The energy and sustainability sectors experienced more rapid change from 2010 to 2020 than they have realized in the previous 50 years. In the new decade, this global transformation shows no signs of slowing—despite the COVID-19 crisis. Companies are moving faster, and in more innovative ways than ever before to address their own emissions and those of their entire value chain. To many, 2020 is a tipping point for climate action; strategies that were once considered cutting edge are becoming foundational. 2030 is the next big milestone that has many asking what progress, disruptions and opportunities can companies expect in the coming 10 years and beyond?
In this blog, Dominic Barbato, Director of Strategy at Schneider Electric Energy & Sustainability Services, paints a picture of what the coming decade may hold for corporate energy and sustainability.
Here’s what he envisions:
The emergence of an identity economy
In the late 1990’s, authors at the Harvard Business Review introduced the concept of an experience economy, formed by the progression of economic value from the extraction of commodities to the making of goods to the deliverance of services to the staging of experiences. This new economic model would reshape the way companies serve evolving customer preferences and find a competitive edge.
The evidence of the experience economy exists in many facets of how businesses operate today— from the use of social media by influencer-inspired brands to the way phones have become essential daily mobile devices. But the economic evolution hasn’t stopped; it is entering a new phase: the identity economy.
Incoming generations of consumers and employees increasingly place value on how their associations with a company’s brand impact their identity. To highlight just a few examples, leading companies globally entice high caliber talent with their commitments to the environment, others market products to consumers by emphasizing fair trade practices, use of repurposed fabrics, compostable packaging, or other similar attributes. Some even articulate how higher prices for certain goods competing against lower priced substitutes contribute to the local community, more sustainable land use, and even traceability of inputs into finished products (think: farm-to-fork).
While there are many reasons to pursue such strategies and messaging, individuals want to interface with organizations that share their ethos and strengthen their personal brand or identity. They are influenced by, buy from, and align with brands not only based on the goods and services that brand produces, but also on that company’s legacy of good. The identity economy is characterized by companies that not only create experiences, but also embrace principles, such as sustainability and transparency, as core pillars of their business.
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Sustainability is one of, if not the most important disruption that will define this coming decade. In the identity economy, energy and sustainability initiatives will contribute to and accelerate business profitability, strategic direction, risk and financial management, and continuity. With COVID-19 causing a downturn in the ‘gig economy’, there is a gap that will be filled coming out of this disruption by the consumption patterns of young consumers. In the next 10 years, companies will need to take decisive actions that deliver upon the market-disrupting sustainability demands of their shareholders, customers, boards, C-suite, and employees, among others, to seize the opportunities presented by this ever-changing world.
Reimagining the energy grid for a sustainable future
The grid is transforming in ways that will challenge conventional energy management. Chief among these is that renewable generation and distributed energy resources (DERs) will soon overtake traditional fossil fuel-fired generation. In most global markets, renewable energy is already beginning to rival, or has surpassed, even the cheapest fossil fuel-generated sources on price.
As the price continues to drop, cheap renewable energy will fundamentally reshape the electricity system. Bloomberg New Energy Finance believes that wind and solar will supply 50% of the world’s electricity by 2050. And once battery storage becomes more cost effective, it will revolutionize the potential of these renewable sources, helping wind and solar reach 80% penetration in some markets.
Although most large-scale energy storage options are not yet commercially viable, it would be shortsighted to assume commercial viability will not improve dramatically by 2030, whether as a result of breakthrough innovations or implied learning rates. By mitigating the intermittency and baseload issues that renewable power sources face, storage will help remove the barriers that have historically prevented greater adoption of wind and solar resources.
Microgrids show great promise in this new ecosystem and are a perfect example of a fringe technology that may easily become a foundational tool for building resilient operations in the next decade. By connecting a combination of clean technologies, microgrids help organizations operate autonomously from the traditional grid and integrate renewable sources at an even greater scale. One of the great values of microgrid technologies is that they can allow organizations to operate independently of the electricity grid—a future-proofing strategy to manage disruptions in energy supply caused by extreme weather events, or, as we recently saw, pandemics.
Autonomous resources will drive the growth of the MeshGrid™ Ecosystem
The way energy is managed, monitored, and flows is also changing. The grid is moving away from the historic linear system of generation-to-transmission-to-distribution-to-end use, to a more clustered and decentralized system, often described as peer-to- peer. The proliferation of renewables and other DERs has begun to test many of the long-standing assumptions underpinning today’s power systems and is driving innovation, as prosumers (producing-consumers) seek to monetize the flexibility of their DERs using bi-directional power flows.
In the future, countless DERs of all sizes and varieties will create new market opportunities for prosumers to optimize their energy resources. As an example, the electric car sitting in your garage can act as a DER—downloading energy when there is a grid surplus or uploading spare electricity back to the grid when there is a shortage—and in the process, potentially reducing charging costs.
Today, the term “microgrid” typically applies to a specific set of onsite DERs that can be orchestrated in a unified fashion and islanded from the broader grid. But from a theoretical perspective, the term microgrid is an arbitrary ringfence. In theory, any electrically connected asset with onboard communications and computational capability could respond to a command signal in a way that could support the overall operation, balance, and cost equation of the grid ecosystem.
This level of interconnection may sound futuristic, but it is at the very heart of the IoT revolution that is driving innovation in virtually every global industry. Thanks to low-cost, communications-enabled microchips embedded in everything from home appliances to electric vehicles to smart light bulbs, the ability to create a response in any number of highly-distributed assets exists today. With grid operators already offering incentives to control smart thermostats, how much harder is it to imagine a grid control signal being sent to a smart light bulb in a home?
In times of uncertainty, looking to the future of energy and sustainability instills a sense of hope and purpose to do better. That sense of hope and purpose for tomorrow can revolutionize the way business operates today, and in a manner that benefits both the environment and the bottom line. As organizations reassess their strategies coming out of the COVID-19 pandemic, they should recognize the pending recovery for what it is: a unique opportunity to thrive in the identity economy by assessing what future generations value and operating in a way that enables a sustainable future, in every sense of the term.
Hear Bill Brewer, VP of Global Supply and Sustainability Operations at Schneider Electric, share insights from more than 260 energy and sustainability professionals and discuss what progress, disruptions, and opportunities companies can expect in the coming decade in our recent webinar: What 2020 & Beyond Holds for Energy & Sustainability.