How are decarbonisation, digitalisation and decentralisation impacting the energy sector?

We have always called on the energy system to be sustainable from an environmental, economic and service perspective. In other words, we need a cheap, green and reliable energy supply. However, it is a difficult equation to balance: we have succeeded in building reliable and fairly cheap energy systems (including electricity, oil and gas), but they are clearly not green enough.

In this context, the increasing social and political pressure to reduce CO2 emissions has made decarbonisation a main objective for all energy companies. So far, there is no clear consensus on what the most effective measures to apply are. These range from including cap-and-trade or specific taxes, to innovating and developing energy efficiency actions. In the end, the environmental costs of producing CO2 are not clearly assigned to the energy producer and final users.

Dealing with the decarbonisation issue alone is tough but it’s not enough. Two additional factors have been recently included in the current energy trilemma: digitalisation and decentralisation. It is obvious that digital technologies are transforming business at an unprecedented pace and when applied to industry (energy is not an exception) we commonly refer to it as industry 4.0. Therefore, as far as digitalisation is concerned we could talk about Energy 4.0. This newly coinedconcept also includes the final “D” of our trilemma, the decentralised generation. This “3D” view, i.e, Decentralised, Decarbonised and Digitalised, of energy is based on five pillars:

  1. The development of a transition architecture. The move from our current system to a low carbon one (EU objectives for 2030 foresee a CO2 emissions reduction by 40% compared with 1990 levels) must be carried out as smoothly as possible. For example, by the deployment of CCS/CCU
  2. An increasing integration of renewable sources in the grid, as well as the use of different alternative fuels.
  3. Providing flexibility to the system while maintaining its reliability and performance (e.g., by the use of energy storage).
  4. The extensive use of data and analytics to anticipate demand patterns and empower users.
  5. Aggregation of home and corporate distributed generation resources into “virtualised” power plans.

However, these pillars are difficult to put into practice. The transition architecture is not yet clearly defined, renewables are not fully integrated, the required flexibility is not still developed and we are far from exploiting the digital world for a better understanding of uses and effective deployment of virtualised power plants.

The future of the energy system is a one-way road heading to a low-carbon economy. The increased use of technology for making a more decentralised and digitalised scenario a reality is a good opportunity to define the required transition architecture for the energy system.

Ángel Sánchez

President of i-deals & Head of Corporate Venturing at everis.

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement
No 637016.

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