Menu

Real innovation is (not) boring Pt I - the energy and utilities market Joren Lemiegre - June 9, 2021

Sustainable Innovation Wind Mill Under Cloudy Skies 152Be44340A9866726A8D5B5A126Ad50

The innovation ecosystem is thriving like never before. Over the past decade, AI, big data, IOT and 4G have taken the speed of innovation to unparalleled hights. What people see are the developments in self-driving car tech, robotics, mobile apps, and customer experience. Driven and marketed by innovation-leaders like Elon Musk, Jack Ma and Jeff Bezos, these developments let us dream about the future.

Without denying the importance of these people and their companies, the innovations they represent are just the tip of the iceberg and they are mostly aimed at consumers. While sending what’s basically a modified grain silo with rocket engines into space, is quite entertaining, it won’t impact our lives very much -yet. That’s why I think it’s time to take a look at the industries that will change the most over the next decade and will have the biggest impact on our lives.

Energy never dies. It just changes form.

Talking about impacted industries, the energy and utilities market is a fascinating industry to kickstart my “boring innovation series”. The EU’s goal to reach net-zero (carbon emissions) by 2050 will require fundamental changes and it’s for a reason we’re including a session about the world’s resources in our Mission NXT program.

A visible short-term change with a major impact is the transition from ICE (internal combustion engine) cars to electric cars. Between today and 2030, the latter will slowly become mainstream. The real innovation, however, is going to happen at the generation, transmission, and storage side of our energy industry.

Grid balance sparks joy

For the past 50 years or so, the energy market was rather static. Depending on the country you lived in, electricity was either generated by gas, coal, nuclear fission (the splitting of a large atomic nucleus into smaller nuclei, not to be confused with nuclear fusion) or anything else that could be burned. A working power grid just meant building a power plant, connect it to the grid, and make sure demand and supply were in balance (an extreme simplification of course).

Today, grid operators are being confronted with a decentralized and unpredictable production of renewable energy, taking the balancing of that grid to an entirely new level. As boring as that sounds, it involves a lot of engineering and new technologies to make it happen.

As a result of this fluctuating production, energy providers are regularly impacted by negative power prices (when a high and inflexible power generation appears simultaneously with low electricity demand). In fact, the electricity market might be one of the few markets where supply and demand have such an effect on pricing in real-time. On a windy day with lots of sun, this can lead to market players being paid to “buy” excess electricity.

This movement alone is currently shaping a completely new market dynamic. There is a lot of money to be made in helping the grid operator to balance the grid. It can be as simple as a large provider of cooled storage lowering the temperature in its freezers when energy is cheap or even free (thus increasing energy usage) and turning up the temperature (a bit) when energy is expensive (thus decreasing energy usage).

What do you have in storage?

The company in my example is offering a primitive way of energy storage and as such, can play a crucial role in the energy ecosystem. For this to work however, the systems in place need to be able to take decisions based on outside temperature, market insights and food safety. As such combining AI, IOT and economics. Who said the energy market is boring?

Looking at energy storage in a broader way, innovation there is happening at light speed as well. Hundreds of companies, universities and governmental organizations are developing new battery types (flow-batteries, solid-state batteries, etc.). Sometimes it’s as “simple” as refining existing chemistries or finding alternatives that might do the same as a battery, like moving heavy objects up a hill when there is an excess of electricity and let them ride down to re-generate that electricity.

Slowly, these technologies are entering the market. In Australia for example, the French renewable energy provider Neoen installed a giant a battery pack to balance the grid that paid for itself after about two years’ time.

In addition to “traditional” battery storage, a lot of money is being put in hydrogen generation and storage in the EU as well. Whether this will be a viable business model with battery prices dropping year after year remains to be seen. Hydrogen for shipping, steel production and other industrial processes requiring a lot of heat however, will definitely be a driver for future growth.

Let there be light

On the generation-side of electricity, fantastic stuff is happening as well. (Offshore) Wind turbines are becoming larger and more efficient by the year. In France, the first large-scale fusion-reactor is shaping up and might produce its first plasma in 2025. At the same time, solar is being added to the grid at an unprecedented rate and as such, South Australia, for the first time ever, ran for 100% on solar energy only for more than one hour back in October 2021.

As far as renewable energy goes, here too it’s changing the game entirely. According to a study from the International Renewable Agency, many new renewable energy projects are now cheaper than even the cheapest coal-fired power plants. As such, driving these players out of the market. In the end, no traditional power plant might be able to compete with renewables without subsidies. After all, the incremental cost of a wind turbine to generate more electricity is close to zero.

Thunderstruck

For the sake of readability, this blog post does not talk about energy transmission, alternative energy (re)sources and the engineering necessary to facilitate this shift.

As an organization however, it is important to realize the changes that are happening in in the energy market. After all, with the right insights, a lot of organizations can profit from the big energy shift that is currently going on. At the same time, not being aware of this shift can cause a lot of harm to both the environment and your bottom line.

Play time is over, it is no longer the greenies preaching change. Today we are talking economics and the odds are not in your favour if you’re still betting on fossil fuels.

Nexxworks Portraits 33
Joren Lemiegre

Joren Lemiegre is one of our content champions working on bootcamps and tours. He's a hands-on marketeer in love with technology and innovation, always looking for bright ideas...