Shifting the future of energy into the hands of the consumer
The energy industry is on the cusp of a seismic shift — not simply in terms of the type of energy society will become dependent upon as the century progresses, but who controls it, too.
It could be the biggest transformation in the market since the Industrial Revolution, except this time control won’t necessarily be in the hands of nations and corporations, but of the consumer. Or, as some have termed them, prosumers – people who don’t just consume power but produce it too.
Some experts believe that by using the extraordinary technology that is dominating every aspect of our lives, they will soon create, use and conserve energy in a uniquely personalized manner.
“The energy industry is on the cusp of a seismic shift.”
In such a market, it’s hoped that consumers will not feel daunted by ever-increasing charges and will benefit from dramatically increased competition, emerging nations will be able to capitalize on the tech revolution — and corporations will form new partnerships and make grand investments that will be felt for generations to come.
The comparison with the Industrial Revolution is apt – the grid system that the planet relies upon has its expensive and often inefficient roots in the 19th century models of buying, delivering, pricing and selling.
But technology has the power to change that – some might say it has to.
Seeing the light
Take lighting as one example. It consumes about 19% of the world’s electric power, more than all our nuclear and hydroelectric plants can produce together (which is about 15% in total). As billions more demand and get access to lighting, billions will have to be spent on new power plants or access will need to be restricted so that entire communities remain in darkness.
Unless software, analytics and the Internet help to recalibrate the system. For instance, at the moment people can’t control energy consumption because it’s not worth it and nor is it practical. We all know switching off lights is good, but we don’t really know how much it saves. New software will profoundly alter that – data will not just record people’s behavior it will change it too.
The problem with change is that it can take a while and we swiftly become disillusioned with promises that are made. Gas, wind and solar power, electric cars and LED systems have existed for so long that many have ceased to believe in them.
“ The “Internet of things” will help to provide the fuel for the planet to live in a more sustainable manner. ”
But technological innovations of the past decade have transformed their efficacy and they’ve been joined by other, even smarter forms of renewables such as smart grids, electro-chromic windows (in which incoming light, and thus heat, can be controlled and even stored) and nanowire batteries, together with biofuels, fracking and, perhaps, fourth-generation nuclear reactors which, it is hoped, will produce more hydrogen-based energy.
While it’s perilous to predict what will and won’t reap dividends – just eight years ago not even the finest minds in America had an inkling of the fracking revolution – the pace of change is so fast that watching and waiting from the sidelines may leave many struggling to catch up. The tech-fueled transformations of the media and retail industries are proof of that.
Thus, the major energy companies have already shifted their focus to capitalize on these changes and ensure they lead – in partnership with smaller, more tech-centric collaborators – the renewable market too.
Businesses such as BP, Shell, Exxon and others have invested billions in research and infrastructure in a bid to turn into reality what were, until recently, fanciful futuristic scenarios.
These companies understand that they now operate in a world in which strategies designed to capitalize on new technologies will need to be developed before consumers take them for granted. Collaborations between East and West, emerging and developed markets, established business leaders with smaller, more agile tech firms will be far more prevalent.
For instance, disruptive technologies will see traditional utility companies in competition with retailers, tech outfits, telecom owners and even media companies to control the infrastructure of a powered future at the mercy of the consumer. It’s not surprising that Google recently invested $3.2 billion in buying Nest Labs, a start-up that makes smart domestic thermostats and smoke alarms.
Every home a power plant?
Typical homes could be turned into miniature power plants, producing and storing electricity. Equipped with tripled-glazed windows, energy-efficient lighting, sensor-windows that can control sunlight, solar panels, mini-turbines, water monitors and heat pumps.
“ Typical homes could be turned into miniature power plants, producing and storing electricity. ”
So utility companies, perhaps in partnership with financial institutions, will need to encourage consumers by helping them to install these products, and then offering discounts for using energy outside of peak times.
A new home equipped with such technology could, by 2020, consume 90% less energy. Thus, selling energy may no longer be profitable in itself; providing infrastructure (such as insulation fabrics) and personalized billing strategies will be.
Souped up solar panels
Solar power is an especially interesting renewable sector because technology such as gas turbines and batteries are beginning to counter the effects of intermittency. Martha Broad, Executive Director at MIT energy initiative, says: “Some consumers install solar panels on their homes and the power is then fed into the grid where it becomes part of the renewable energy pool consumers can choose to receive.
Our engineers are also finding ways to deposit solar cells on ordinary materials, making them lightweight, flexible and less expensive,” Broad adds. “For example, researchers have developed a way to make the first solar cell that produces two electrons for every incoming photon of sunlight thereby wasting less heat and generating twice as much energy than conventional solar cells.”
China may have a transformative shale boom (it’s predicted to own the world’s largest shale gas reserves, though access to water may be a serious issue).
Electric cars may be cheaper than petrol-fueled, and the oil price may drop significantly – perhaps by as much as 70% – if there’s a reliance on renewable resources or through the abundance of shale and tight oil reserves. America, for instance, is predicted to be the world’s top oil producer by the end of 2015 and will be close to energy self-sufficiency within the next two decades.
The power of data
While much is unknowable, the Internet of things and mobile technology will make “knowing” one of the energy industry’s most valuable commodities. Enormous amounts of data will enable the consumer to know in fine detail what energy they’ll need, what it will cost — and how much they can create and store.
Companies will know their customers more intimately than ever and can tailor personalized packages to instil loyalty, enabled by companies such as Autogrid – a World Economic Forum Technology Pioneer.
Autogrid’s software gives utility companies and others visibility and control over how much power supply is needed in specific areas and at specific times. Instead of a company overestimating that it needs to supply 1GW of power for a city, the Autogrid software can tell it that it only really needs 927 MW, a 7% reduction.
Moreover, if they offer pricing incentives to 637,521 customers that have in the past accepted pricing premiums to turn down that power, they can lower the overall power they need for the next two hours to 700 MW, a 30% reduction.
“The Internet will enable the consumer to know in fine detail what energy they’ll need, what it will cost — and how much they can create and store. ”
“But by measuring and controlling the grid in such a manner,” Narayan adds, “we believe the greatest impact of software like ours will be in the developing world. For instance, an estimated 1.6 billion people still read by kerosene lamps – they don’t have electric lights because it has been too costly to install a grid.”
“We make the grid more economical and, once some sort of microgrid or other infrastructure is in place, we help to ensure that you only buy as much power as you need,” she says.
Regardless of the changes in the business model, technology will continue to make renewable sources cheaper to use and install. Lower prices and lower emissions accelerate decarbonization and power available to a vastly increased audience will compel energy companies to adapt to new technologies and the changing preferences of consumers.
This article first appeared on Sept. 8, 2014 on the World Economic Forum and was republished with permission.