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Energy is at the heart of our civilization. As far back in history as we can trace, major economic developments have emerged each time new sources of energy were discovered. A few striking examples: the first industrial revolution in the early 19th century was propelled by steam and coal. The second industrial revolution at the dawn of the 20th century saw the rise of electricity and oil. On both occasions, major opportunities arose to do things better and faster, and more importantly to do new things that were unimaginable before.
We live today in an energy system which was discovered during the second industrial revolution. This energy system consumes around 150,000TWh of energy yearly, with 80% of it coming from fossil fuels (oil, natural gas, coal). A century ago, this was 10 times less, an indication of the tremendous economic developments that this new energy system has enabled. Today, a large chunk (40%) of this “primary” energy is used to produce electricity, the rest being transformed and refined.
A system that is not sustainable
This energy system shows major limitations as the world’s development accelerates at an ever-faster pace. First, it is heavily carbonized. Today, energy represents around 80% of the total CO2 emissions, an issue which has taken center-stage in recent years. It also creates significant dependencies, as fossil fuel reserves are not equally distributed across the globe. Finally, it is massively inefficient. 60% of the fossil fuels extracted are wasted, with half of it being lost in the production of electricity, and another half from the actual use of these fuels in inefficient combustion engines or heating systems.
These issues continue to create major imbalances and risks going forward. But, they also present a significant opportunity for change.
3 reasons the future is all electric
The solution to tackling these increasing challenges can be broken into two steps. First, decarbonize the power sector with renewable energies. Second, electrify massively the end-uses of energy. There are several advantages to this new all-electric renewable-based energy paradigm:
- Renewable energies will trigger the power sector decarbonization. In addition, electrification of end-use will enable migrating other traditional fossil-based energy uses to clean electricity.
- Renewable energies (wind and solar) are obviously distributed across the globe, even though not completely equally. Accessible “reserves” correspond to 3 times the total of fossil fuels retrievable on the planet… and they renew daily.
- The migration towards an all-electric renewable based system could nearly double the overall energy system efficiency, through the combination of a power sector relying on renewable energies and electrification of major uses of alternative energies (transportation, heating, etc. – traditionally 2 to 5 times less efficient depending on the application).
A new energy paradigm for the 21st century
That’s not all. The key underlying question is whether this transition will lead to a more economical energy system, which accelerates economic development to the next level.
Numerous studies have shown that the transition to a renewable-based energy system would not significantly increase the overall current capital expenses dedicated to energy. In addition, renewable-based electricity production has very low operating expenses (operation, maintenance and fuel costs), typically ranging 2 to 4 times lower than traditional power technologies.
When traditional fossil-fuels based energy uses are electrified, the efficiency gain proves also to be net worth.
This new all-electric renewable-based energy paradigm therefore has the potential to make energy more accessible – fostering economic development, as well as new uses of energy which were unimaginable before. Let’s pick just one example – the accelerated development of digital technologies which are creating a new surge for energy demand, as discussed in one of my recent blogs.
A growing consensus
Many large organizations in the world are today converging towards this probable future. BNEF has estimated that by 2040 50% of global power capacity could already be of renewable sources, while electric vehicles (EVs) could represent over 50% of total annual car sales. The Energy Transition Commission has estimated that power decarbonization combined with electrification could lead to a 25% reduction in CO2 emissions by 2040. Shell, has recently presented a likely future (“Sky” scenario) where net CO2 emissions could be zeroed by 2070, with electricity (80% renewable) to represent close to 60% of the total energy mix (vs 20% today).
Many companies around the world have acknowledged this and are taking the necessary steps to be ahead on the curve. One example is Hewlett-Packard which chose Schneider Electric to help them reach their goal of reducing greenhouse gas emissions by 40% from 2010 to 2020. HP now can power 100% of its Texas-based data center operations with renewable energy.
A complex transition
The future is thus undoubtedly electric. The transition to it remains however a key topic of our generation. Surprisingly enough, the greatest challenge is not so much about supply-side transformation, even though this is what most headlines today refer to.
Renewable energies are by nature distributed, mixed with local consumption. Electrification also significantly changes the way energy is used. This new all-electric renewable-based energy system is undergoing a “deep” revolution on where and how energy is being consumed, and to which extent it can get self-powered locally. Take the example of Fairfield, Connecticut. The town uses a microgrid with the ability to “island” or disconnect itself from the central grid if utility power is lost in an emergency. This gives the coastal town 120% of its peak demand power during an energy crisis or extreme weather event. Demand-side is the new frontier where the transition will accelerate or stumble.
