay handsomely for large customers to reduce their energy usage. Many places do this already using polluting cogeneration plants or, to a limited degree, battery storage. The difference here is that one company could do this for a large number of customers, increasing its negotiating power. (Tesla is dabbling in this by linking its Powerwalls together as a virtual power plant, but it’s an approach that depends on utilities and the grid.)
Once that part of the business is up and running, and as renewable and storage technology improves, the startup could start branching out. The next step might be corporate campuses or large malls and commercial centers. Parking lots could be peppered with wind turbines, covered with solar panels and threaded with geothermal piping. Batteries could sit in vacant boiler rooms or on the outskirts of the property.
So far, this approach should feel somewhat familiar. What comes next could be truly disruptive.
After locking up a number of institutions and property managers in low-cost, long-term contracts, the company could start chasing less traditional customers like condo and homeowner associations or even small towns. The sales pitch would be the same: The company would install renewable power and storage, build a microgrid connecting every individual customer and manage it all to lower costs and improve resilience.
Over time, renewable power will get better, providing more energy without requiring more space. Storage will get better, too, able to bridge longer and longer gaps in grid power. Soon, the startup’s customers won’t need the grid at all, and they can just pull the plug.
Utilities would find themselves losing large and small customers in droves. The economics of being a utility, where near-universal adoption helps keep infrastructure and maintenance prices manageable, would suddenly collapse.
Sounds a lot like what happened to taxi companies when Uber arrived.
But the effects would reach even further. Fossil-fueled power plants, already on the edge of unprofitability, would become poor operating investments, perhaps even shuttering. Transmission lines would plunge in value. Over time, microgrid startups might buy them on the cheap to connect their disparate microgrids. Regulators would probably have to step in to address concerns about equity and reliability.
Ultimately, much of the new grid would look like the old one. But it would be built from the ground up to handle renewables and storage, and it would have intelligent features that could wall off buildings, campuses and neighborhoods, allowing them to continue with power when disaster strikes other parts of the grid. These microgrids, linked together into a macrogrid, would be more efficient, more effective and zero-carbon, both responding to and limiting the effects of climate change.
There would undoubtedly be problems, and the road to get there would be bumpy. But given the strains on the grid and the uncertainties wrought by climate change, that’s probably what we’re in for anyway.