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Why Morgan Stanley Is Betting That Tesla Will Kill Your Power Company 502

Posted by timothy from the pure-greedy-capitalism dept.
Jason Koebler (3528235) writes One major investment giant has now released three separate reports arguing that Tesla Motors is going to help kill power companies off altogether. Earlier this year, Morgan Stanley stirred up controversy when it released a report that suggested that the increasing viability of consumer solar, paired with better battery technology—that allows people to generate, and store, their own electricity—could send the decades-old utility industry into a death spiral. Then, the firm released another one. Now, it's tripling down on the idea with yet another report that spells out how Tesla and home solar will "disrupt" utilities.
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Why Morgan Stanley Is Betting That Tesla Will Kill Your Power Company More

Why Morgan Stanley Is Betting That Tesla Will Kill Your Power Company

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  • Small-scale, real-time. (Score:4, Interesting)

    by SeaFox ( 739806 ) on Tuesday August 05, 2014 @06:33PM (#47610143)

    I'd believe in small-scale power systems in basements that run off natural gas, or all-in-one nuclear reactors being more likely to disrupt the power industry/grid complex than solar and stored charge. Wind power still has a chance in rural areas were people have larger backyards, though.

    • I'd believe in small-scale power systems in basements that run off natural gas, or all-in-one nuclear reactors being more likely to disrupt the power industry/grid complex than solar and stored charge. Wind power still has a chance in rural areas were people have larger backyards, though.

      Why is this marked troll? If you disagree with an opinion don't just mark it troll, argue the case! I must disagree about the wind power though. I don't think it will work.

    • Re:Small-scale, real-time. (Score:5, Interesting)

      by rahvin112 ( 446269 ) on Tuesday August 05, 2014 @08:24PM (#47610939)

      That's great that you believe it. Too bad your beliefs and reality are so different.

      A few facts for you, installed solar PV per year is growing at 400% per year for the last 5 years. Costs are declining about 20% per year. You can currently go out right now and find a company in your town that will provide, install and maintain PV panels on your roof for a guaranteed electricity price that is LOWER than what you currently pay and is fixed for 10 years (the loan is a monthly payment that will be cheaper than the power cost it offsets over a year). At the end of the 10 years you own the panels outright and all the power generated until they fail is FREE. PV panels routinely come with a 25 year warranty that guarantees they will provide 80% of their rated power for 25 years. Most PV panels lose about 0.5% of power output per year with no known lifetime, they could in fact last 100 years for all we know.

      Right now, without subsidy Solar PV is cheaper than nuclear power per KW/hr. If the price of panels continues to decline at the same rate it has for the last 5 years by 2020 Solar PV will be cheaper than Coal without subsidy. The absolute only thing holding back Solar PV from storming up and down our grid is the up and down nature of it's generation. Tack reasonably priced storage on and that goes out the window. As solar gains traction manufacturing capacity will ramp up and costs will continue to decline. There are a lot of very rich people betting on solar. Companies like Solar City are routinely turning down hundreds of millions of investor money because they simply can't hire enough people to install that many panels.

      • Re:Small-scale, real-time. (Score:4, Informative)

        by Lawrence_Bird ( 67278 ) on Tuesday August 05, 2014 @11:34PM (#47611757) Homepage

        That's great that you believe your own bullshit. Solar is not cheaper than nuclear. http://en.wikipedia.org/wiki/C... [wikipedia.org]

        • > That's great that you believe your own bullshit. Solar is not cheaper than nuclear. http://en.wikipedia.org/wiki/C... [wikipedia.org]

          See, here's the problem... your quoting an article I made major contribs on, and I can state without doubt that the numbers you're quoting are out of date.

          Here's some new ones:

          http://gallery.mailchimp.com/ce17780900c3d223633ecfa59/files/Lazard_Levelized_Cost_of_Energy_v7.0.1.pdf

          Go to page 2. Utility scale PV *is* cheaper than nuclear.

          Really, did you expect otherwise? Nuke

  • Apparently... (Score:5, Funny)

    by Type44Q ( 1233630 ) on Tuesday August 05, 2014 @06:33PM (#47610153)
    Apparently the over-priveledged and intellectually under-equipped "analysts" at Morgan Stanley are trying to give Gartner Group a run for their money... :p

  • Translation: "A few of our VP's are long on Tesla stock, so please buy it. We double pinky swear it'll go up, trust us, we're Morgan Stanley".

  • Home generation through solar is good for everyone.

    • Yeah, but we still have the battery problem. And the huge upfront investment.

      No one in cities has the space to dedicate for solar other than a rooftop supplemental.

      Solar panels went down a lot in price and will continue to do so (still quite an expensive component though), but batteries haven't really quite kept up. Unless a new tech comes in as well like some sort of super capacitors (or ultra cheap sand battery tech), we also have the lifetime/limited cycles to consider along with capacity.

      Am I going to

  • .. how is this a bad thing?

  • Macroeconomic investment theses are always wrong (Score:5, Insightful)

    by JoeyRox ( 2711699 ) on Tuesday August 05, 2014 @06:43PM (#47610215)
    Generally such theses are well founded in reason and logic but it's very difficult to make money from them, in this case by shorting the power companies, because not only does the basic premise need to be correct but so does the secondary and tertiary effects of that premise. In other words, these theses have to get multiple predictions correct, some of which are nearly impossible to do so considering all the permutations of possible outcomes.
    • I think its more correct to say that its difficult to make money from them because the biggest portfolios are already on it. Macroeconomics is too simple. Before anyone retorts about banks needing bailouts... banks arent holding companies. Look at what Warren Buffet is doing (ignore what he is saying, although what he says often jives with what he does) ...

      Berkshire Hathaway (Buffets holding company) current has over one billion invested in each of these companies respectively:

      Wells Fargo, Coca-Cola, A

    • Re: (Score:3)

      by gutnor ( 872759 )
      More importantly - timing matters. Even if they are 100% correct, power companies will continue to make money for a decade. As for the "market disruptor", if you are just a few year wrong, you would have put your money in MySpace rather than Facebook. If you sold your investment in real estate in 2006 you hit gold, if you did it in 2004 or 2008, you lost.

  • The energy needed to power vehicles used to come from oil-derivatives (gasoline, diesel fuel). In a way, each car was its own little power plant.

    With more and more cars becoming electric — for better or worse — the need for somebody to turn fuel into electricity will increase. That somebody can only be a power company, really... Solar panels remain joke — you need too many of them [howstuffworks.com] and making them is rather harmful to Earth [ehow.com]. And disposing is a problem too [theguardian.com].

    So, even if they lose some busin

    • From your link:
      Solar Energy Comparison with Fossil Fuels
      By comparison, solar power is still the clear winner, according to ecology.com, in terms of being more environmentally friendly. When solar power generation is matched against fossil fuel-based energy production, solar is less damaging to the earth. Even the dangers that are presented by solar power are found as often, or more so, in the by-products of fossil fuels, and there is no escaping the fact that a solar panel can provide as much as 20 years of power generation for a single carbon investment of manufacturing the system, which cannot be duplicated by any other commonly used type of energy production, other than wind system

      Read more : http://www.ehow.com/list_63278... [ehow.com]

    • You would think, but the big issue with renewable energy is that when the power is flowing, you have to use it. Storage is not increasing at the rate of improvements in tech. But that's changing. With better batteries, electric cars plugged into the grid can act as a large storage system. The batteries can be both filled and drained by the grid, meaning that energy can be stored and pulled from the network of cars that are sitting idle. This (potentially) fixes the storage issue of renewables, and allo

    • Solar panel production can only have environmental disadvantages in third world countries without environmental regulations.
      I doubt you live in such a country so stop spreading FUD.

    • Re:Wouldn't electric cars have the opposite effect (Score:5, Insightful)

      by Ken_g6 ( 775014 ) on Tuesday August 05, 2014 @07:21PM (#47610527)

      Solar panels are no joke. They're already out-competing all other forms of electricity on price [thinkprogress.org] in some places in the USA.

    • In Australia ATM, a dodgy deal with the monopoly owners of the grid's "poles and wires" has enabled and encouraged a massive over investment. Causing prices to rise for just about everyone. At the same time, in response to recent economic woes, the government was offering large subsidies to residential investment in solar panels.

      As I travel around our suburbs now, solar is everywhere. And there is actually talk about the grid going into a death spiral. Their customers are reacting to rising prices by installing more solar arrays, even though the government subsidies have ended. There's a good chance that some of the over investment in the grid will never be needed at all.

  • In order for solar+battery tech to become a viable solution, there needs to be ways to move the electricity generated by the solar panels to batteries you want to use. I.e. co-locate the two (e.g. panels & cars at home; panels & cars at work) or network them together (e.g. panels at home, cars at work.) The first scenario isn't very likely considering the sun generally shines when people are at work and the concentration of vehicles at work will overshadow the electricity generated by panels at an

    • They effectively already do this in austin. The latest solar rate structure pays 10.5c/kwh but they charge 12.5c/kwh for users using over 1000kwh/mo. So even when I don't use the network I pay 2.5c/kwh for solar power I generate. Unfortunately they do not meter push/pull to/from network, they charge based on total solar generation and total usage. And of course they reserve the right to adjust how much they pay me at will. Last year solar power pay'ed 12.5c so it was a wash.

    • Re: (Score:3)

      by geekoid ( 135745 )

      Yes, then when you get home you charge it from the batteries that were charging while you were at work.
      Also, there is vast unused solar space.

      How many large parking lots could be covered but aren't? all of those could be generating electricity. It would even have the side benefit in that there will be less impact on micro-climate then asphalt.
      The cover could be 30 feet high, so trucks wouldn't have a problem. And it would be better for shoppers during 'bad' weather.
      The sides of the freeways could have link

      • Don't even start on the solar powered roadways thing. Driving on solar panels is just not a thing that is currently possible, no matter how much kickstarter wants to make everyone believe.

        That being said, there is a ton of effectively useless (undriven-upon) land where solar panels could go. Just the strips of land where the electric lines are could do it.

    • . I.e. co-locate the two (e.g. panels & cars at home; panels & cars at work) or network them together (e.g. panels at home, cars at work.)

      Even assuming co-location is a viable thing (probably not yet) it will still be a very slow roll-out. Global panel manufacturing capacity absolutely could not support anything even close to resembling a fast roll-out, and you can forget about battery manufacturing which would be needed for both the electric vehicles and the homes that charge them. That gigafactory isnt even going to be operational until 2020 or later, and will only support at most the production of 500,000 electric vehicles per year.

      Morg

  • So an investment company has published reports.

    Have they started pulling out of investments in power generation and transmission, then?

  • sign up with a solar lease for my house, flatten my mains bill for 20 years and THEN go buy a volt / leaf / pip / tesla? Or is this subject to the dreaded fine print?

  • Half of Americans rent (Score:5, Insightful)

    by jgotts ( 2785 ) <jgotts&gmail,com> on Tuesday August 05, 2014 @06:56PM (#47610323)

    Half of Americans rent. People who rent can't do anything to their property. Apartment buildings are stuck with whatever they were built with 40 or 50 or more years ago. They're built using the cheapest technology available at construction time and they're never upgraded. When they get old enough they become the bad part of town or in some cases the outright ghetto until they collapse or are torn down. Some people rent houses, but there is no way your landlord going to put solar panels and a charging system in your rental unit, at least not this decade and not bloody likely the next.

    When I read here on Slashdot about intelligent devices in homes, or this thing people have called garages, or home chargers for vehicles, or fiber to the home, it kind of makes me laugh because these aren't most people. These are the things that less than half of Americans even have a chance of using.

    People who rent aren't necessarily poor. Many renters in New York City, Boston, and San Francisco would be informally considered rich in most of the United States.

    The electric company will continue to serve at least 50% of Americans indefinitely.

    • Re: (Score:2)

      by praxis ( 19962 )

      People who rent can't do anything to their property. Apartment buildings are stuck with whatever they were built with 40 or 50 or more years ago. They're built using the cheapest technology available at construction time.

      This is not universally true. The problem is apartment buildings owned by national corporations. A building owned by a reasonable land lord often do get upgrades or do make upgrades or modifications at the request of tenants.

  • So let me get this straight.... (Score:5, Insightful)

    by russotto ( 537200 ) on Tuesday August 05, 2014 @07:05PM (#47610391) Journal

    A company making an electric car, which has the potential to roughly double residential electrical demand, is going to put the utilities out of business? Using two of the biggest vaporware technologies around -- practical residential solar and really good batteries? The only thing they left out is nuclear fusion.

    • If that company provides good enough and cheap enough batteries for a lot of people to use nothing but rooftop solar all day and night - yes it's certainly going to deliver a shock to the worst run power companies that only survive due to a local monopoly. There's still plenty of little Enrons in the mix.
      It's got to the point where price gouging in some places is enough to drive people to spend the large capital cost for solar panels plus storage and go mostly or completely offgrid, which then makes the ut

  • "The more customers move to solar, the [more the] remaining utility customers' bills will rise, creating even further 'headroom' for Tesla's off-grid approach."

    That's a good example of FUD, because if solar systems ever get cheap enough for large numbers of people to go off the grid, then as the remaining customers' bills rise, it will make more and more sense for them to go off the grid as well. "So it'll just work itself out naturally," to quote one of the Bobs.

  • Heads in the Sand (Score:5, Interesting)

    by kf6auf ( 719514 ) on Tuesday August 05, 2014 @07:20PM (#47610515)

    The utilities are sticking their heads in the sand and trying to pretend that technology won't move forward. In some places they are trying to add an interconnect fee for those with solar panels that's as large as my electricity bill. They also are requiring solar panel inverters to stop working entirely when the grid goes down, instead of just providing power for the house and still leaving the grid upstream unenergized. All this, and the price of electricity keeps going up. And they expect people won't move forward with batteries as technology improves?

    Disconnecting from the grid entirely is large investment: people need a large solar array, several days worth of batteries, and probably smart appliances (mainly air conditioners and refrigerators). Or the utilities can make money helping to create a lower-investment intermediate option: staying connected to the grid with a smaller solar array and half a day worth of batteries which both help the utility with load balancing and can keep the house powered when the grid goes down. If they do this right, they will be able to remotely control when the system is storing energy or sending it to the grid, which probably means it's in their best interest if they write the software and maybe even make and sell (and install?) the hardware.

    Plus, they can provide monitoring services and, if they want to really diversify, insurance services or financing options. Otherwise, as more people abandon the grid, it will become more expensive per person to maintain it, creating a downward spiral of grid usage.

    • Re:Heads in the Sand (Score:5, Interesting)

      by roc97007 ( 608802 ) on Tuesday August 05, 2014 @07:49PM (#47610739) Journal

      > The utilities are sticking their heads in the sand and trying to pretend that technology won't move forward. In some places they are trying to add an interconnect fee for those with solar panels that's as large as my electricity bill. They also are requiring solar panel inverters to stop working entirely when the grid goes down, instead of just providing power for the house and still leaving the grid upstream unenergized. All this, and the price of electricity keeps going up. And they expect people won't move forward with batteries as technology improves?

      True. I'm experimenting with a different approach. There's one circuit (pilot project so far) that's solar / marine batteries only, and the rest of the house is connected to the grid. The two feeds don't interact in any way. If the grid goes down, most of the house power goes down, but a few sockets, including the one the freezer is plugged into and the one the fridge is plugged into, continue to operate. (Be careful to pick a properly spec'd sine wave inverter for this application.)

      What I'd like to do eventually is have parallel wiring in the house, one string coming from the inverter, and one coming straight from the batteries, (through a fuse box of course) so that things like lights and electronic devices that don't mind working on 12 volts can use the native voltage, and things that need 110 will have 110. (Did you know that you could get CFLs that run on 12 volts?)

      My concern at this point is that I don't really have a feel for how many charges the batteries will take, or whether the battery creation/disposal lifecycle is any better than a coal fired electricity plant, for the environment.

      • What I'd like to do eventually is have parallel wiring in the house, one string coming from the inverter, and one coming straight from the batteries, (through a fuse box of course) so that things like lights and electronic devices that don't mind working on 12 volts can use the native voltage, and things that need 110 will have 110. (Did you know that you could get CFLs that run on 12 volts?)

        If you have 12 volts DC, you can set up some cheap, efficient, and long-lasting LEDs. Most of the cost and inefficiency of "lightbulb replacement" LEDs are because they need a transformer and rectifier to reduce the household current to low voltage DC; if you already have that you are probably better off using LEDs, and they will be (much!) cheaper, more efficient, and longer lasting than the "screw into a regular lightbulb socket LEDs", and also than compact fluorescent.

  • And all those great new Tesla batteries will cut the cost of producing steel in electric arc and induction furnaces. And then there's converting bauxite into aluminum.

    Cars will be (almost) free. Bridges will be cheap. There will be an airplane in every garage. I can't wait.

  • Solar city model (Score:5, Interesting)

    by 140Mandak262Jamuna ( 970587 ) on Tuesday August 05, 2014 @07:33PM (#47610607) Journal
    One of the main stumbling blocks for residential solar is that a typical home owner is ill equipped to make the decision, (investment needed, financing, amortization schedules, expected future price of grid electricity, sizing etc) and find the contractor to execute it. Also resale, value of home etc etc come in. The solar city model is where they own the panels, they install it, you only pay metered electricity, you get to keep the grid for back up. In the end they pack it and take it away when you want to sell the home if the buyer is not interested in it. Suddenly the home owner can try solar for very low risk.

    Even without subsidies, this model has reasonable pay back period in places like Arizona or Hawaii. Of course storage technology is very bad at residential levels. Solar thermal has better storage using molten salt. But not viable at homes. But home storage does not have the size, weight and crashworthiness requirements of auto batteries. The flywheel storage mechanical batteries might become viable. But almost all the proposed storage have issues.

    • Re:Solar city model (Score:5, Interesting)

      by K. S. Kyosuke ( 729550 ) on Tuesday August 05, 2014 @08:32PM (#47610981)
      Supercaps ought to fare better than batteries - as far as I understand it, the price per lifetime energy storage should be lower. And bulkiness is of little issue in stationary applications. I've even seen a proposal to develop caps with very long lifetimes and then use them as structural elements in the buildings (which are bulky anyway), although that sounds really adventurous. And last but not least, you don't need any exotic materials such as lithium, cobalt etc. Only aluminum, carbon, some organic chemicals.

  • Scaling usage (Score:5, Interesting)

    by physicsphairy ( 720718 ) on Tuesday August 05, 2014 @08:16PM (#47610899)

    It's quite believable that technology will develop toward helping people reduce their energy costs. What's not quite so believable is that it will be enough to reduce demand.

    If energy was cheap enough, maybe you would use your excess electricity to get free water instead, extracting it and/or producing it from air and hydrocarbons, or otherwise recycle your waste. Maybe you will have some of the latest computer modules chugging away simulating your entire antatomy to anticipate future medical problems. If I had free electricity right now I would be using as much of it as possible to mine bitcoins. Who would have anticipated that 20 years ago?

    I don't see the end to domestic energy demand until we see the end of people wanting wealth, because technology is increasingly a way of translating energy into things of value.

  • You insensitive clod! (Score:5, Insightful)

    by PPH ( 736903 ) on Tuesday August 05, 2014 @08:17PM (#47610909)

    My roof is the floor of the people upstairs. I can't install solar!

    This is increasingly the situation many people find themselves in, having bought into the urban, high density, live close to everything and take your bicycle to work lifestyle. We will forever be the slaves of the big power utility.

    Where's that hipster urban planner with the pony-tail that sold me this line of crap? I want to strangle him.

  • An interesting death spiral (Score:5, Interesting)

    by EmperorOfCanada ( 1332175 ) on Tuesday August 05, 2014 @10:07PM (#47611447)
    The power industry can't just die, no matter how hard we try, but....

    This is where it is going to get interesting. At some point (probably quite easy to graph) the combination of cheaper solar, cheaper durable deep cycle power storage, and braindead easy inverter and other power management technologies will make it feasible to switch to fully off grid with very little pain. I suspect that there will be some adjustment such as not being able to run the washer, dryer, vacuum, dishwasher, and a bunch of 55" TVs all at the same time but that the average household will be happy at some point to go off grid. But the key is that some people will go off grid as this equation approaches balance for a variety of reasons ranging from green thinking, a more consistent power bill (simply amortized payments for the capital cost), it came with the newly built house, and my favourite: a big FU to the power company.

    So as this equality approaches a small number of fairly well moneyed houses will make the switch. While technically the load on the power company will marginally drop, their equipment service costs will remain steady. Thus as these customers leave the remaining customers will have to pick up the slack through rate increases. This of course will drive another handful of customers away; which is now driving a vicious cycle of rate increases. All this while the cost of the installed system will drop while the cons of having such a system will vanish. Also somewhere in this process that critical point will be crossed where it is cheaper to buy an off grid system than to stay on grid.

    But there are a number of customers who can't leave. Some are simply the poor who can't obtain the credit for the capital costs, others are people in poor solar/wind locations; and then there are the high density customers who simply can't obtain a sufficient amount of renewables from their property such as tall buildings and factories.

    So the rates for these remaining folks will be prohibitive if they have to carry the entirety of the power system capital costs alone. So even these folks will begin to look elsewhere for electrical power. I suspect a popular source will be natural gas generation, either through traditional generators or through some sort of fuel cell systems. This will push up the price of natural gas but will probably be much cheaper than grid power.

    So my prediction is that the power companies and large power consumers will try to bend reality, they will attempt to make it illegal to go off grid, or they will charge regular fees to any house that does go off grid. I can see other tactics such as charging a tax for every KWh generated with your own power system. This will be in defence of not only the power companies but of the landlords and factory owners who don't want to pay for their own problems.

    But this reality bending will simply be dealt with by the free market. Factories will move closer to power generation sites or will move the power generation sites closer to the factories. The same with high density buildings. I suspect that they will figure out some way to buy power. An interesting one would be to have containers with massive batteries that are charged at a power generation site and then trucked to the building. This might sound bonkers but it could end up being cheaper than paying for the unwieldy infrastructure of a power grid.

    On top of all that this will certainly drive a massive quest for efficiency. Right now it is stupid to have any incandescent bulbs in your house. Yet most people still do. But if these bulbs meant the difference between needing a $10,000 power system and a $20,000 power system; people would throw them out with their next trash. The same will go for nearly every appliance. People will look at the 150W 55" TV and instead and opt for the 120W 55" TV; this being something that the TV companies don't focus on much.

    On top of all that this will be another opportunity for third world countries to leapfrog over another technology as they did with landlines.

    • At some point (probably quite easy to graph) the combination of cheaper solar, cheaper durable deep cycle power storage, and braindead easy inverter and other power management technologies will make it feasible to switch to fully off grid with very little pain.

      The efficiency of charging/discharging batteries, will never be as good as the efficiency of the grid, just drawing power from a different baseload source without the storage losses.

      Combine that with the up-front cost of those batteries, and you reall

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