One thing that I now have more time to do is to step back and think about some of longer term trends that might affect the energy industry. This time I have been pondering the future of electricity generation and I have come up with 3Ds which I think will drive investment over the long term.
DECARBONISATION
The science that underpins climate change is now well established and the fact that man made emissions of carbon, mainly from fossil fuel burning, are one of the principal causes is becoming increasingly accepted. This means there is growing conflict between maximising the production of energy and minimising climate change. For example, the UKs Energy Reserach Centre says that "a third of oil reserves, half of gas reserves and over 80% of current coal reserves globally should remain in the ground and not be used before 2050 if global warming is to stay below the 2 degreeC target agreed by policy makers". This potential conflict is starting to have an impact through the policies of major investment firms. This pressure is being applied initially to resource owning companies. As well as resource owners this will also start to apply to resource users and electricity producers will be in the front line.
We will, therefore, need to largely decarbonise electricity supply over the coming decades and this has been the focus of a number of disjointed policy instruments. However, electricity has some unique features as a kWh is the same the world. A gramme of carbon emissions is the same the world over. Taking these two factors means that the carbon intensity of generation (ie grammes of CO2 per kWh) is comparable over both time and space. That gives us a foundation for policy. Every country and every large geneator should halve their carbon intensity every ten years. In the UK it's typically around 500g now so by 2025 it would be 250g, by 2035 it would be 125g and so on. This is technology neutral and would allow nuclear, renewables and carbon capture to compete. It can be used as the basis of a global deal in the electricity sector. I have called this idea, modestly, MARCHANTS LAW.
The key point is that we are moving from high carbon to low or no carbon generation.
DECENTRALISED OR DISTRIBUTED
That past investment also tended to be on an industrial scale, with large utilities exploiting economies of scale by building ever larger power plants. We created the era of 'big iron' with coal sets reaching 500MW by the 1960s and now, in China, units of 900MW are common. Nuclear power stations have also got bigger and bigger (and more and more expensive but that's another story) with the latest targeting 1600MW. These big stations also created the need for a big transmission grid. As a consequence most people became disconnected, physiologically, from their source of power when they became physically connected to the grid. I think this is one of the reasons why we waste so much energy; we are remote from its production.
In the future, and increasingly in the present, we are reconnecting with sources of power generation. We are seeing the emergence of farm scale anaerobic digestors, community owned and scaled wind farms and there are nearly a million solar roofs in the UK already. When we own the means of production we start to care about our usage. When the power is produced close to demand it improves security of supply. These new technologies are generally zero carbon and are displacing high carbon, grid based fossil generation. Distributed energy is making a contribution to all three aspects of the energy trilemna.
It is not just in the developed world that decentralised and distributed energy is making a difference. In Africa the availability of solar lamps is transforming the lives of the 500 million people without access to grid power. It is improving health, increasing education levels, eliminating carbon emissions and reducing poverty. It is rapidly becoming a disruptive force for good.
We are moving from 'big iron' to 'small silicon'.
DIGITAL
As well as being big and dirty generation used to be dumb. There may have been smart controls in the station itself and in the centralised grid despatch centre but the relationship between the two was and generally still is, definitely analogue. I suspect despatch orders are now sent by email but only a few years ago it was still all done by fax! Whilst some generation was load following this usually applied to a few large coal plants and other plant were either on or off. Processes and systems were designed in the 1960s and applied largely unchanged. It also meant that in times of stress generation plant just tripped off the system to protect itself. Indeed, the cause of many large scale grid outages around the world has been put down to exactly this response.
The expontential advances in technology over the last fifty years or so are only starting to be felt in the generation industry. In the next few years we will see augmented technology being increasingly used in system control and plant despatch, possibly even extending to full scale artificial intelligent systems. This means that as we move from hundreds of large generation sets to thousands and thousands the system will cope faster and better than it does now and will be self healing. The tremendous reduction in the cost of sensors and data storage combined with the advances in data analytics will change the processes used to operate and maintain the stations themselves. For example, with the Internet of things leading to billions of connected devices there will be an order of magnitude increase in pieces of kit in a power station being monitored real time leading to the elimation of unexpected plant failures and simple time based maintenance. Nanotechology, addative printing and robotics will change how plant is built and maintained, what ever size it is. Finally in the next ten years one of the important and productive areas of research and innovation will be energy storage; be it batteries, phase change materials, electromechanical devices or some form of storage I haven't even heard of.
We are at the start of a revolutionary move from an analogue to a digital generation sector.
DISRUPTIVE
The three themes of decarbonisation, decentralisation and digitisation will work together to completely transform the generation sector from the predictable, ponderous and polluting one we have now, to decarbonised, decentralised and digital one. This change will be as radical as the shift from fixed line telephones to smart phones. A digital control system with enhanced storage will allow the integration of thousands of small, clean power stations to work together for the common good. The transition will be disruptive and leave some behind and create winners out of others. The only thing that is inevitable is change itself.
