As the world grapples with the consequences of the conflict in Iran and its impact on global politics and economics, quiet but tectonic changes are taking place in the energy market. While the price of oil threatens to break the psychological barrier of $100 per barrel, the price of battery power has fallen below the equally important barrier of $100 per megawatt hour, signaling that the transition away from fossil fuels may be moving faster than we expected.
According to an analysis by Bloomberg Opinion, this price reversal is not just a temporary trend. While analysts predict that the price of oil will continue to rise by three to six dollars a day as long as the conflict lasts, battery technology has become so competitive that there is no going back. To understand the extent of this change, it is enough to compare the energy value. One barrel of oil contains approximately 1.6 megawatt hours of energy. The current price of grid electricity using four-hour batteries is about $78 per megawatt hour, which is the energy equivalent of $125 per barrel of oil.
But the key difference lies in efficiency. Oil-fired power plants have an efficiency of about 30 percent, which means that 70 percent of the energy is wasted. On the other hand, utility-grade batteries return about 80 percent of the electricity they store. Even more modern gas-fired power plants, with efficiencies of up to 60 percent, have become a more expensive source of electricity in much of the world than batteries that are charged with cheap renewable energy when the sun shines or the wind blows.
This paradigm shift is not only limited to large energy systems, but also directly affects consumers’ pockets. In the world of electric vehicles, every rise in the price of oil makes batteries even more attractive. Ironically, with his moves toward Iran, US President Donald Trump seems to have given the world a huge boost in the direction of the long-announced transition away from oil. Although the specifics of this “incentive” are far from ideal, the final result could be extremely positive for the planet.