AI, energy storage & companies like Drax: the answer to responsible investing

If responsible investing is your thing, and you are looking at technologies that could save the planet, consider AI and energy storage. Drax is an example of a company doing both.

Article updated: 19 September 2019 12:00pm Author: Michael Baxter

For responsible investing, bear this in mind: The cost of renewables is falling. According to the International Renewable Energy Agency (IRENA), “75% of the onshore wind and 80% of the solar PV capacity due to be commissioned next year, will produce power at lower prices than the cheapest new coal, oil or natural gas options.”

That takes me to electric cars. I’ve heard it argued that the green credentials of electric cars are based on a lie. The only difference between the carbon dioxide emissions of an electric car and a petrol car is the point where the carbon emissions occur, goes the argument. But this is not so. I read that at the moment, a small electric car, such as the Nissan Leaf, emits roughly a quarter of the carbon dioxide emitted by the equivalent petrol car.

The catch with electric cars is that the process of making the batteries emits carbon dioxide. For that reason, a car such as the Nissan Leaf, doing 7,500 miles a year, will take around three years to emit less carbon dioxide than the equivalent petrol car. Obviously, if it is subjected to higher mileage this pay back period is shorter.

For a larger car, the batteries are bigger and the payback period is more like five to six years.

But, two other factors come into play, factor number one, renewable energies are accounting for an ever higher proportion of electricity output. The National Grid has projected that for this reason, the carbon dioxide emissions of an electric car bought today will be half the current level in 2025.

The other factor is that the lifetime of lithium ion batteries is increasing. If electric cars were to use a combination of lithium ion batteries and super capacitors, which I believe they eventually will, then the lithium ion batteries will have a much longer lifetime.

For these reasons, the green credentials of electric cars will just carry on getting better, not only will they help save the planet, they will become cheaper, after taking into account their energy consumption, than conventional cars.

That takes me to renewables themselves. The big problem with renewables is that wind turbines are not much good when it’s not windy, and solar is pretty useless at night time.

A windless night is bad news for renewables.

The fix comes on two fronts: energy storage and clever use of the energy we do use.

Let me look at the second fix first. Take heating. It seems that storage heaters are the future. You heat them up when energy is cheap, release the heat when it is needed. A similar case can be made for air conditioning. Ditto for electric cars — charge them up when energy is cheap. Then there is computing. Over the next few years, one of the big users of electricity will be neural networks — advanced technology used in AI. Again, when a company wants to make use of neural networks, it could save substantial money by waiting for moments when energy is cheap.

This is why smart meters, making use of AI, could be so transformative — channelling energy usage into those moments of the day when it is windy or sunny. The sun comes out from behind the clouds, ‘quick! lets start pushing energy into storage heaters, or run a neural network.’

As for energy storage, the obvious one is pumped hydropower, when you use excess energy to pump water to the top of a hill and let it come back again moving turbines, when you need it. But I read about two other uses which I find especially compelling. One uses the electric vehicle fleet, using the batteries on these vehicles as a kind of backup for the grid. The other entails compressed air storage. Of particular interest is small scale compressed air storage, a by-product of which is warm and cold air, which through clever use of technology could be used as heating and air conditioning for local businesses and homes.

The key to all of this is a combination of technologies, some of which are still in the ‘work in progress’ stage. AI is fundamental to this technology.

Drax is interesting, I think, because first of all it accounts for 15 per cent of renewable energy generation in the UK.

Secondly, it is making heavy use of AI to make more efficient use of energy via smart meters.

Thirdly, I read that the company is investing in energy storage.

Solutions to the challenge of climate change have to be a part of a responsible investing portfolio, and the combination of AI, renewables and energy storage may well be the most important answer to climate change.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.