From RenTechs to battery power: how the energy industry will be transformed in 2018
The energy markets will be radically re-drawn with the rise of RenTechs
Customers desire green energy and are committed to the global warming challenge. Large enterprise customers are already building or buying their own solar farms to become 100% green, reduce reliance on energy suppliers and even sell surplus to the grid. Due to the rapidly falling price of renewables, the cost of entry to energy markets is plummeting, falling further in 2018. For example, solar costs are predicted to fall again 59% by 2025 (after 85% improvement from 2009 and 2016). Technology firms, like Amazon and Google, large consumers having already built their own generation facilities to meet their needs are waiting on the sidelines to meet consumers’ energy generation and management needs. Established Utilities invest also a lot in renewables development.
Instead of large-scale fossil fuel plants, established tech firms and start-ups alike will start to enter the industry with renewable technologies. Just as FinTechs have disrupted financial services, in 2018 we will see “RenTechs” (Renewable Energy Techs and Companies) will start to pose a threat to energy firms’ survival in NA. The utilities answer can result in an aggressive renewable development plan, as announced this December by EDF with 30GW solar projects in the 10+ coming years in France.
Consumers will break free from traditional utilities firms with self-powering communities
With the falling cost of renewable technologies as well as storage competitiveness improvements, self-energy production has become accessible to a much broader section of consumers, notably in countries with high residential tariffs. Frustrated with the traditional energy market, individual producers will increasingly organize themselves into energy communities during 2018. For example, Sonnen has created a community of solar power owners, where each can buy and sell energy to each other based on their generation and need. In another instance, Nottingham City Council has set up a non-profit supplier using renewable energy to provide residents with the lowest-cost power possible. With increasing numbers of consumers opting for self-production and local power sources, utilities will see a squeeze in their customer base and need to reassess their cost structure. Communities also take the face of “purchasing together” groups.
Musk will prove batteries' potential for energy storage
2018 will be the year that Elon Musk and other innovators prove batteries have the capability to be instrumental in the energy market of the future. With renewable energy production costs plummeting, having the right power storage will be crucial if it is to replace the majority of fossil fuel production long term. This is where batteries come in, becoming immensely valuable as a method to store energy sourced from renewable technologies. Next year, batteries will start to prove their potential. The future will become tilted towards use of batteries to store self-produced power. Costs will continue decreasing, on track to be below $190/kWh by 2020 and projects will show batteries to be critical for providing long-term energy supply from renewables.
Artificial Intelligence and robotics will start to restore consumer faith in utilities
There is no denying utilities have a terrible reputation when it comes to consumers. The industry has a digital customer experience gap of 71%, the largest of all sectors. Customers are fed up with what’s perceived as high prices and bad service, and will be keen to abandon the traditional suppliers in their droves if they can cheaply self-produce. However, in 2018, artificial intelligence technologies such as chat bots or predictions of downtime / boiler breakdown will start to build trust, better service and transparency. Three quarters of firms using AI have already seen a 10% uplift in sales, 73% think AI can increase customer satisfaction scores and 65% believe it could reduce future customer churn. This technology is a vital lifeline for a beleaguered energy industry, and expect to see adoption rates spike as firms try to keep up with market changes.
Utilities transformation programs will accelerate and start to pay-off
The u2es move (Utilities to Energy Services) and profound transformation started in Germany will be adopted by almost all established players, when entrants go directly to the downstream and services business. We will observe in the coming months the mushrooming of e-Solutions type of units, with accurate resources and Digital as a main lever, these units being focused on chosen priorities. Players expect to reinvent their models, shift their market positions, differentiate from the competition, design new revenue streams at good margins, and leverage their stock-markets value.
Perry Stoneman is the Vice President at Capgemini.
Carbon dioxide removal revenues worth £2bn a year by 2030
Carbon dioxide removal revenues could reach £2bn a year by 2030 in the UK with costs per megatonne totalling up to £400 million, according to the National Infrastructure Commission.
Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades - although costs are uncertain given removal technologies are in their infancy - and revenues could match that of the UK’s water sector by 2050. The Commission’s analysis suggests engineered removals technologies need to have capacity to remove five to ten megatonnes of carbon dioxide no later than 2030, and between 40 and 100 megatonnes by 2050.
The Commission states technologies fit into two categories: extracting carbon dioxide directly out of the air; and bioenergy with carbon capture technology – processing biomass to recapture carbon dioxide absorbed as the fuel grew. In both cases, the captured CO2 is then stored permanently out of the atmosphere, typically under the seabed.
The report sets out how the engineered removal and storage of carbon dioxide offers the most realistic way to mitigate the final slice of emissions expected to remain by the 2040s from sources that don’t currently have a decarbonisation solution, like aviation and agriculture.
It stresses that the potential of these technologies is “not an excuse to delay necessary action elsewhere” and cannot replace efforts to reduce emissions from sectors like road transport or power, where removals would be a more expensive alternative.
The critical role these technologies will play in meeting climate targets means government must rapidly kick start the sector so that it becomes viable by the 2030s, according to the report, which was commissioned by government in November 2020.
Early movement by the UK to develop the expertise and capacity in greenhouse gas removal technologies could create a comparative advantage, with the prospect of other countries needing to procure the knowledge and skills the UK develops.
The Commission recommends that government should support the development of this new sector in the short term with policies that drive delivery of these technologies and create demand through obligations on polluting industries, which will over time enable a competitive market to develop. Robust independent regulation must also be put in place from the start to help build public and investor confidence.
While the burden of these costs could be shared by different parts of industries required to pay for removals or in part shared with government, the report acknowledges that, over the longer term, the aim should be to have polluting sectors pay for removals they need to reach carbon targets.
Polluting industries are likely to pass a proportion of the costs onto consumers. While those with bigger household expenditures will pay more than those on lower incomes, the report underlines that government will need to identify ways of protecting vulnerable consumers and to decide where in relevant industry supply chains the costs should fall.
Chair of the National Infrastructure Commission, Sir John Armitt, said taking steps to clean our air is something we’re going to have to get used to, just as we already manage our wastewater and household refuse.
"While engineered removals will not be everyone’s favourite device in the toolkit, they are there for the hardest jobs. And in the overall project of mitigating our impact on the planet for the sake of generations to come, we need every tool we can find," he said.
“But to get close to having the sector operating where and when we need it to, the government needs to get ahead of the game now. The adaptive approach to market building we recommend will create the best environment for emerging technologies to develop quickly and show their worth, avoiding the need for government to pick winners. We know from the dramatic fall in the cost of renewables that this approach works and we must apply the lessons learned to this novel, but necessary, technology.”
The Intergovernmental Panel on Climate Change and International Energy Agency estimate a global capacity for engineered removals of 2,000 to 16,000 megatonnes of carbon dioxide each year by 2050 will be needed in order to meet global reduction targets.
Yesterday Summit Carbon Solutions received "a strategic investment" from John Deere to advance a major CCUS project (click here). The project will accelerate decarbonisation efforts across the agriculture industry by enabling the production of low carbon ethanol, resulting in the production of more sustainable food, feed, and fuel. Summit Carbon Solutions has partnered with 31 biorefineries across the Midwest United States to capture and permanently sequester their CO2 emissions.
Cory Reed, President, Agriculture & Turf Division of John Deere, said: "Carbon neutral ethanol would have a positive impact on the environment and bolster the long-term sustainability of the agriculture industry. The work Summit Carbon Solutions is doing will be critical in delivering on these goals."
McKinsey highlights a number of CCUS methods which can drive CO2 to net zero:
- Today’s leader: Enhanced oil recovery Among CO2 uses by industry, enhanced oil recovery leads the field. It accounts for around 90 percent of all CO2 usage today
- Cementing in CO2 for the ages New processes could lock up CO2 permanently in concrete, “storing” CO2 in buildings, sidewalks, or anywhere else concrete is used
- Carbon neutral fuel for jets Technically, CO2 could be used to create virtually any type of fuel. Through a chemical reaction, CO2 captured from industry can be combined with hydrogen to create synthetic gasoline, jet fuel, and diesel
- Capturing CO2 from ambient air - anywhere Direct air capture (DAC) could push CO2 emissions into negative territory in a big way
- The biomass-energy cycle: CO2 neutral or even negative Bioenergy with carbon capture and storage relies on nature to remove CO2 from the atmosphere for use elsewhere