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Energy is a hot topic right now; several European countries are pledging to ban the sale of Internal Combustion Engine (ICE) vehicles in favour of Electric Vehicles (EV’s) and most of the developed World has pledged to replace the energy provided by fossils fuels with zero greenhouse gas emitting sources as a part of the Paris agreement. EasyJet has even hinted the introduction of electric planes within a decade. In the coverage of this subject, the terms electricity and energy are often used interchangeably. This can lead to confusion and can muddy the waters of an already muddy topic, rife with public misconception. So what is the difference, why is it important to get it right and what are the challenges underpinning this misunderstanding?
Energy describes the work and heat available from all energy carriers, from the point of supply to consumption; whereas electricity is only one of these carriers. The energy carriers which supply the world today are predominantly: fossil fuels, biofuels, nuclear fuels, the wind and solar radiation. On the demand side we still use fossil fuels as a direct carrier of energy e.g. gas central heating and ICE vehicles but we also consume energy carried by electricity.
So why is this distinction important? Presently only a small fraction of the energy supplied and consumed worldwide is carried by electricity, approximately 11% and 20% respectively in the UK (assuming that hydro, wind, nuclear and solar energy are converted to electricity at the point of supply) whereas the majority of the energy supply and demand is carried by fossil fuels as shown in the figures below. Looking at these statistics in the context of the targets discussed in the introduction suggests the energy sector will need a major overhaul in the coming years.
Significant investment will be required in electricity generation and distribution infrastructure
As the demand for electricity and pressure to move away from fossil fuels increases, so will the requirement for additional electricity generating capacity (nuclear, wind and solar) and transmission infrastructure. For example, if the UK is to meet its target of phasing out ICE vehicles in 2040 then it may have to more than double its electricity generation capacity, including the electricity generated from fossil fuels, in the space of a few decades.
Additionally, the reliability and inertia of the traditional fossil fuel burning power plant will be gradually replaced by erratic and decentralised sources of electricity, specifically wind and solar. This may be compounded by the changing nature of electricity demand; a future “filling station” of electric vehicles will consume energy much faster than can be supported by existing transmission and distribution infrastructure. This combination of erratic supply and demand will create a need for a smarter grid system which can dynamically distribute, store and supply electrical energy in response to changing trends.
Increased demand for electricity will drive innovation
These challenges are serious but will also stoke innovation in the energy sector, especially if the price of energy in the form of electricity rises in response to the increased demand. The prize is potentially massive for disruptors who can bring smarter data management tools, high performance storage solutions or low cost generation solutions to the market. This week Cambridge Consultants are at the European Utility Week in Amsterdam to see how the energy sector is responding to these challenges. Come and say hello at stand 5Q32.