Power games: disrupters target banking and motors

Tech gurus are often fond of forecasting the future. As with economics, that’s a shame: forecasting is always an exercise in futility.

In the week that has seen the launch of the latest version of Tesla’s electric car, the usual antagonists are slugging it out over what the future holds. One question dominates the debate: does it make sense for various governments to ban the internal combustion engine over the next two or three decades?

Whether or not it is the right thing to do – or even if it is technically possible – there will be all sorts of consequences, some of which are easy to spot, others far less so.

Technology has ripped apart book publishing, retailing, the music business and travel agencies. The list is both long and familiar. Two massive industries now look ripe for similar disruption: banking and autos.

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It’s actually something of a miracle – for the banks at least – that the financial world hasn’t been shredded by the internet already. A combination of customer inertia and a protective regulatory environment has led to banks still behaving pretty much as they did for most of the last century. But this could all be about to change.

Retail banking is on the cusp of going the way of the record business. Glance at the app Monzo, a UK online bank. Virtual banking has been tried many times before of course, and Monzo has plenty of competition, but this, or something like it, looks like the real deal.

Customer base

Indeed, although Monzo is still essentially in beta-test mode it has been overwhelmed by applications for accounts. Just as nobody under 30 seems to have ever used a pen or made an actual phone call, I suspect that the same age group is itching to abandon high street banks altogether.

Monzo’s business model is also very post-modern: as far as I can tell it doesn’t aim to make money but merely wants to develop a very large customer base and wait for Facebook to buy it out.

Similar forces are at play in the motors industry: the technology necessary for self-driving cars has been around for a while (some Teslas can be driverless at the flick of a switch, for example).

Battery life still remains the biggest stumbling block. Whether or not you are a sceptic depends mainly on your beliefs about the likelihood of progress with electricity storage. Indeed, storage is a major issue for alternative energy supply (wind and solar) generally.

Autonomous, electric cars will all but destroy the car insurance business, reduce giant oil companies to shadows of their former selves, do something similar to car repair shops and parts suppliers, make millions of professional drivers redundant, play havoc with tax revenues, reduce or even eliminate traffic congestion, bankrupt many owners of car parks, significantly reduce hospital spending and prompt a resurgence in rural pubs.

Better batteries

Electric cars need better batteries. While nobody knows if this is possible, we do know that, when it comes to forecasts of anything to do with energy, we need to be very careful.

For years we have been told that wind and solar energy cannot survive without subsidies. Today it seems likely that the cost of (unsubsidised) wind energy, for example, will, within two or three years, be comfortably below current average EU power prices.

Indeed, in several parts of the world, wind and solar costs are already below those of fossil fuel electricity.

In almost every year for more than a decade the costs of wind and solar electricity have fallen faster than anybody expected.

British Gas recently got into a huge row over the costs of energy: a double-digit percentage rise in its electricity prices was blamed by the company on environmental costs imposed by government. In turn, the authorities said that they “did not recognise the company’s figures”.

The true cost of electricity production is very difficult to establish. That seems to suit certain vested interests very well. But the surprising collapse in solar and wind costs is ongoing. As more capacity is installed, costs keep falling. China is planning to build more solar power plants over the next few years than currently exist on the entire planet.

Bullish

Just because even the optimists have not been bullish enough about wind and solar is no guarantee that the battery storage problem will similarly prove the sceptics wrong, of course. But whether or not all cars are electric by 2040, we can be sure of one thing: demand for electricity, particularly of the green variety, will soar.

And it’s not just cars. Tech giants locate their power-hungry data centres (the “cloud”) near secure, environmentally friendly and reasonably priced electricity.

One country that is already hopelessly behind projections of power needs is the UK. Any near neighbour that is able to produce surplus power will have a very needy customer on its doorstep.

The sceptics sell Tesla shares because they believe battery technology will remain inadequate, the company is burning through cash and has a ridiculous stock market valuation. True believers, currently in the ascendant, just don't care. My money is on them.