Sometimes it's hard to see innovation happening until one day, you wake up and realize everything has changed. A decade ago, smartphones were the stuff of science fiction, cheap solar energy was a pipe dream, and Elon Musk was still struggling to keep his electric car startup alive. Today, all three are huge growth stories. 

The underlying technologies that drove the innovative products in smartphones, solar, and EVs were present in 2007, but most people just didn't see how they could be practically adapted to revolutionize the world in such a short time.

Today, improvements in battery technology are on the cusp of changing everything we know about energy in transportation and electricity. The groundwork has already been laid, and a decade from now, we'll look back and think about how obvious the transformation should have been ahead of time. 

Abstract image of a battery.

Image source: Getty Images.

Batteries are the new solar panels

Before we dive into how batteries will change everything, I think it's important to frame what's going on today. The future of growing battery use and falling cost has some precedent in the energy industry. When I started writing for The Motley Fool in 2010, the solar power industry was small, and the cost to manufacture a solar panel was about $1.10 per watt, meaning buying a panel on the open market would cost you around $1.60 per watt. In 2017, solar panel prices hit $0.40 per watt on the spot market, a quarter of their cost just seven years earlier, and a much faster cost reduction than anyone had predicted. It's no coincidence that between 2010 and 2016 solar installations globally nearly quintupled from 16 GW to 74 GW

The same dynamic is happening in the battery market today, with massive capacity additions, cost reductions, and technology improvements happening at multiple companies simultaneously around the world. Tesla's (NASDAQ:TSLA) Gigafactory gets a lot of attention, and Musk has said a 35% reduction in battery costs could be coming. Worth noting that he claimed his costs were below $190 per kWh early last year. 

By 2020, the forecasts have battery costs falling to below $100 per kWh, with manufacturers Samsung, Panasonic, and LG Chem leading the way. LG Chem is the supplier for the recently launched Chevy Bolt, which reportedly got battery cells for just $145 per kWH. 

On top of these cost reductions, industry sources say that energy density has doubled, allowing more energy to be packed into a smaller space. And as space constraints fall and costs come down, the potential for batteries to disrupt the energy sector increases. 

Changing everything we thought we knew about transportation

When electric vehicles started to emerge on the scene, battery cost alone was a deterrent to manufacturing or buying them. When batteries were $400 per kWh a few years ago, that meant that by itself, the 65 kWh battery that powered a Tesla cost $26,000. But with $100 per kWh pricing on the horizon, a 100 kWh battery would cost just $10,000 and provide a car over 300 miles in range per charge, making EVs a much more palatable choice. 

It's no coincidence that General Motors (NYSE:GM), BMW, Tesla, and many others are accelerating their EV development now. Batteries themselves are no longer a hurdle for the industry to get over; soon, they will be a cost advantage over conventional vehicles. 

I'm also becoming more convinced that transportation can be disrupted on a larger scale. Electric buses built by companies like Proterra are now cost competitive with diesel powered models, Mercedes-Benz is testing urban e-trucks, and new companies like Nicola One are launching electric semi-tractors. 

The market growth of electric vehicles of all sizes is like a ball rolling down a hill -- we just don't know how fast it's rolling or where it's going to land. But with battery prices dropping, we can be assured that the disruption in the transportation industry is just beginning. 

Electricity will never be the same

While batteries in vehicles will be a highly visible application, power storage may be just as important to the energy industry overall. Batteries can store energy to make the grid more reliable, to offset the intermittence of renewable energy sources like wind and solar, and even justify delaying or cancelling the construction of "peaker plants" that come online only during periods of high demand. 

The incredible innovation better, cheaper batteries allow is the ability to think of electricity as more than a constant supply-and-demand equation. Since the grid was built, generators had to match their production capacity with peak demand, no matter what that demand was. Now, we can move excess supply from one time of a day to another, and begin to start using energy more efficiently. 

Batteries can also be installed in homes, at businesses, or by grid operators. When a customer can react to price signals at a moment's notice or can cheaply and easily store the energy from their rooftop solar panels for use at night, it changes the electricity business forever. 

Batteries are going to change everything

The rapid cost reductions and improving technology in the battery industry are going to change a lot of what we thought we knew about energy. And as these products get more cost effective they'll become more common and soon they'll be commonplace. 

A decade from now, it won't be strange to drive an electric car, or take an electric bus, home from work, and flip on lights that are powered by solar or wind-generated electricity stored in your battery system. The revolution is clearly happening, and investors should make sure they're on the right side of the disruption so they don't get run over.