3 Trends Driving the Energy Transition
Updated: Mar 15, 2021
The energy transition has become a global reality.
There are three key trends underway: namely decarbonization, decentralization, and digitalization which are radically transforming the way we produce, distribute and consume energy.
Decarbonisation is the first and foremost element in accelerating the energy transition.
There is overwhelming scientific evidence that climate change is driven by our CO2 and other greenhouse gases emissions such as methane and nitrous oxide. Majority of that CO2 and other greenhouse gases emissions such as methane and nitrous oxide come from burning fossil fuels – coal, oil and gas.
Given that most of world’s energy come from the burning of coal, oil and gas, therefore, three-quarters of global greenhouse gases come from energy and the other quarter come from agriculture and land-use change. For instance, in 2019, 84% of the world’s energy came from burning fossil fuels. Therefore, we need to rapidly transition away from fossil fuel based energy sources to low-carbon sources.
But it’s hard to get rid of fossil fuels completely from the energy mix because of sectors like transport and heating that are often harder to decarbonize. Transport relies heavily on oil; and heating on gas. There are fewer energy options available to substitute in these sectors. However, in the electricity system, however, we have more options: nuclear power, hydropower, wind, and solar. This means the electricity mix tends to have a higher share of low-carbon sources.
According to the Intergovernmental Panel on Climate Change (IPCC), electricity production emits approximately 37% of global emissions, therefore, cleaning up the electricity with low-carbon sources i.e. nuclear power, hydropower, wind, and solar could deliver a huge reduction in carbon emissions coming from our energy system.
According to Center for Climate and Energy Solutions (C2ES), an environmental nonprofit organization based in Arlington, Virginia “Renewables made up 26.2 percent of global electricity generation in 2018. That’s expected to rise to 45 percent by 2040. Most of the increase will likely come from solar, wind, and hydropower.”
But even if Renewables energy sources make up 100 percent of global electricity generation in the future, electricity makes up a fraction of world’s overall energy consumption. Sectors like transport and heating which represents a huge chunk of world’s overall energy consumption rely heavily on fossil fuels – coal, oil and gas and are often harder to decarbonize because there are fewer energy options available to substitute in these sectors.
Therefore, there is need to adopt two-pronged strategy for achieving deep decarbonisation:
Clean up the electricity.
In my opinion, the good strategy for achieving deep decarbonisation would be to focus on cleaning up the electricity but also in the meantime develop electricity end use technologies for the direct and indirect electrification of transport, buildings and industry. One example of this is electric vehicles: if we can shift oil-dependent transport to electrification then we have more options for powering them in a low-carbon way. This will, however, require massive increases in nuclear and renewable generation to make up for rising demand for electricity.
Secondly, decentralization is playing a critical role in the acceleration of the energy transition.
The traditional power grid- with its centralized generation, transmission and distribution is being turned upside down for a new generation grid with prosumers and distributed storage. The future power grid will look much different than the one we have today – the next generation paradigm is organic, local, and highly distributed.
In the past, large scale utility businesses delivered energy to the end-user from large power plants. At present, a clear shift is seen from traditional utility business model to a more democratic business model giving birth to distributed energy networks in which energy consumers manage their own energy portfolio.
Centralized model relied heavily on the supply side of the equation to manage the system, more power was generated and distributed when demand peaked. In a decentralized system, more focused is placed on the demand side in which demand response is used to manage distribution and grid stability.
Such a set-up or network have become possible because of the development and availability of technologies i.e. distributed renewables energy generation, smart homes and factories, batteries, and fuel cells, to name a few.
However, there is a need to develop and experiment new market mechanisms that provides incentives to different players in the system in order to orchestrate the individual parts of new energy ecosystems effectively.
Critical to the successful energy transition is digital transformation, which has received a further boost in the wake of the pandemic. Because decarbonisation and decentralization of energy using renewables have increased the complexity of running the energy system. This added complexity requires management, and that management requires high level of digitalization to ensure reliability and security of the energy system.
As thousands of new agents (i.e. distributed energy resources such as rooftop solar panels, small-scale wind turbines, electrolysers, batteries, fuel cells, and even electric vehicles etc.) are getting connected to the energy ecosystems there is a need for development and deployment of high degree of sophisticated automation and analytics tools to manage a system powered by an increasing variety of energy sources.
Supporting technologies such as predictive artificial intelligence, machine learning, Internet of Things, and blockchain are going to play a critical role in the development of an integrated, renewable and efficient energy system.