Energy – moving from commodity to technology

Azeem, on his Exponential View blog, had an insightful post about how energy is transitioning from a commodity to a technology. This table summarizes the difference between the two.

We see these play out in commodity prices over time. Even as supply has gone up (more extraction), oil is concentrated in the hands of a few who set prices.

On the flip side, the cost curves of batteries and solar continue to head downward.

This is happening because both these technologies have learning rates of 20%. This means every doubling of production reduces costs by 20%.

And while we started with rare-earth metal, we’re increasingly seeing more mainstream materials being used to develop batteries.

This movement from energy as commodity to energy as technology has profound consequences. A few examples –

• Electricity replaces oil as the currency. Dollars per megawatt hour instead of Dollars per barrel. We already see this begin to play out as investments in datacenter technology continue to go up. No one is powering new datacenters with oil.
• 14% of countries control all the oil. With renewable sources, over 90% of countries will have the energy they need. Consider this – all our energy needs can be met if we simply used all the solar power we get from the sun for 3 minutes.
• Seasons could dictate consumption patterns. With the amount of excess solar in summer, for example, energy intensive processes could become viable.

These are just a few examples. Financing and regulation will both need to adapt as renewables have an upfront investment need that pays off for the next decades.

The implications of all of these changes will be profound. It is an exciting time for humanity.