Disruptive Innovation: 3 Ways Technology Is Changing How You Will Use Energy

Technological progress promises to forever change the way we use, generate, and think about energy. Learn what these technologies are and more importantly, how they might, and might not, allow you to make a fortune by investing in them.

Technology revolutionizing drivingThe Internet of things or IOT, is perhaps one of the most important trends of the coming decades, and one that might truly revolutionize the way energy is used to transport people and cargo as efficiently as possible. For example The Hatton Group -- a research firm located at MIT -- estimates that by 2020 there will be 12.5 billion machine to machine or M2M Internet connections in the world, more than six times the amount of Internet users today.

Perhaps the most exciting potential for the IOT to transform transportation is in self driving cars -- made possible by vehicles communicating their locations and speed with one another on the roads. For example, self driving cars on highways and interstates could drive much closer to one another than human drivers can. This could not only allow for less congestion on our roads -- some studies suggest self driving cars could quadruple road capacity -- but also allow vehicles to drive far more efficiently.

In addition, fleets of self driving cars could be used as taxis and greatly decrease the need for automotive ownership in major cities, potentially greatly reducing traffic congestion. Given that a recent study found that sitting in bumper to bumper traffic cost America's economy $124 billion in 2013 -- $1,700 per household -- the reduction in wasted fuel, time, and money might serve to further benefit our quality of lives as well as our wallets. However, technology isn't just likely to connect our cars together on the roads of the future, but is also revolutionizing our cars themselves.

Tesla Model S. Source: Tesla Motors.

Technology revolutionizing what we driveAfter more than 100 years of failing to compete with petro-powered cars, electric vehicles such as Tesla Motors'Model S and the Nissan Leaf and GM's upcoming Chevy Bolt, are finally starting to make Americans stand up and take notice of the benefits EVs have to offer -- most notably less environmental impact, less reliance on oil, and lower operating costs.

Chevy Bolt image courtesy of GM

The growing popularity of electric cars is important to the future use of transportation energy in two ways. First, electric cars are far more efficient than regular vehicles. In fact the Department of Energy estimates that EVs are 3.2 times as efficient as gasoline cars at converting power from the grid, and gasoline, respectively, to forward motion.

Combined with IOT technology, EVs could greatly decrease the amount of energy wasted in transportation, but perhaps most importantly of all, revolutionize the source of our future transportation energy away from oil, and toward solar power.

Solar power revolution is changing how we produce energyFor decades solar power has been too expensive compared to fossil fuel alternatives to grow without government subsidies.

However, decreasing costs of solar power, courtesy of the efforts of such companies as SolarCity and SunPower , means that more and more Americans are able to drive cleaner cars on cleaner power.

For example, a recent report from the International Renewable Energy Agency shows that the cost of solar power has plunged in recent years:

  • Residential solar costs down 70% since 2008.
  • Utility-scale solar costs down 50% since 2010.
  • Solar-panel costs down 75% since 2009.

What's more, the cost of solar is expected to continue to plummet in the years ahead because of massive investment and R&D efforts. Even falling oil prices aren't likely to cancel the solar revolution, according to Sultan Ahmed Al Jaber, the minister of state of the United Arab Emirates -- a major oil exporter.

In fact, analysts at Deutsche Bank foresee another 40% decline in solar costs by 2017, which would allow unsubsidized solar to be at grid parity -- costs equal to or lower than conventional fossil-fuel sources -- in 80% of the world's energy markets within the next two years.Thanks to these long-term projections the International Energy Agency predicts that solar power has the potential to provide up to 33% of the world's power by 2060.

However, before you get too excited and run out and load up your portfolios with shares of Tesla, SolarCity, SunPower, or similar futuristic energy stocks, be aware that this energy revolution is still in its infancy and thus these investments are incredibly risky. That's because, while the growth potential of solar power and EVs is staggering, we can't reliably predict which companies will turn out the winners of these exciting industries -- making these kinds of investment highly speculative.

Takeaway: Technological innovation means a more efficient, cleaner future, but invest carefullyThe Internet of things, electric cars, and solar power technology will revolutionize the way we use energy to move in the future. Cars of tomorrow will likely be faster, safer, and far more efficient than what is on the roads today. But as exciting as these changes may prove investors shouldn't get overly excited and investing large portions of their portfolios into IOT or clean-energy companies. There are likely to be many winners and losers in green energy in the decades to come, and even if a company succeeds, it's still possible for investors to lose money on such investments -- especially if they overpay for shares.

The article Disruptive Innovation: 3 Ways Technology Is Changing How You Will Use Energy originally appeared on Fool.com.

Adam Galas has no position in any stocks mentioned. The Motley Fool recommends General Motors, SolarCity, and Tesla Motors. The Motley Fool owns shares of SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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