Welcome to episode 399 of the energy talks podcast. I'm energy journalist, Marcum Hislop. One of the most contentious issues for energy professionals in my circle is the role of solar in the North American power grid. Even former grid managers, who should know better, will object that the sun doesn't always shine or that grids with plenty of solar will always require fossil fuel backup. Hitachi Energy recently released a new white paper titled The Solar Power System, Building a Sustainable Grid for a Brighter Energy Future.
I'll be discussing this report with Maria Fajachet, global product manager for energy storage at Hitachi. So welcome to Energy Talks, Maria.
Thank you, Malcolm, for having me. It's a pleasure to be here, and I look forward to our conversation.
Well, I'm really, interested in this. I read your, the white paper, and it really is, I think, consistent with the trends that I've seen in other jurisdictions. And the US market in particular is of of interest, of course, because, president-elect Donald Trump has promised to end a lot of the support for renewables and clean energy technologies. And so we'll see how that's how that's gonna go. But here, I wanna quote a paragraph from your from the white paper because I think this really is absolutely correct.
So here we go. This is a major shift in the world of energy. No longer is adoption of renewable energy driven purely by environmental factors, it is now the economically sound choice. And the reason I picked this out, Maria, is that here at Energy Media, we use s curves a lot to explain the adoption of technology over time. And so solar has been around since the late seventies, and it's been getting better and better and better all the time, particularly the last 10, 12 years.
We've seen the cost curve decline enormously driven, primarily by China, and the scale up of manufacturing there. And the argument is a couple of years ago, maybe let's say 2020 as the break point, the solar, reached its inflection point on that s curve, which means that essentially it's now competitive with other sources of power generation. Now it's on the, the hockey stick part of the, of the s curve for its growth, and, your white paper would seem to agree. Is that a fair way to describe this?
Yes. That's a fair way, to describe, and, I would just add, to that one. Another important aspect we should, I think be always taken into consideration when we are now talking and looking at this global energy landscape and how the energy system, transitions. So, you mentioned something about the adoption of, renewable energy sources, primarily solar, But what we see, that there is, these, kind of, energy new, generation resources are actually introducing a lot of challenges when it comes to the energy storage and the need for, improving or ensuring stability and, resiliency of the new, grid. Here, there this, demonstrates the need for having additional assets connected to the network, like grid edge, technologies, that will, help, us ensure stability and reliability of the, power network in the coming, years.
So I think it's kind of clear, and there is a consensus globally, on where the megawatts will come from, predominantly from solar and wind, but we really need to look into the services, that have been provided by those traditional generators. And the question today is what are alternative green and clean technologies that can provide the same services, and ensure, reliability?
Now, I I think it's fair to say, and I I've interviewed a couple of your colleagues, Gerhard Schlage, for example, your chief technology officer to Hitachi Energy. And the point that they make, and I agree with this 100%, is that the grid that we have, which was designed, you know, 50, 100 years ago for thermal generation, primarily coal and gas, is not the grid we need for renewables. You need to reengineer your grid, for, and you mentioned some of them you have storage, you need different market structures, you need to be able to transmit over long distances so that you can trade with other jurisdictions. You need grid forming inverters. You need I mean, it's this it's a it's a really a very different grid.
And one of the things I don't understand is I and I I mentioned earlier, you know, grid managers that I've talked to. So these are engineers. And and many of them have 20, 30, 40 years experience in the in the electricity system, and they just don't seem to get it. They don't seem to understand that they that, in order to adopt really cheap renewables, that you have to make changes so that, the system continues to be reliable and and resilient. And is there a, my question for you is, is there a different levels of understanding within the system around the world, given kind of how new, this technology is or at least its rapid diffusion is?
Absolutely. And I think first of all, we need to adapt the existing power management, practices. And, with that, we will have more and more, different and advanced technologies, which will be able to provide the services that I mentioned before, but this needs to come together with the new, grid code and technical regulations to support this change as well as new market mechanisms, which will recognize, but then also reverse those technologies for their capabilities to provide services, and ensure reliability and stability of the new network. And what we see globally, there are, the the transition is happening, but it happened in a different pace. So we see in some markets, there are, transition system operators who have already prepared documents and released the first set of requirements, which describe expected behavior of these new technologies while in some other markets that is still missing.
But this is all when it comes to the, you know, minimum set of requirements to operate the system in the desired way. But what we need in addition to that and to, you know, enhance the adoption of these technologies are also market mechanisms, and they will define return of investment in these new technologies.
Let's talk about the cost of solar, And, your report pegs the US cost per megawatt hour at $60. That's levelized cost of of energy. And, for those who are listeners who aren't familiar with that, that basically, you take all the costs over the anticipated life of the technology. You amortize it, all of the capital costs, the operating costs, the interest costs, and so on, and you come out with a price per megawatt hour. So you're at $60.
The American Clean Power Association just released their inaugural solar market monitor this morning. As a matter of fact, I was prepping for this interview and it popped up on my inbox, which was very, very handy, I have to say. But one of the they peg the, levelized cost of energy in the US of solar at $46 and and going down to $38 by 2030. And then, of course, we have Lazard, which you refer to in the report, and it's down around $24 a megawatt hour. Now that's at the lower end.
There is an error bar there. There is a bar, and and there are higher costs in some regions. What leads to these different estimations of what a a megawatt hour of solar costs in the United States?
Well, I think, one of the re one of the driver for this, cost and price decline is also investment in, renewable, energy, which, I think was, higher. However, what we see is that, perhaps this estimated exponential growth, of renewables, did not follow-up as expected. So now in some cases, we have oversupply of, you know, for example, PV panels or battery energy storage. And, just to complement, data that you shared with us 2 days ago, I also came across the report which, showed that the, total cost of battery 2 hours battery energy storage system in, China is, for the first time, below 100 US dollar per megawatt hour. This cost is higher, outside of China, especially in the US.
I think, it was shown 3 times, higher than in China, but this really says enough about the trends. And, again, it's really scaling up. The projects are bigger and bigger, and, I think also this global commitment on actually, going through this transition and, replacing the standard centralized generator generation, assets with more renewables, it's definitely supporting and helping the adoption.
And we should point out that there are substantial regional, differences in in in, costs because, what your what your cost is in California, which is, well up on the curve now and there are, you know, permitting reforms. There are many, there's a lot of competition in the solar installation space. Whereas maybe you might go to some place like North Dakota or, you know, Louisiana. I don't know. I'm just picking jurisdictions where those costs may be higher simply because the industry isn't as well developed yet.
Absolutely. That's, correct. So I think all those so called soft, costs, which include, for example, engineering, support towards grid connection, approval, different, regulations, lengthy processes, and then, yeah, they they all impact the total, cost of the system and project, delivery.
Now you quote the, International Energy Agency in the report, which I think is a fascinating point that is poorly understood, at least in in Canada, it certainly is, and I would argue even in the US from the experts that I interview. But you're forecasting US energy consumption or the IEA is forecasting this. That energy US energy assumption consumption is going to rise by only 6% by 2050. So that's kind of primary energy demand, all of the energy in the economy. But renewables consumption will increase, 400% compared to 2022 levels.
And the reason for that, and Rocky Mountain Institute did a just a a brilliant paper on this called energy after fire is that when you combust fuels, coal, oil, and gas to make energy and then use technology to convert it into work, it's very inefficient. Whether it's the, you know, a coal plant or an internal combustion engine, the efficiency is anywhere from 20 to 50%. When you generate electricity through renewables and then use electric motors or, you know, some other technology like electrolyzers, industrial processes to convert it into work, the efficiency is much, much higher. It can be like 75, 80, even 90%. So that even while you're growing out you're electrifying your economy, essentially, the actual you need more electricity, but the actual energy that you require is is much less.
And there are estimates that the primary energy demand might actually fall quite a bit by 2050 as we electrify. And and I just wanted to get your take on that.
Yes. Absolutely. I think efficiency will be one of the main, factors, that, will work, for, you know, in prioritizing the new the adoption of the new technologies. On top of what you shared already for PV and v, I mentioned in the, report, I would also add, for for example, complementary technologies like lithium ion based, we see today that round trip efficiency is above 90%. So this will really be, an important aspect to consider when transitioning to these new technologies.
And, also, if you look not only at the system, level, but also at the at the products themself, I think today, it's a very common requirement for, new inverters, for example, to have a maximum efficiency higher than 99%. And, once we really, demonstrate this, high efficiency, that will be a deciding factor, I think, when, choosing and prioritizing certain technologies over, others more traditional ones which operate at the significantly lower efficiency level.
I make this point on this podcast often. So regular listeners probably wanna go for a coffee now for, if if you want to. But the point here is that, in Canada, we have we don't have a grid. We have 10 little islands, and I guess 3 for the territory. So we have 13 islands with very little trade east and west.
Most of it is north and south, but it's a very clean grid. It's 84% clean hydro and nuclear and, and renewables. And it's very stable. It's very low cost. Here in British Columbia, I pay 9 and a half cents a kilowatt hour for hydropower.
I but in the US, which was dominated up until recently by by coal and then increasingly by gas. It's not like that. And the grid, is aging and is not in very good shape. It desperately needs to be upgraded all across the the country. There's a lot of work to be done in the US, but in a way that kind of facilitates the adoption of all of these new technologies.
Because now that we're in a transition, the impetus to change is there that maybe they didn't have before. The impetus in Canada to change rapidly is still it's not there. We just everybody's quite happy with what we've got. And so they're they're not adopting, wind and solar at scale the way the Americans are. Is that a fair way to look at this?
Yes. Absolutely. And I think a very important message here is, when we recognize the need, for new investments and deployment of new technologies, I think it's important to know that these new technologies have been already, implemented and demonstrated their full capability to actually, provide the services we mentioned at the beginning of this conversation and, operate the grid in a reliable manner. So we have today all the control technologies which come on top of this new, renewables and battery energy storage, technologies. They are developed.
They are implemented. They are in operation, and we are now working on advancing them further to support network with, even higher penetration of renewable, energies.
One of the big issues that comes up all the time is the intermittency of renewables, and the, the critics of renewables have been busy the last little while because in Europe, the, I can never pronounce the German word Duncan flunk, you know, where there's there's the the wind stops blowing for a couple of weeks at a time, and then you have overcast skies and your solar, capacity drops. And they point to that as saying, look. You know, we're gonna have to have fossil fuel back up for all of this stuff be for those those times when the the wind isn't blowing and the sun isn't shining. And how are we how are we coping with intermittency, and are we getting better at designing systems that accommodate intermittency?
I think one of the, commonly discussed way to deal with that is to add storage, next to the renewables. Today, that is predominantly lithium ion based, storage, but we should, I think, maintain flexibility also when it comes to the, you know, storage media, because we know that battery energy storage, solutions can help us, resolve, you know, these issues on a time scale of up to a couple of hours, but we will probably, in future, need a longer, duration storage. And then the final choice of the storage will be also defined by some other requirements, like infrastructure, space availability or constraints, the duration, and the discharge time. So, as said, today, I think even the, regulatory framework, sometimes look at this topic, look at the hybrid systems because they want to ensure that the, at the point of interconnection of, for example, coupled PV, plus based system, the full plant meets the required, the requirements.
Now your PhD, as I understand it, is in energy storage. Do you foresee, long duration storage being economic in any, in a reasonable time frame, and what might that look like?
Well, I think that all, market, forecasts talk about that. While some up to some years ago, I think 1 hour or even late in 1 hour started application seem to be, very attractive. Today with the market mechanisms that support longer duration storage. And today, we talk about 2 to 4 hours, and we see also battery products that are available on the market today supporting more and more, that kind of, applications, all future developments are moving towards, 8 hour, application. So there are certain developments happening on the battery side that, leading to the improved, for example, thermal, management of this system and, overall better battery cell performance, to support a longer duration, storage.
Still considering the, the available technology, the cost of the batteries might, be, a bit expensive, but, I'm confident that in the coming year, both on the technology side as well as the market side, there will be advancement which will support, that direction.
Are we going to see in the near future, long duration storage of maybe weeks at a time and maybe even seasonal storage?
Yes. That will I think that the batteries, most probably will not be the best storage media to support that. We do expect, new advancements and developments on the battery side, which will expand, duration, as I said before, from 4 hours towards maybe 8 or 10 hours. But in order to support even longer, storage durations, as you mentioned, measured in weeks, months, or even seasons, then I believe that the storage solutions like hydrogen or, flow batteries and others might be an alternative option worth looking in and exploring.
What about the role of distributed energy resources? So now we're talking about, rooftop solar panels that go on, residential homes, apartment buildings, business and industrial plants. They very often have big buildings and and lots of room where they can install that, they can install batteries. We're seeing that begin to take off globally. Last year, I think the China installed almost 600 gigawatts of solar capacity.
Half of it was rooftop. And we saw there I was reading a story in Bloomberg about Pakistan. So there's so much, so cheap solar Chinese solar panels flooding into Pakistan that their grid, demand dropped 9% in 1 year. And I can't help wondering, if the trend in the US, you know, like in California, for example, where they have a lot of rooftop solar, is is that kind of the, in a way, the the silver bullet here in terms of making this system flexible? I mean, people can, you know, they they they can put a a rooftop panel on your house.
You can have your EV store it, which then can discharge back into the grid or back in you know, you can draw power from it, Or you can have even an additional battery, you know, right beside your freezer in your garage, you've got a battery that stores electricity or a power wall, something like that. Is it are DERs set to finally maybe fulfill some of the promise that we've been talking about for years?
I think there is a positive trend, and we will see more and more, DERs being installed. However, I believe that, at least midterm, it's from the meter installation, will be more dominant, over behind the meter. And I think the ratio, would be, I think, 70% for front of the meter and 30% behind the meter installations. However, as you mentioned, before, I think APAC, for example, starting from Australia, but then, also expanding to, Japan, India, Thailand, and other countries in the region, for the the there, we see, quite, an big, impressive, forecast, for the adoption of the behind the meter, technologies. In the US, I think it's still very dominant, utility scale, renewables plus best, plants.
However, we will see more and more of distributed energy resources as well, in the coming years because, as we mentioned before, one important factor is efficiency, and this distributed energy resources indeed, help increase the efficiency of the overall process, quite significantly. And that will be the driving, I think, for for the further adoption.
I I have to ask you this question because there's been so much speculation in the energy world about the impact that a Trump administration will have on the renewable well, clean energy technologies and deployment in the United States over the next 4 years. He takes office on January 20th. And opinion ranges from there's not much you can do with the inflation reduction act because it's kind of baked in and a lot there's a lot of republican support for it. And then on the other side of the argument is, you know, the Trump will will focus on oil and gas and and be a real break on the deployment of clean energy technology. What would be what's your take on that?
No. I would like to be positive and, also, you know, to believe that, we will continue in the right direction, and we will see more and more, incentives, to support adoption of, green and clean energies. We, see, that it is possible, to, you know, maintain, stability and ensure reliability when adopting these new technologies, and we do not need to rely, to the old and traditional technologies that, has, you know, demonstrated a lot of, I would say, light good effects to the environment, so far.
What about the building of, a domestic, US renewable manufacturing, industry? Because the whole point of the inflation reduction act and and president Biden slapped, some very large tariffs on on solar panels, back in the spring. And the idea is that the United States, because China is such a a large, a significant rival, a geopolitical rival to the US that the US can't rely upon China for its energy technologies. It has to build those plants and the supply chains, in the US or with countries like Canada and Mexico with which it has free trade agreements. We don't know how Trump is gonna upend all of that, but I saw a, an estimate not that long ago where, the panels in China were 9¢ a watt and 22¢ a watt in Europe and 40¢ a watt in the US.
That's a big difference. And is the US going to be able to close that gap so that solar domestically manufactured solar systems are competitive?
Well, again, I do believe it's possible to reduce the gap. It seems quite challenging, to achieve the same prices that we see today in China, but on the other side, we don't know for how long it will be, possible, to maintain such a low prices, also in China. We discussed about overproduction, that is happening there, as the result of overinvestment in this renewable and the best business in China. And we see today or some reports show that system integrators in China today operate at 0, if not negative, margin. So this is quite, an important mess message.
I think here we really need to enable healthy economy, that will provide benefits to all parties involved in this, energy transition. And, I believe that there is a trade off between these 2. Not necessarily we need to, you know, go after the cheapest. We, have to take care of, of course, all other segments, that are, important, like, you know, developing, products, in a good quality products and deliver them and deploy in the same manner. Yeah.
Increase of the market scaling up the business, I think, will lead to reduction of the prices in the markets outside of China. And, it will be very important, of course, to enable collaboration and partnership between different regions, globally. It's never good to have very centralized, manufacturing and production of any technology, including the ones that we talk about today.
Maria, let's wrap up of the this interview and have you look out to the future and not that far into the future, 2030. With the rapid growth of US solar and the the grid changes to accommodate more solar at scale, tell us what what this looks like in 2030 from your point of view.
So I think in, 2030, the power grid characteristics will be quite different. While today's grid is characterized with high inertia, high, you know, short circuit level, which means a strong network, high volt current, high stiff voltage and, frequency, and traditional protection systems. I think that the power grid in 10 years from now will look pretty, very different to what we have today. We will see the level of financial declining and also all other characteristics of the network changing probably, at a different, pace. So what is very important throughout this transition to ensure stability, it's really having, advanced control techniques which are adaptable to these changing, power, network conditions.
This is quite a challenge. We said that we have technology, we have advanced control techniques to support the deploy deployment of those technologies, but not all, you know, technologies that are implemented today are future proof and can provide all the services that are required. So there is still a bit of work to work on that, but I am very confident that looking at where we are today and we want where we want to be in perhaps 10 years from now, we can, be there.
One follow-up question, and that is, looking out to 2030 and then beyond, is a clean energy grid with low cost, reliable power, a competitive advantage for any economy in the future?
I think so because, we need, to, you know, do it in such a way that is economically, sustainable. So, the the transition to the clean, and green technology should not come, at the cost of economical instability of any region globally. So I think these 2 are linked and should come, and go together also in the future. For sure, the initial investment, will be, driven by the countries, which, are you know, have better, economies, but I think that the level of support, will be also provided to, other countries that perhaps could not avoid, could not permit avoid, investing in this technology at the very beginning.
A follow-up to my follow-up. Do you see the global south adopting in particular solar and microgrids and virtual power plants and all of the related technologies and particularly DERs, in places like Africa where there isn't a lot of a lot of infrastructure. Do you see the the the solar and clean energy technologies taking off in the global south to the point where they begin to push out oil and gas and coal, I guess?
I think that I would say that must happen. We don't know when exactly, in certain regions, as those that you mentioned, perhaps the transition, will be slower. It will take us more time, to retire those fossil fuel based generators and replace them, with a cleaner technology. But I think, we have to do it in sequences and, you know, start from those regions that are most impacted, and then, expand that towards wider, regions and areas, of Africa or other countries.
Well, Maria, thank you very much for this. Really appreciate your insights.
Thank you for hearing me.