Electricity Companies

For a world primed for decarbonization, Electricity 4.0 is the natural ally

It is true that electricity can be a panacea to carbon-intensive systems and processes, but not in its conventional form. Currently, 60% of all energy produced is wasted; while the production itself is carbon-intensive. Electricity also remains a privilege in remote parts of the MEA. So, it must be re-envisioned, just like how we arrived at Industry 4.0, the evolutionary phase marked by an increase in digitalization.

Before the COVID-19 pandemic, the World Economic Forum revealed [1] that the Middle East and Africa (MEA) are at the frontlines of climate change. Rising sea levels in the Mediterranean coast of Egypt, recurring floods in the Arabian Peninsula and increasing famines and draughts across the region are putting many cities at risk. Following the pandemic, these existing susceptibilities in the regions are generating even greater focus — this time within the sustainability and climate action framework.

Considering energy is responsible for over 80% of global GHG emissions, this sector calls for a much-needed policy re-visit. In MEA, however, the energy equation is skewed towards oil and natural gas due to their widespread availability and related economic dependencies. So, decarbonization runs into systemic challenges. In recent years, owing to the increasing population, rising energy demands and greater awareness, MEA economies are subscribing to the need for decarbonization by way of electrification.

Decarbonization through electrification

As electricity is inherently 3-4X more efficient than other energy sources, its uptake is a welcome development. Globally, we believe the share of electricity in the energy mix will grow from 6% today to at least 40% by 2040. By then, the electricity demand in the MEA is likely to increase three-fold compared to now. This begs the question: How will the required electricity be generated?

This is an important question because, while electrification is a tested-and-proven way of decarbonizing systems that are currently powered by fossil fuels, the production of electricity through thermal power plants runs counterproductive to the core objective of reducing carbon emissions. Currently, thermal power plants are the mainstay of electricity production in MEA. In 2018, they generated more than 1,900 TWh of electricity [2].

As things stand, oil and natural gas reserves are expected to power thermal plants for the foreseeable future. While the contribution of renewable sources such as solar and hydro to electricity production is set to increase by six folds by 2040 globally, there is a pressing need to ensure that the MEA region’s performance is greater than or equal to the global average. But at this stage, the lack of investments, inefficient production processes, and gaps in the distribution value chain are hindering the uptake of renewables.

Harnessing MEA’s renewables strength

In East Africa, hydropower has emerged as the most feasible renewable energy due to geographical factors. In fact, by one estimate, hydropower (including mixed energy plants) constituted almost 78% of the total renewable energy generated in the region in 2019 [3]. It is expected to remain the single largest renewable energy segment for the foreseeable future. Ethiopia, in particular, has all the hallmarks to emerge as the frontrunner in hydropower production due to its nine major rivers and 11 major dams.

On the solar energy front, the potential in MEA, particularly Africa, is colossal. But despite accounting for 40% of the global solar potential, Africa only has 1% of the world’s solar panels. In light of the declining life-cycle costs of panels and batteries, the timing is right to enhance efforts toward harnessing Africa’s untapped solar energy. It is equally important, however, to ensure that the efforts are aligned with priorities such as holistic sustainability and climate action.

Electricity 4.0, not just electricity, is the answer

At Schneider, our phraseology for this much-needed shift is Electricity 4.0. Here’s why.

Electricity 4.0 posits a more electric, more digital world. Additionally, the “zero” in 4.0 symbolizes the need for electricity to be zero waste, zero emissions, and zero carbon. So, in other words, if electrification is evidently the most plausible solution for climate change, then electricity must essentially be free of carbon-intensive production and be accessible to all. We believe in the immense potential at the intersection of electrification and digitalization — something that we have been able to quantify and that has been substantiated by intergovernmental organizations’ studies.

Electricity 4.0: Increasing efficiencies across the value chain

Recently, the International Energy Agency (IEA) released a report [4] stating that MENA can free up more natural gas for exports. The rationale was predicated on the fact that energy-producing economies are utilizing one-fifth of the region’s total gas each year in low-efficiency, gas-fired power plants, which have an average efficiency of 30-35%. By increasing the efficiencies to 50%, energy producers can save natural gas worth USD 150 billion per year at current continental European wholesale prices.

Pioneering several efficiency-driven strategies, Schneider Electric began using EcoStruxure — an IoT-led, plug-and-play, open, interoperable architecture platform — in buildings, data centres, grids, and industries. Across sectors, we have registered up to 80% reduction in engineering costs and time, up to 75% reduction in maintenance costs, and up to 50% reduction in carbon footprint, on average. Likewise, such platforms can also enhance “dispatchability”, which is one of the primary determinants of renewables adoption in MEA.

Dispatchability is paramount because solar, hydro, or wind energy cannot be harnessed on demand. It can only be harnessed when available and stored for future use. The utility thus hinges on storage efficiencies and dispatchability to remote areas. Digitalization of existing systems through IoT, data analytics and automation can enable stakeholders to increase value-chain efficiencies, reduce wastage, and unlock greater savings, and increase revenues.

Innovation-driven economies such as the UAE are pinning their hopes on technologies as they pursue ambitious targets, including the goal to generate 75% of electricity from renewables by 2050. Such actions are well-aligned with the Electricity 4.0 school of thought. At this juncture, the onus is on all stakeholders — governments, the private sector, and intergovernmental organizations — to ensure that policies and regulations are conducive to the re-envisioning of electricity within the net-zero framework. The fact that Saudi Arabia — which produces and consumes the highest electricity in MEA — is spearheading the digitalization and electrification movement through initiatives such as the privatization of power utilities offers much in the way of optimism.

Footnotes

  1. World Economic Forum – How the Middle East is suffering on the front lines of climate change
  2. MIDDLE-EAST AND AFRICA POWER MARKET – GROWTH, TRENDS, COVID-19 IMPACT, AND FORECASTS (2022 – 2027)
  3. EAST AFRICA POWER MARKET – GROWTH, TRENDS, COVID-19 IMPACT, AND FORECASTS (2022 – 2027)
  4. IEA – How producers in the Middle East and North Africa can free up more natural gas for exports

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