The rapid reshaping of our energy sector is creating opportunities aplenty for UK businesses
12 October 2017
How electricity powers the UK is changing at a pace not seen since the dawn of the Industrial Revolution. Back then, steam power enabled an eruption of industrial activity and innovation that eventually led to energy access for all, but at the expense of unsustainable levels of resource depletion and pollution. Today, it is much more bytes of data than bits of coal that are driving change, as digital innovations pave the way for user-led energy efficiency and society sits on the crest of a low-carbon energy revolution.
This “digitisation” of the UK energy system is working in tandem with democratisation, decentralisation and decarbonisation to drive what I like to consider the “4D energy transition”. And opportunities await any savvy business out there that understands how these different trends are converging to reshape the energy market.
The speed of change has taken me by surprise, and I am not alone. The industry’s chronic under-estimation of the uptake in renewables, for example, has been striking. In 2002, the International Energy Agency forecast that by 2020 the amount of solar power installed globally would double to 10GW of generation capacity. Yet the UK alone exceeded this projection as early as 2016 following the installation of 850,000 decentralised micro-power stations. Worldwide, capacity has grown to 227GW, driven by the desirability of solar and plummeting costs.
Then there’s the democratisation factor – power from the people. Individuals the breadth of Britain are rallying in groups, and often with the support of businesses, to set up community energy projects and seize control of their energy needs. One scheme in the Welsh town of Bethesda, for example, is seeing residents and local firms regularly trading surpluses from their renewable energy projects at lower prices than that of the major utility companies. At Forum for the Future, we are building an online platform to enable businesses to match up with community energy groups to develop renewables on their sites.
Advances in digital control systems are empowering businesses to manage their energy use like never before, and I believe this is now the sector’s biggest driver of change. The Living Grid initiative, for example, enables participating members to save money by powering down energy-intensive processes when national power demand spikes, and thereby reducing the need for so many polluting gas-fired power stations. And this is just the tip of the iceberg. Nicola Shaw, Executive Director at National Grid, believes that as much as 50 per cent of demand could be “time shifted”, enabling much more wind and solar sources of power onto the grid than was ever thought possible.
Lastly, there’s decarbonisation. The story here is of energy economics swinging rapidly in favour of zero-carbon technologies, as digitisation, democratisation and decentralisation come together with production cost drops to make the shift towards renewables unstoppable. The days of clean tech being the costly but moral choice are over.
The critical question now is, with the energy system estimated as being responsible for 65 per cent of global warming, how quickly can this transformation deliver? Meeting all of the national commitments laid out in the Paris Agreement would limit warming to 2.7°C this century, which is a big improvement on the 3.4°C we are otherwise headed for, but would still have a profoundly detrimental impact to business and society as a whole.
So we need stronger commitments still if the overarching Paris target of keeping warming to “well below 2°C” is to be reached. The strong response to the widely anticipated US federal bailout from US states and cities, the EU, China, India and others was therefore a hopeful sign that this is still possible.
While innovators and the market are now in the driving seat, the rate of progress will therefore be in part dependent on governmental engagement, as well as strong business leadership, with pioneering companies pushing the understanding of what is possible.
For the first time in our history, any UK business can take control of its energy to reduce costs and link with local communities and customers. Every company can be an energy company of the future, and I am hugely excited about that.
Will Dawson is Head of Energy, Forum for the Future