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Stanford BUS45 - Leading Market Disruption-

CLEAN DISRUPTION
WHY CONVENTIONAL ENERGY AND
TRANSPORTATION WILL BE OBSOLETE BY

2030

PRESENTATION TO

!
!
Hong Kong, HK
"#$%&!'#(#&)#!

16 Sept 2015
!! %&'($)"vestors Forum *+,"-$.*#/0$1"$2*"3$4*"3$$
51.6$/$7*89-$*"$3:*;/:$1"-./;1:1.0$/"#$Chinas new normal$
$
"#$

Tony Seba

#$%&"#$%%Monday 14 September 2015: CLSA Limited (CLSA), Asias leading and longest'
www.tonyseba.com
ning brokerage and investment group opens today the 22nd CLSA Investors Forum, one
*+%,-.$+/)%-#0%,+-01#$%$,"2-,%1#3+/)4+#)%5"#(+.+#5+/%1#%)*+%-//+)%4-#-$+4+#)%1#06/).78%%

e 22nd CLSA Investors Forum provides more than 1400 global fund managers and 230
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-1.4-#%-#0%ADE%F"#-)*-#%C,"#+%/-7/%?/1-%9.+/+#)/%-%5"49,+@%915)6.+%1#%G;HI8%%

A Stroll down
Memory Lane

ith%4-.<+)%/+#)14+#)%0.131#$%21$%/J1#$/>%)*+.+%1/%-%#++0%)"%.+("56/%"#%(6#0-4+#)-,/%-/%
%,"#$%)+.4%$."J)*%0.13+./8%K#%)*+%5-/+%"(%A*1#->%5"#)1#6+0%6.2-#1L-)1"#%-#0%0+3+,"94+#)%
*+%/+.315+%/+5)".%J1,,%9."310+%-%2-/1/%"(%$."J)*%J*1,+%A*1#-%-0M6/)/%1)/%1#06/).1-,%/+5)".%)"%
realities of excess capacity in a more mature domestic economy, Slone said. %

?%9."310+/%-%0+)-1,+0%31+J%"#%A*1#-%)*."6$*%/+3+.-,%#+J%.+9".)/%)"%2+%1//6+0%)*1/%J++<8%
$%&'(#)%'"*+(+,"#-, CLSAs Head of China'!&%C).-)+$7%N.-#51/%Aheung looks at why Chinas
"#"47%*-/%J+-<+#+0%-#0%*"J%)*+%/+.315+%/+5)".>%#"J%)*+%,-.$+/)%+49,"7+.%-#0%,-.$+/)%
)%"(%)*+%+5"#"47>%J1,,%"((/+)%4-M".%.1/</%-#0%9.+3+#)%-%*-.0%,-#01#$8%%

Clean Disruption- Copyright 2001-2015 by Tony Seba


ear since it was announced, Chinas One Belt, One Road strategy is reviewed by CLSAs
-0% "(% A*1#-% K#06/).1-,% O+/+-.5*>% ?,+@1"6/% B++>% 1#% -% M"1#)% .+9".)% J1)*% AKPKA% C+56.1)1+/8%
.01#2+34#/&3(#'"5#2&'#0,'5%.+31+J/%)*+%5"6#).1+/%-#0%/+5)"./%)*-)%J1,,%2+#+(1)%4"/)%(."4%
nas brilliant plan to export its overcapacity, e/)-2,1/*% /).-)+$15% $+"'9",1)15-,% -,,1-#5+/>%
#+//%+#+.$7%/+56.1)7%-#0%(".4%-%$1-#)%#+J%(.++').-0+%L"#+8%%
Clean Disruption - Copyright 2001-2015 by Tony Seba

um delegates will hear from more than 40 CLSA analysts on Chinas banking, energy,
 
    

Stanford BUS45 - Leading Market Disruption-

5th Ave New York City, April 15, 1900

1900:
Where
is THE
?
CAR?

Photo: Fifth Ave NYC on Easter Morning 1900


Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: US National Archives

5th Ave New York City, March 23, 1913

1913:
Where is
THE
HORSE?

Photo: Easter 1913, New York. Fifth Avenue looking north.


Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: George Grantham Bain Collection

Clean Disruption - Copyright 2001-2015 by Tony Seba

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Stanford BUS45 - Leading Market Disruption-

Technology-based

Disruption

Clean Disruption- Copyright 2001-2015 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

What is a Disruption?
A disruption happens when a new
product or service helps

!create a new market


and

! significantly weaken,
! transform, or

! destroy an existing product /


market category / industry.
! Ex: car -> horse, PC -> typewriter, iPod->Walkman
Clean Disruption- Copyright 2001-2015 by Tony Seba

Photo: Tony Seba


Images Source: Wikipedia

Clean Disruption - Copyright 2001-2015 by Tony Seba

3
 
    

Stanford BUS45 - Leading Market Disruption-

Fast Forward to 1985

1985
Image Source: GMAuthority.com

Clean Disruption- Copyright 2001-2015 by Tony Seba

Mainstream Disruption Forecasts


! In the mid-1980s AT&T hired
McKinsey & Co to forecast cell-phone
adoption by the year 2000
! Their (15-year) prediction:

900,000 subscribers.
! The

actual number was

109 million
! They were off by a factor
of 120x

Leading
Clean
Market
DisruptionDisruptionCopyright
Copyright
2001-2015
2001-2015
by Tony
by Tony
Seba
Seba

Motorola DynaTAC 8000X from


1984. Source: Wikimedia
Source: Economist

Clean Disruption - Copyright 2001-2015 by Tony Seba

4
 
    

Stanford BUS45 - Leading Market Disruption-

AT&T Disrupted and $$ Trillions Created


120,000,000

Actual

Subscribers

109,000,000
100,000,000

80,000,000

60,000,000

40,000,000

20,000,000

Forecast

$2.4 trillion - Market Cap Top 15 Global Internet


Public Companies (2)

!!AT&T's landline telephony market was disrupted,


!!It Missed out on a multi-trillion dollar opportunity!
Subscriber Data Source: CTIAThe Wireless Association
Clean Disruption- Copyright 2001-2015 by Tony Seba

Internet Companies: Internet Report 2015 - Mary Meeker

It's usually the 'Experts' and 'Insiders' who

dismiss disruptive opportunities


"The Internet will catastrophically collapse in
1996."
-Robert Metcalfe, 1995.
"There is no reason anyone would want a
computer in their home."
- Ken Olson, CEO, Digital Equipment Corp., 1977

"I do not believe the introduction of motor-cars


will ever affect the riding of horses."
- Scott-Montague, United Kingdom MP, 1903
Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

5
 
    

Stanford BUS45 - Leading Market Disruption-

Why do smart people at


smart organizations
Consistently Fail to
Anticipate or Lead Market
Disruptions?

Clean Disruption- Copyright 2001-2015 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

4 Reasons Why Organizations Consistently


Fail to Anticipate or Lead Market Disruption

1.! Disruption Models


2.! Exponential
Technologies
3.! Business Model
Innovation
4.! Product Innovation
Leading Market Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

6
 
    

Stanford BUS45 - Leading Market Disruption-

Exponential
Technologies
If the rate of change on the outside is greater than the rate
of change on the inside, the end is near.
- Jack Welch
Clean Disruption- Copyright 2001-2015 by Tony Seba

Computing: Moores Law (1971-2011)

Logarithmic Scale

1 billion X

! # of transistors doubles (roughly) every two years.


! Annual Improvement Rate ~ 41.4%
! Exponential Growth in # of Transistors
Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: Wikipedia

Clean Disruption - Copyright 2001-2015 by Tony Seba

7
 
    

Stanford BUS45 - Leading Market Disruption-

!!Technologies improving
at exponential rates.
!! Data Storage Kryders Law
!! Hard Disk $ cost per bit down

50%

every 18 months.

!! Digital Imaging Hendy's Law


! Pixels per $ - 59%

/ year

Logarithmic Scale

PC / Internet / Mobile Phone industries:


Covergence of Exponential Technologies

!! Network Capacity: Butters Law of


Photonics
!! The $ cost of transmitting a bit decreases
by

50% every 9 months.


Kryders Law: Storage

Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: Wikipedia

2015: Key Exponential Technologies


1.! Sensors / Internet of Things
2.! 3D Printing
3.! Machine Learning / Artificial Intelligence
4.! Robotics
5.! 3D Visualization
6.! Solar PV
7.! Energy Storage
8.! Mobile Internet & Cloud
9.! Big Data / Open Data
10.!Unmanned Aerial Vehicles / Nano Satellites
11.! eMoney / eFinance

Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

8
 
    

Stanford BUS45 - Leading Market Disruption-

Clean Disruption of Energy & Transportation

1.!Solar
2.!Energy Storage
3.!Electric Vehicles
4.!Self-Driving Cars
Clean Disruption- Copyright 2001-2015 by Tony Seba

1. THE SOLAR
DISRUPTION
If you evaluated rooftop solar a year ago, or even three
months ago, you are way out of date.
- David Crane, CEO, NRG Energy

Clean Disruption - Copyright 2001-2015 by Tony Seba

9
 
    

Stanford BUS45 - Leading Market Disruption-

Solar PV Costs: DOWN 200X


Learning Curve: 22%

$100/W

50/W

200x
Clean Disruption- Copyright 2001-2015 by Tony Seba

Graph Source: BNEF Economics of PV Power

Market: Solar PV Installed Capacity: UP 132X


200,000
180,000

Global Installed Solar PV (MW)

185,356

160,000
141,156
140,000
120,000
102,156
100,000
80,000

71,061

60,000
40,670
40,000
20,000

6,946 9,521
1,400 1,765 2,235 2,820 3,952 5,364

16,229

23,605

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

! Solar PV Market CAGR 2000-2014 ~42%


! Solar PV installed Capacity 2000-2014 Growth ~ 132X
Clean Disruption- Copyright 2001-2015 by Tony Seba

Data Source: EPIA, PV Magazine

Clean Disruption - Copyright 2001-2015 by Tony Seba

10
 
    

Stanford BUS45 - Leading Market Disruption-

Energy = 100% Solar by 2030 ?


Solar Installed Base (GW)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0

! If Solar PV continues to grow at ~42% CAGR

! 100% of all energy (not just electricity) in the world would be


solar by 2030
Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: Clean Disruption

Can Solar Continue


Growing at this Rate?

Clean Disruption- Copyright 2001-2015 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

11
 
    

Stanford BUS45 - Leading Market Disruption-

!"#$%&'"!(&(%)*+!&
,!&&
'"*,)*(-"*$#&)*)%./&
Clean Disruption- Copyright 2001-2015 by Tony Seba

Since 1970 Prices for conventional resourcebased energy sources are up 6X 16X

Oil
Nat Gas
Nuclear

Clean Disruption- Copyright 2001-2015 by Tony Seba

Coal

Sources: DOE, Clean Disruption

Clean Disruption - Copyright 2001-2015 by Tony Seba

12
 
    

Stanford BUS45 - Leading Market Disruption-

Solar Cost Improvement vs Conventional Energy


Solar PV Cost
Improvement
relative to:

Times
improvement
(1970-2015)

Petroleum

3,165x

Nuclear

2,600x

Natural Gas

2,965x

Coal

1,164x

Oil at $50/bbl

! Since 1970 Solar PV has improved cost by thousands of times


relative to most conventional forms of energy.
!

Note: unsubsidized cost of solar PV

Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: "Clean Disruption"

01!-*)!!&2&3-*$*'-$#&
4"+)#&-**",$(-"*&
Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

13
 
    

Stanford BUS45 - Leading Market Disruption-

Zero Money Down Solar 3rd Party Finance


! ~80% of California Residential Solar PV is third-party
owned & financed (March 2012) (1)
! This includes PPA and Leasing.
! CA 3rd-party finance = substantially

all growth in

residential solar
Cash
3rd-party

Colorado Excel Energy

California Solar Initiative


Clean Disruption- Copyright 2001-2015 by Tony Seba

Images Source: GTM Research

(1) PV Solar Report

3:;B;?:B5&2&0F@:;8@@&46E85&-;;6GBD6;@&
!"#$#%"$&'(')*+"#,++'-./,&'"##.0$1.#+'$2,&56789:;<&=>8&?6@=&
6A&?BC:=B5'$#/'B??8589BD;<&@65B9&BE6CD6;&

34!'(>:9EHIB9=J&3:;B;?8&
! 556'7'8,$+,'
94!':.&$2'8.$#+'

;4!'/:85E'6&

<4!'56=>'?'52.@,2AB'6++,++,/'=&,$#'>#,2CB'
D4!'E.#/?556'FB)2"/'
G4!'=2.H/!*#/"#C'
I4!J85'?'J$+A,2'8"-"A,/'5$2A#,2+K"@'L'
M4!'N>OP'Q'N,$&'>+A$A,'O#0,+A-,#A'P2*+A'L'
'6CJ9:<>=&KLMMNHLMOP&QJ&(6;J&!8QB&&&

Clean Disruption - Copyright 2001-2015 by Tony Seba

14
 
    

Stanford BUS45 - Leading Market Disruption-

Grid Parity in 80% Global Markets by 2017

! Solar at/below grid parity in 100's of markets globally TODAY.


! Deutsche Bank: Solar Below Grid Parity in

! 47 states in the US by 2016

! Up to 80% of Global markets by 2017


Source: Deutsche Bank

Clean Disruption- Copyright 2001-2015 by Tony Seba

Solar PV costs to drop another 50%+ by 2020


$100/W
Total Res. System
Cost = $l.12/W

25/W
! Solar PV costs down 400X from 1970-2020
! Citi: installed cost of Residential solar ~$1.12/W by 2020
! Installed cost is already <$1.4/W in Australia. (2)
Clean Disruption- Copyright 2001-2015 by Tony Seba

1) RenewEconomy (2) SolarChoice.net.au

Graph Source: Citibank and GTM

Clean Disruption - Copyright 2001-2015 by Tony Seba

15
 
    

Stanford BUS45 - Leading Market Disruption-

By 2020: Solar Cost vs Conventional Energy


Solar PV Cost
Improvement
relative to:

Times

Times

improvement improvement
(1970-2020)
(1970-2015)

Petroleum
Nuclear

3,165x
2,600x

6,329x
5,200x

Natural Gas

2,965x

5,911x

Coal

1,164x

2,329x

! Solar PV will keep improving unit cost by thousands of times


relative to conventional forms of energy.

Assumption: conventional energy prices in 2020 = 2014 Oil @$50/bbl

Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: "Clean Disruption"

Solar Growth Rate


may Accelerate!
(Tech S-Curve)

Clean Disruption- Copyright 2001-2015 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

16
 
    

most innovations go through a process of discovery


or development of concept, laboratory demonstration,
Stanford BUS45 - Leading
Market Disruptionfield trials,
and early commercial trials, before they
are generally introduced to the market. Once you

Percentage

Technology Adoption S-Curve (Color TV % US)


100

Color TV

80

Installed base
Consumer Adoptions 2008

60
40
Price

20
0
1950

1960

1970

1980

1990

Data Source: eBrain Market Research

2000
Time

Source: Technology
Inc.
! Solar PV is a technology. Tech adoption
is not Futures,
linear
but follows an S-Curve.
Figure 4 US Color Television Adoption
Graph Source: Technology Futures, Inc

4)

we felt that lack of


problem in the 1990
1950s for color TV.

Perhaps we should
the problems likely
turned out, in 1993,
vidual proposals for
to form a Grand A
the new system beg
second HDTV stud
standards approval
in 1997, and 1 % pe
and a half later than
before final approva
vened, demanding p
scanning. The resul
promise was reache
of scanning, the FC
December 24, 1996

Lawrence K. Vanston, Curt Rogers, and Ray L. Hodges, Advanced Video Services: Analysis and
Providers, Technology Futures, Inc., 1995.

182

Solar GOD Parity


Point of No Return

Clean Disruption- Copyright 2001-2015 by Tony Seba

Image: RedOrbit.com

Clean Disruption - Copyright 2001-2015 by Tony Seba

17
 
    

Stanford BUS45 - Leading Market Disruption-

God Parity by 2020 - $ Rooftop Solar < $ Transmission


Transmission
Costs /kWh

4-5
4-5/kWh
/kWh

! God Parity: cost of rooftop solar lower than


cost of transmission!
! Centralized Generation can't compete
! Obsolete: Nuclear, Natural Gas, and Coal
Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: Clean Disruption

Solar Growth Rate


may Accelerate even
more!
(S-Curve)

Clean Disruption- Copyright 2001-2015 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

18
 
    

Stanford BUS45 - Leading Market Disruption-

But Not all power generation


will be rooftop, right?
What about

Utility Scale?

Clean Disruption- Copyright 2001-2015 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

1D5:=J&!?B58&!65B9&:;&1!$&]Z&PS2TU>&&&

! LMOP&1!$&II$&RP&S2TU>&VW2H&&OS2TU>X&
OY! *,&);89<J&!65B9&II$&HZ&[YN\&S2TU>&RX*&'Y3DS&VLX&
VOX&

! !BFE:&$9BQ:B&II$&^Y_&2TU>&VF;@FQX&R6*C'Y3DS'V[X&
'6CJ9:<>=&KLMMNHLMOP&QJ&(6;J&!8QB&&&

R3S':.*2%,T'UPJ'N,+,$2%K'R9S'5V'J$C$W"#,'R;S'=&,$#P,%K#"%$'

Clean Disruption - Copyright 2001-2015 by Tony Seba

19
 
    

Stanford BUS45 - Leading Market Disruption-

Energy = 100% Solar by 2030?


Solar Installed Base (GW)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0

! If Solar PV continues to grow at ~42% CAGR


! 100% of all energy in the world will be solar by 2030
Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: Clean Disruption

2. ENERGY
STORAGE
While there are many kinds of stories, there's only
one plot: things are not as they seem.
- Jim Thompson, film-maker

Clean Disruption - Copyright 2001-2015 by Tony Seba

20
 
    

Stanford BUS45 - Leading Market Disruption-

Li-on Battery costs dropping exponentially

Laptop Li-on battery costs


dropped ~14% per year
over 15 years. (1)
Investments in battery tech
increasing dramatically:
! Now 3 multi-trillion $
industries investing:
1.!IT/Electronics
2.!Automotive &
3.!Energy

Photo: Wirkipedia

Photo: Telegraph.uk

! Since 2010, battery costs have dropped


at ~16%/year -> ACCELERATING

(1) Clean Disruption

Clean Disruption- Copyright 2001-2015 by Tony Seba

Cost of Li-On Battery Storage ($/kWh)

Projected Cost of Li-On Battery $/kWh


$500
$450
$400
$350

$200/kWh

$100/kWh

$300
$250
$200
$150
$100
$50
Copyright 2001-2015 by Tony Seba

$-

Assumptions: 16%/year

cost improvement

'58B;&+:@9FCD6;H&'6CJ9:<>=&K&LMMOHLMOP&QJ&(6;J&!8QB&

Source: Clean Disruption

Clean Disruption - Copyright 2001-2015 by Tony Seba

21
 
    

Stanford BUS45 - Leading Market Disruption-

Tesla's Battery GigaFactory

! $5 billion investment (6,500 jobs)


!

Battery pack output: 50 GWh/year -> 500,000

year
Double world battery production

Tesla Gigafactory!
!

Gigafactory Projected Figures

cars/
New Local
Renewables !
Solar and Wind!

! Reduce battery pack costs by 30+%

2020 Tesla Vehicle Volume

2020 Gigafactory Cell Output

2020 Gigafactory Pack Output


Space Requirement
Total Land Area (acres)
Employees

500,000/yr

35 GWh/yr!
50 GWh/yr!

Up to 10M ft2!
w/ 1-2 levels!
500-1000
6,500

Rendering!
Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: Tesla

Tesla's Battery Ahead of the Curve

!
!
!

Tesla PowerWall Residential Battery:


! $350/kWh (7kWh or 10kWh)
Tesla Microgrid/Commercial Battery:
! $250/kWh for commercial/microgrid (100kWh)
Market reaction:
Tesla received

$800+
million in
orders /
reservations
first week!
Clean Disruption- Copyright 2001-2015 by Tony Seba

Sources: Tesla, Bloomberg

Image: Tesla,

Clean Disruption - Copyright 2001-2015 by Tony Seba

22
 
    

Stanford BUS45 - Leading Market Disruption-

Battery Megafactories are coming!

! BYD plans to add 6 GWh every year.


! Could ramp up to 34 GWh by 2020 matching Tesla's 35 GWh

(1)

! Foxconn and LG
Chem could add
combined 22 GWh
(2)

Plus Samsung SDI, Apple,


etc.

! Tech Cost Curve


could accelerate!
Copyright 2001-2015 by Tony Seba

Picture 2015 by Tony Seba

(1) Reuters (2) Benchmark Minerals

)*)%./&!("%$.)&
01!-*)!!&4"+)#&
-**",$(-"*&
'58B;&+:@9FCD6;H&'6CJ9:<>=&K&LMMOHLMOP&QJ&(6;J&!8QB&

Clean Disruption - Copyright 2001-2015 by Tony Seba

23
 
    

Stanford BUS45 - Leading Market Disruption-

Business Model Innovation:


Storage As A Service

Image: Stem

! Stem and GreenCharge Networks offering storage-asservice to reduce DEMAND CHARGES for businesses
! Zero-money down, 10 years
! Lower utility bills by 10-50% (1)
! Similar business model that made solar skyrocket
(1) Source: Bloomberg

Clean Disruption- Copyright 2001-2015 by Tony Seba

!=69B<8&+:@9FCD6;&]&%8@:E8;DB5&B;E&'6``89?:B5&
! 60,2$C,'6-,2"%$#'%.#+*-,+'Z[;'\]K(-.#AK'?^'_';[\]K(/$B'

! EB'9[9['"A'H"&&'%.+A'a[bYN2`6;=>'RaOYL2EBJS'`.2'$'
`*&&'/$B'.`',&,%A2"%"AB'+A.2$C,&

Monthly Cost of
Residential Storage

Target Year ->

Purchase Cost of Battery Storage


System ($/kWh) ->
SaaS Services

$600

2014

$500

$300

2020

2024

2028

$200

$100

$50

$1.5

$0.8

$0.4

Hours kWh Storage: Monthly Cost

Demand Response

1.25

$4.6

$3.8

Avoid peak, buy low & shift usage


Store all solar self-generation

$2.3

$18.4

$15.3

$9.2

$6.1

$3.1

$1.5

10

$36.8

$30.7

$18.4

$12.3

$6.1

$3.1

Self-sufficiency

16

20

$73.6

$61.3

$36.8

$24.5

$12.3

$6.1

Off-grid

24

30

$110.4

$92.0

$55.2 $ 36.8

$18.4

$9.2

Assumptions: 4% cost of capital (mortgage) over 20 years


'58B;&+:@9FCD6;H&'6CJ9:<>=&K&LMMOHLMOP&QJ&(6;J&!8QB&

:.*2%,T'=&,$#'a"+2*@1.#'

Clean Disruption - Copyright 2001-2015 by Tony Seba

24
 
    

Stanford BUS45 - Leading Market Disruption-

3. The Electric Vehicle


Disruption

Photo Tesla Motors

Clean Disruption- Copyright 2001-2015 by Tony Seba

Nov 16, 2012


Motor Trend
2013 Car of the Year: Tesla Model S

It drives like a sports car, eager and agile and instantly


responsive. But it's also as smoothly effortless as a Rolls-Royce and
carry almost as much stuff as a Chevy Equinox. Oh, and it'll sashay up
to the valet at a luxury hotel like a supermodel working a
Paris catwalk.

Consumer Reports:

Best Car EVER!

(1)

Best-selling high-end
large luxury car in
America!

Image -Tony Seba

(2)

Clean Disruption- Copyright 2001-2015 by Tony Seba

Sources: Motor Trends, (1) Consumer Reports, (2) Extremetech.com

Clean Disruption - Copyright 2001-2015 by Tony Seba

25
 
    

Stanford BUS45 - Leading Market Disruption-

But who can afford an


Electric Vehicle?

Clean Disruption- Copyright 2001-2015 by Tony Seba

Photo Tony Seba

Is the Electric
Vehicle
Disruptive?
(You always need to ask)
Clean Disruption- Copyright 2001-2015 by Tony Seba

Photo by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

26
 
    

Stanford BUS45 - Leading Market Disruption-

1. Electric Motor 5X more Energy Efficient


Internal Combustion
Engine

40

70

20

Energy Efficiency

80

10

90

0
50

60

30

17%-21%
40

50

100

60

30

70

20

80

10

90

100

Clean Disruption- Copyright 2001-2015 by Tony Seba

Electric Motor

90%-95%
Energy Efficiency

Sources: ICE DOE, EM Wikipedia


Images Source: ICE - Tony Seba , Electric: BradMerritt.com

2. EVs are 10X cheaper to charge / fuel


! It costs $15,000 to fill up
a (gas) Jeep Liberty over five
years (Consumer Reports).
! An Electric Jeep Liberty would
cost
!

$1,565 in electricity.

Improvements in
power electronics
will increase 10X.

Assumptions:
!
12,000 miles/year
!
Tesla Roadster: 4.6 miles per kWh.
!
Ave retail electricity in the U.S.: 12 /kWh
!
5 year-cost = (60,000 miles * 0.12 $/kWh) / 4.6 miles/kWh = $1,565.
Clean Disruption- Copyright 2001-2015 by Tony Seba

Image: Jeep.com

Source: Tesla

Sources: Consumer Reports, DOE, Clean Disruption

Clean Disruption - Copyright 2001-2015 by Tony Seba

27
 
    

Stanford BUS45 - Leading Market Disruption-

3. Maintenance - Gasoline Car:


2,000+ moving parts
(1)

Photo Todd McLellan


Clean Disruption- Copyright 2001-2015 by Tony Seba

(1)! Baron Funds

3. EVs: 100X fewer Moving Parts


Electric Vehicle (EV)

ICE (Gas) vehicle

2,000+ moving parts

(1)

18 moving parts

Transmission, driveshaft, clutch, valves,


differentials, pistons, gears, carburetors,
crankshafts...

(1)

Photos: Tony Seba

EVs 10X-100X cheaper to maintain!

! Tesla: Infinite Mile Warranty!


Clean Disruption- Copyright 2001-2015 by Tony Seba

(2)

(1)! Baron Funds (2) Tesla blog

Clean Disruption - Copyright 2001-2015 by Tony Seba

28
 
    

Stanford BUS45 - Leading Market Disruption-

4 EVs FAR MORE powerful than ICE

EV Torque

ICE Torque

Teslas EV SUV will have the performance


of a Porsche 911 Carrera! - Elon Musk, Tesla
Image Source: BRD Motorcycles

Leading Market Disruption- Copyright 2001-2015 by Tony Seba

EVs Shift the Price/Performance equation ->


Disrupt the BASIS of COMPETITION
High $$$
Porsche 911 Carrera

Price
Medium $$
Buick Enclave

Tesla Model X

Low $
Copyright 2009-2015 by Tony Seba

High
Performance
EVs: Porsche performance for Buick prices!
Low

Clean Disruption- Copyright 2001-2015 by Tony Seba

Car Images Source:WikiMedia

Clean Disruption - Copyright 2001-2015 by Tony Seba

29
 
    

Stanford BUS45 - Leading Market Disruption-

Ok, so the EV is
DISRUPTIVE.
How long will the transition
take?

Clean Disruption- Copyright 2001-2015 by


Tony Seba

Disruption from Above:


Cost of EV with 200-mile (320 Km) range
$80,000

Cost of Electric Vehicle

$70,000
$60,000

gas "Affordable
SUV": $35-$40K
Ave gas Car
cost in US: $31K

$50,000
$40,000

Ave cost of Low-end


gas car in US: $22K

$30,000
$20,000
$10,000
$-

Clean Disruption- Copyright


2001-2015 by Tony Seba

Assumptions: 4 miles/kWh, 50kWh batteries,16% yearly improvement in battery costs,


Source:Program
Clean Disruption
Source: US DOE Vehicle Technologies
EV Costs = 3X cost of battery

Clean Disruption - Copyright 2001-2015 by Tony Seba

30
 
    

Stanford BUS45 - Leading Market Disruption-

ComputerWorld

Sept 4, 2014

Foxconn to make EV for $15,000


Foxconn, the maker of the Apple iPhone
to invest $811m to develop Electric Cars."
"Foxconn CEO
Terry Gou said they
are targeting EVs
priced at less than

$15,000. " (1)


Clean Disruption- Copyright 2001-2015 by Tony Seba

Image Copyright 2015 by Tony Seba

4 - The Autonomous
Vehicle Disruption

Photo Wikipedia
Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

31
 
    

Stanford BUS45 - Leading Market Disruption-

Financial Times

May 5, 2015

Nevada approves Autonomous Trucks

Daimler Benz autonomous self-driving truck approved in Nevada

Leading Market Disruption- Copyright 2001-2015 by Tony Seba

Reuters

Video: WSJ

June 3, 2014

Nissan autonomous Car by 2016

Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

32
 
    

Stanford BUS45 - Leading Market Disruption-

Oct 2, 2014

TheVerge

Tesla capable of Self-Driving


90% of the time by 2015

90% of your miles


to be autonomous.
For sure on
highways." (Elon Musk)
Photo: Tony Seba

"Legal, regulatory issues must be


overcome." (1)
(1) UK Daily Mail

High End: Semi-Autonomous Capabilities

"! High-end cars already have autonomous


('Drivers Assist') tech

Leading Market Disruption- Copyright 2001-2015 by Tony Seba

Graphic Source: Audi

Clean Disruption - Copyright 2001-2015 by Tony Seba

33
 
    

Stanford BUS45 - Leading Market Disruption-

What about the


COST of
Autonomous Vehicles?

Copyright 2001-2015 by Tony Seba

What an Autonomous Car Sees

""! Google Car: 3D Machine Vision uses LIDAR


Clean Disruption- Copyright 2001-2015 by Tony Seba

GraphicPopular Science

Clean Disruption - Copyright 2001-2015 by Tony Seba

34
 
    

Stanford BUS45 - Leading Market Disruption-

Exponential Technologies:
Machine Vision LIDAR Sensors
"! In 2012 Google announced that the cost of technology in its
self-driving car was ~$150k.
"! LIDAR Sensor (for Machine Vision) was

$70k in 2012

! By the end of
2013, the next-gen
LIDAR was: $10k
! By Oct 2014, a SV
startup company
announced LIDAR
for $1k
Graphic Source Wikipedia

Clean Disruption- Copyright 2001-2015 by Tony Seba

Mark VIII (M8) & Solid State (S3) LiDARs

LIDAR: From $70,000 to $1,000 to $90


Designs focus simultaneously on cost,
performance, size and reliability
Gen 1: mechanical LiDAR (M8)
Gen 2 & 3: solid state LiDAR (S3)
Disruptive Pricing:
Gen 1: <$1,000
Gen 2: <$250
Gen 3: <$100

Clean Disruption of Energy &Transportation

One beam is pointed skyward to prevent


blind spots in the event of pitch or roll

Disruptive LiDAR Solutions for Autonomous Vehicles,


3D Mapping, Navigation and Location Based Services
Louay Eldada
CEO, Co-Founder
Quanergy Systems, Inc.

$1,000

!! 2015 LIDAR: ~
8 Patents
Pending
!! Gen 2 (solid state):
$250
June 9, 2015

2015 Quanergy Systems, Inc.

15 Patent Apps in prep


covering Gen 1, 2 & 3

!! Gen 3 (postage stamp):


2015 Quanergy Systems, Inc.

$90

Leading Market Disruption- Copyright 2001-2015 by Tony Seba

Source Quanergy

Clean Disruption - Copyright 2001-2015 by Tony Seba

35
 
    

Stanford BUS45 - Leading Market Disruption-

Autonomous Vehicles = Computers on Wheels

!!What is the Cost Curve of Computing Power?


!! to process sensor input?
Clean Disruption- Copyright 2001-2015 by Tony Seba

Image Copyright 2015 by Tony Seba

Year 2000: World's 1st 1-TeraFlops Computer


ASCI RED Sandia National Labs

"! Space = 1,600 sq ft (150 m2)


"! Power Consumption = 850 kW
"! Cost = $46

Image: ExtremeTech

million

Leading Market Disruption- Copyright 2001-2015 by Tony Seba

Source Wikipedia

Clean Disruption - Copyright 2001-2015 by Tony Seba

36
 
    

Stanford BUS45 - Leading Market Disruption-

Exponential Technologies:
GPU: NVIDIA Drive PX
!! Dual Tegra X1 GPU Processor

!! 2.3 TeraFlops
!! Power Consumption =

15 W

#!56,666X improvement

#! Cost =

$59

#!~1 million X improvement

#! Built for Self-Driving Cars


! Surround Computer Vision (CV) with Advanced Rendering
! Deep Learning S/W, and
! Over-the-air updates
'58B;&+:@9FCD6;H&'6CJ9:<>=&KLMO^&QJ&(6;J&!8QB&

Image & Data Source: NVIDIA

Ok, cost is not an


issue...but
Is the Market Ready
for Self-Driving Cars?

Leading Market Disruption- Copyright 2001-2014 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

37
 
    

Stanford BUS45 - Leading Market Disruption-

Are consumer ready for Autonomous cars?


2.8b people

Clean Disruption- Copyright 2014 by Tony Seba

Source: Cisco Systems

Cool! I can
and also
while NOT driving!

But what's the

disruptive
impact?
Clean Disruption- Copyright 2001-2015 by Tony Seba

Rodin Thinker -

Photo: Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

38
 
    

Stanford BUS45 - Leading Market Disruption-

01!-*)!!&4"+)#&
-**",$(-"*&
'58B;&+:@9FCD6;H&'6CJ9:<>=&K&LMMOHLMOP&QJ&(6;J&!8QB&

My Smartphone On-Demand
Transportation
Plan & schedule ALL transportation
needs with Apps
1.! Buses: NextBus
2.! Trains: CaltrainMe, iBART

3.!Car-Sharing: Zipcar
4.!Ride-Sharing: Uber, Lyft
5.! Parking: PayByPhone
6.! EV Charging: ChargePoint

Clean Disruption- Copyright 2001-2015 by Tony Seba

Photos:
Tony
Seba
Image 2015
by Tony
Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

39
 
    

Stanford BUS45 - Leading Market Disruption-

CAR- Sharing
Zipcar:
!! On-demand individual transportation
!! By the hour, by the day

!! 760k members and $270m in revenues (2012)

!!Share-to-own ratio: 15

!! Each shared zipcar replaces


15 cars on the road.

Images: Tony Seba

On-Demand Mobility:
changing the concept of
"Car Ownership"
!!while reducing the need for
new cars
Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: "Clean Disruption"

RIDE- Sharing
Companies disrupting private and public
transportation.
"! =.##,%1#C'*+,2+'H"AK'/2"0,2+'
"! >bT'c),2d'8Be'

"! Uber (started 2009):


"! May '15 - 311 cities in 58 countries (1)

"! Est. 2015 Bookings = $10 billion(2)


"! 1 million drivers (global) (3)
San Francisco Figures
!! # Uber Drivers (2015): 22,000
!! # of Taxicabs (2012): 1,825 (4)

!!Carpooling ~= half of Uber Rides


Image:
Seba Insider
(1) (2) Tony
(3) Business
Clean Disruption- Copyright 2001-2015 by Tony Seba

(4) Wikipedia

Clean Disruption - Copyright 2001-2015 by Tony Seba

40
 
    

Stanford BUS45 - Leading Market Disruption-

Cars: Hugely Inefficient Use of Assets

Cars are our 2nd largest


Capital Expense.

! Ave. car costs = $31k


!

Plus OpEx: gasoline,


insurance, maintenance, etc

cars are
parked 96% of
But

the time!

(1)

! 4% Asset Utilization is a
disruption waiting to happen!
Photo: Tony Seba
Leading Market Disruption- Copyright 2001-2015 by Tony Seba

(1) Donald Shoup

!)#3H+%-,-*.&W&'$%!c$%-*.d&
'"*,)%.)*')&"3&
()'c*"#"./&e&01!-*)!!&
4"+)#&-**",$(-"*&

'58B;&+:@9FCD6;H&'6CJ9:<>=&K&LMMOHLMOP&QJ&(6;J&!8QB&

Clean Disruption - Copyright 2001-2015 by Tony Seba

41
 
    

Stanford BUS45 - Leading Market Disruption-

Feb 2, 2015

The Verge

UBER announced Self-Driving Car


Project
Uber announced plans with Carnegie Mellon
University to create the Uber Advanced Technologies
Center: R&D of autonomous

vehicles."

"When there's no [driver], the cost of


taking an Uber anywhere becomes
cheaper than owning a vehicle...and

car ownership
goes away." said Uber's
then

CEO
Clean Disruption- Copyright 2001-2015 by Tony Seba

Image: Tony Seba

Helsinki, Finland: Clean Disruption by 2025


"! Helsinki announced intention to build 'mobility on
demand' platform based on self-driving cars by 2025.
"! Mobile platform / app
would knit together:
"! Driverless cars,
"! Little buses,
"! Shared bikes and
"! Ferries,
"! into a seemless "mobility
on demand" service.
"! Objective: make

car
ownership (in the
city) obsolete
Image: Fool.com

Leading Market Disruption- Copyright 2001-2015 by Tony Seba

(1) Guardian

Clean Disruption - Copyright 2001-2015 by Tony Seba

42
 
    

Stanford BUS45 - Leading Market Disruption-

The Self-Driving Car Disruption

1.!Car-as-a-service (CarSharing +
Self-Driving Vehicles) will make
Individual Car Ownership Obsolete
2.! New Car Market to shrink by ~80%.
! Disruption of Auto industry
! Disruption of Car insurance industry
3.!~80% parking space not needed
! Citiscape to be re-designed
Clean Disruption- Copyright 2001-2015 by Tony Seba

!144$%/&
Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

43
 
    

Stanford BUS45 - Leading Market Disruption-

Summary: On the Cusp of a major


Disruption in Energy and Transportation

2015:
we
are
HERE

Clean Disruption- Copyright 2001-2015 by Tony Seba

Source: US National Archives

2015 Clean Disruption of Energy & Transportation


!! The technologies, skills, organizations, and culture of the
industrial revolution have run out of steam
!! They are being disrupted by the technologies, skills, organizations,
and culture of the "Silicon Valley" technology revolution

1.!
2.!
3.!
4.!

Solar
Energy Storage
Electric Vehicles
Self-Driving Vehicles

!! Generation, Storage, and Intelligence pushed to the edges


!! Distributed, Mobile, grid-independent

!! Bits + photons are replacing atoms (coal, nukes, gas, oil)


!! Electric + ICT replacing combustion
Clean Disruption- Copyright 2001-2015 by Tony Seba

Image: Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

44
 
    

Stanford BUS45 - Leading Market Disruption-

Clean Disruption - By 2030

1.! ALL Energy will be Solar (+Wind)


!
!

Disruption of Conventional Electric Utilities


Obsolete: Nukes, Coal, Gas, Diesel

2.! ALL NEW Vehicles will be Electric


!
!

Disruption of Conventional Car Industry


Obsolete: ICE Vehicles, Petroleum

Disruption of Conventional Car Industry, Car


Insurance, Parking

3.! ALL NEW Vehicles will be driverless

Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption of Energy & Transportation

This disruption is
not in the future.

It is NOW!
Clean Disruption- Copyright 2001-2015 by Tony Seba

Clean Disruption - Copyright 2001-2015 by Tony Seba

45
 
    

Stanford BUS45 - Leading Market Disruption-

(c$*f!g&
'
!
!
"#$%&!'#(#&)#!
www.tonyseba.com

($)"vestors Forum *+,"-$.*#/0$1"$2*"3$4*"3$$


9-$*"$3:*;/:$1"-./;1:1.0$/"#$Chinas new normal$
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4 September 2015: CLSA Limited (CLSA), Asias leading and longest'


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CLEAN DISRUPTION

WHY CONVENTIONAL ENERGY AND


s Forum provides more than
1400 global fund managers
and 230
TRANSPORTATION
WILL
BE OBSOLETE BY

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!
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#$%&"#$%%Monday 14 September 2015: CLSA Limited (CLSA), Asias leading and longest'

Tony Seba
www.tonyseba.com

ning brokerage and investment group opens today the 22nd CLSA Investors Forum, one

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Clean Disruption
- Copyright
Tony Seba
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46