Not long ago, Capgemini analytical company released its annual review of global energy markets. The research detected growing energy consumption in China, decreasing cost of renewable energy and other megatrends that we have seen in the past several years. The energy sector in general is characterized by megatrends that do not require annual measurement. But the changes are already evident. Below are the three key tendencies for the near future.
Paradigm shift
For a long time, the energy sector followed the model of infinite capacity growth. Power plants were growing bigger and turbine designers were pushing for new records. Large facilities do have undeniable advantages: they are easier to control than small facilities; you can also save money on the scale – for example, by buying equipment in bulk.
At the same time, the energy sector is actively eyeing up a concept of lean production that prioritizes efficiency. From the “lean” perspective, using giant turbines and centralizing capacity at major production facilities is not always an efficient strategy – at least not for consumers.
The larger the distance from generation to consumption, the higher the losses. Decentralizing energy grids would help to reduce these losses. Huge facilities could be replaced with a distributed network of local power plants that transform solar and wind power, as well as fuel-cell generators.
Decentralization in energy is a megatrend stimulated by several factors:
- The cost of renewable energy production is decreasing (renewable sources are an important component of distributed grids);
- There is a new technology for efficient management of distributed grids;
- Decentralized systems are in some cases more efficient than centralized systems – for example, in areas with low population density.
One form of decentralization is microgrids. It is a local system with its own generators that does not need to be connected to the general energy grid. Microgrid projects have existed in the industry for several years now and their number will be increasing. For example, Finland plans to launch its largest industrial microgrid this year. Over 1,500 solar panels will supply energy to a retailer’s distribution center that covers the area of ten football fields.
Therefore, the trend is to replace upsizing with decentralization while developing distributed network management technology.
Networks get “smarter” day by day
The main trends in the energy sector are always more or less associated with transitioning to the next wave of innovation. The industry is now closely following the developments and cases in several areas at once.
Artificial intelligence
AI systems are already being used in power plants. One of the areas of their application is predictive analytics. For example, at an energy center of the Florida Power & Light (FPL) Company, predictive analytics, based on machine learning models, identified unusual patterns in the functioning of the combustion turbines in the plant faster than specialists. Due to this, an inevitable downtime was avoided by eliminating the malfunction.
AI systems also help manage electrical grids. A few years ago, a potential deal to apply Google DeepMind cloud technology to optimize the UK’s power grid was widely discussed. The algorithm analyzes weather forecasts and search queries on the Internet to predict electricity demand surges. This helps suppliers manage network capacity to balance supply and demand.
Artificial intelligence is an important tool for decentralized networks. For example, the AutoGrid platform algorithms analyze data from multiple sources and help make optimal decisions about energy distribution.
Internet of Things (IoT)
AI platforms often source data from smart sensors and IoT devices — autonomous devices capable of connecting to the Internet and sharing data. PwC estimates the economic effect of introducing IoT into the Russian electric power industry to 2025 at about RUR 532 bln ($8.5 bln). This result can be achieved due to the value of the data entered into the network.
Information from smart devices helps diagnose problems and optimize power consumption. For example, using a network of more than 100 sensors, a power plant in Whitegate, Ireland, has built a system of continuous monitoring and diagnosis of equipment. Thanks to this, engineers always get up-to-date data on the utility’s status.
Blockchain
Blockchain technology appears to have a promising future in distributed energy grids. One of the examples of the technology application is a microgrid pilot project in Brooklyn, NY. Previously, local residents who had installed solar panels could sell excess energy to utility companies, while now they can choose to sell it directly to their neighbors using a blockchain platform that documents all transactions between residents. This allows excluding utilities from the supply chain, as well as assessing the grid load, and, in a long run, automating the energy distribution.
These AI technologies – IoT and blockchain – have common intersection points in the energy field. The major trend for the immediate future is growing investments in this sector as well as emerging commercial systems that will follow the megatrend towards decentralization.
Consumers’ increasing role in energy distribution
Another trend – which is the result of the previous two – is the sector ceasing to be limited only to major producers. Electric energy consumers are receiving greater impetus to actively engage in its production and distribution.
With an opportunity for purchasing electric energy from a neighbor, energy storage systems are becoming more affordable; some countries even grant subsidies for installing solar panels on residential building roofs. This leads to behavior change in citizens, who become more willing to create new microgrid networks. People who are switching to the new model are called prosumers – those who both consume and produce a product.
Major energy companies still preserve their role in such networks. They are actively embedding into these systems and taking part in creating the “infrastructure of the future”. One such example is a startup which was spun out of the European company Vattenfall and developed the Dutch peer-to-peer energy exchange platform Powerpeers. Other energy companies are also investing in similar solutions and thus taking their place in the developing prosumer market.
The energy industry’s main megatrend is the policy of transparency and efficiency. This is the aim of both individual companies and entire countries, which are actively investing in this area and setting a global trend. New technologies are infiltrating the sector, with new consumer behavioral patterns – and this is what will possibly lead to global changes in the industry as early as this year.