Casey Handmer: prediction

Transcript context

…There's another blog post you wrote, which was also related to a conversation we had, which is “How to feed the AIs.” That’s much more recent. That was after dinner, I think. To be fair, I usually am fairly clear in my blog posts if I'm shitposting or if I'm serious, but this one actually I'm dead serious on. It's actually the one where it's the most out of the money bet as well. Everyone else that I consider to be a respectable forecaster in this area disagrees with me on it. That to one side. We know why the grid is expensive. It's a lot of wires strung up in hard to reach places that are hard to maintain, especially as the workforce ages, with regulations and all the rest and eminent domain and so on and so forth. So the grid's not going to get cheaper anytime soon or easier to build. If you look at the projections of how much grid the DOE would have us needing to build in the next 10 years versus how much's actually being built, it's not even in the same order of magnitude. You say, “Are we totally screwed?” The answer is, “No, we're not totally screwed” because batteries actually do the same job that the grid does. This is kind of weird. Hear me out. The grid transports power from one place to another. It transports almost instantaneously at the speed of light, so it's actually performing a spatial arbitrage. The idea being that right outside the local nuclear power plant, power is really cheap because they make a lot of it. And in your house, power is really expensive because you don't have a power plant in your house. You pay the intermediary a small fee and they allow this trade to take place. That's basically how the grid works. Until quite recently, the only way we had of meaningfully storing energy, storing electricity on the grid, was pumped hydro. That only works in a handful of places and with limited capacity. It doesn't work all that well either. The efficiency is not great. Now we have batteries. Batteries store power at one time of day and they release it at another time of day. Batteries are performing a temporal arbitrage, an arbitrage over time. But they can be local or they can be more remote. I think we'll end up seeing batteries next to the solar arrays, and batteries in the middle of the grid at substations, and batteries on the sites of existing power plants that get turned off, and batteries in your house, and batteries everywhere in between. One way of thinking of this is, what is your per capita allocation of batteries in kilograms per head? When you and I were much younger, the lithium ion battery was just in your cell phone. So let’s say it’s 10 grams per person or something. Nowadays half the people in this town drive Teslas, so your per capita allocation of lithium ion batteries is 100 kilograms or something like that. We're talking four or five OOMs of increase of total battery per person. That trend is only going to continue. We've got batteries that are performing this temporal arbitrage. The sun comes up every day, right? ing four or five OOMs of increase of total battery per person. That trend is only going to continue. We've got batteries that are performing this temporal arbitrage. The sun comes up every day, right? So the power swings from midday—you're otherwise curtailing the solar array—to dusk when everyone's watching TV and cooking dinner or running the air conditioners to cool off in the evening. It’s very predictable. Whereas, "Oh, we had really bad weather, so we had to use the power line that runs to the extra power plants over by Hoover Dam or something." It doesn't get used nearly as much. Its peak utilization happens almost never, which means that the utilization of the batteries is on average, let's say 300 days a year. The utilization of your most expensive, highest voltage grid assets is much, much lower. That includes the substations and transformers and stuff that serve that. So it's a really bad position to be in if you're a grid operator. You've got this aging existing thing that the batteries are cannibalizing. The batteries are being installed behind the meter. You don't have a say in whether they're being installed and how they're being used. All you know is that your utilization of your asset where you get to charge top dollar for it is just dropping year after year at the same time as your operating costs are increasing year after year. So it's just very clear that the average distance the electron is going to travel between generation and consumption is going to decrease in the future pretty radically. It's already decreasing. It's going to continue to decrease.…

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