By Randolph Brazier
[TL;DR] The following post describes the energy sector transition from a centralised system to a decentralised approach. The role of innovative technologies will help respond to some of the challenges the traditional energy grid is facing. Moving to a cleaner and smarter system will present a variety of benefits both at consumer and producer level. Ultimately, the change will enable consumers to make more informed energy decisions and this is causing the industry to innovate and adapt to meet their customer needs.
In the energy sector, there is currently a shift underway that is unlike anything experienced previously; arguably the biggest shift since large scale electrification in the 1880’s. This shift is towards decarbonisation, decentralisation and digitisation, and is being driven by the need to transition to a low carbon energy future while maintaining our energy security and ensuring affordability for all (the Energy Trilemma).
Climate change is one of the biggest challenges we face, and the world has agreed to act, as evidenced by the 2015 Paris Climate Agreement. The UK Government has ratified this commitment and also enshrined the Climate Change Act into law. Decarbonisation of energy, and in particular electricity generation, heat and transportation are all critical components of this commitment.
The electricity system was designed to shift power in one direction, from large fossil-fuel (coal and gas) powered generators, typically far away from the population, to homes and businesses. This is now changing dramatically:
Large fossil-fuel generators are being shut down, and the future of Nuclear power is somewhat unclear
Electricity is being produced by renewable generators such a solar panels and wind turbines en masse
Battery storage is being connected to homes and businesses, with the ability to consume or produce electricity
Electric Vehicles (EVs) are becoming more popular, driven by the need to reduce our reliance on oil for transportation. However, EVs use around as much energy as an entire home
Electricity is now flowing in all directions, and there has been a move from tens of producers (centralisation) to tens of thousands of producers (decentralisation).
This amount of change means the future of energy is uncertain and we’re only just starting to think about other challenges looming on the horizon, such as electrification of heating (to help decarbonise heat and gas), which would traditionally involve eye-watering amounts of infrastructure investment.
For the electricity networks to meet these challenges in a cost-effective way, we need to utilise innovative technologies and move towards a smart grid.
Opportunities and Solutions
The transition to a cleaner, smarter and more flexible energy system opens a range of opportunities for energy producers, utilities, businesses, users of energy and the UK in general. The technologies and innovation underpinning the smart grid will enable:
Local generation and consumption
New commercial models, businesses and job creation; there is already a flurry of start-ups forming in the energy space
Greater control over energy bills, through smart meters and smart appliances
Businesses to uncover new revenue streams by providing services from their on-site generation and storage
Increased investment in the UK energy sector and export of smart technology and services
This transition is already underway, but the infrastructure underpinning it needs to adapt.
Local electricity networks in particular need to evolve from their traditional ‘static’ role of delivering electricity, to one where they form the basis of the smart grid and act as a platform for new energy technologies. Part of this new role will be enabling new types of energy markets, which will not only help reduce infrastructure costs, but benefit users of the electricity networks by allowing them to realise new revenue streams and buy and sell clean energy on a highly localised scale.
There is a strong push in the energy industry to put the customer at the centre. What this means is that socially minded start-ups and disruptors are beginning to use data, smart technology and intuitive software to give customers better and faster service; allowing them to chose how they use their energy, when they use it and where it comes from. In fact, the way we buy energy in the future may completely change – instead of buying a certain number of kilowatts, we may just be buying comfort levels in our homes or miles for our EVs.
Incumbents in the industry will need to adapt quickly if they do not want to be overtaken by tech-savvy and innovative players; don’t be surprised if you are buying your energy from Google or Amazon in the near future.
Given the size and pace of change we are experiencing, there is a large amount of uncertainty as to what the future energy system will look like. Driven by the tech and renewables sectors, the energy industry is taking a ‘learn-by-doing’ approach and undertaking a range of innovative projects and trials to minimise this uncertainty by understanding what works and what doesn’t. We need to continue this process going forward; we must ensure we properly understand new challenges, as well as explore emerging opportunities that maximise benefits to customers.
So what does the energy future look like for the average person if one were to look into the crystal ball? It’s impossible to say of course, but a fair guess would be that your home energy usage is being optimised to your comfort levels using Artificial Intelligence, and this AI is in turn trading the electricity you are generating with your solar panels and storing in your home batteries and EV directly with your neighbours over an instantaneous peer-2-peer energy trading platform!