Four Energy Trends Combine to Reshape Power Worldwide

Four energy trends are shaping today's rapidly evolving power industry, but it's impossible to tease apart their impacts. The trends—decarbonization, decentralization, vehicle electrification, and energy access—intersect and interact while they bring about a dramatic global transformation, according to GTM Research. Here's a look at how each energy trend is changing the power sector and how you should prepare.

Decarbonization: Dropping Costs and Increasing Penetration of Renewables

What's driving it? In response to climate change, the power sector is working to reduce greenhouse gas emissions through the steady adoption of renewable energy. Increased acceptability, favorable policies, and falling costs are all contributing to renewables' rise.

Why does it matter? Wood Mackenzie's carbon-constrained scenario envisions solar and wind energy will rise to 30 percent of global electricity generation by 2035 and coal will drop below 50 percent. Right now, if you leave out hydro, renewables account for only 8 percent of global electricity generation, says BP. So making that renewable scenario a reality requires greater grid flexibility and decreased storage costs to manage intermittent generation.

What now? Never mind decarbonization, coal is no longer the automatic winner when it comes to cost, according to The New York Times. Given low bids for big power plants using wind turbines and solar panels, utilities need to consider whether renewables will allow them to build and operate new plants more cheaply than traditional sources. Dispatchable clean energy from nuclear, hydro, and distributed energy resources could help balance the load.

Decentralization: Reimagining the Grid

What's driving it? Thomas Edison promoted the central station to distribute electric power, instead of isolated plants that served every building. But what goes around comes around: One-way power flows from centralized generation are shifting to two-way flows from an array of distributed energy resources (DERs).

Why does it matter? Navigant Research predicts the installed capacity of DERs will reach 530.7 GW in 2024, up from 136.4 GW in 2015. DERs not only require grid restructuring but also changing business models and regulations to incorporate intermittent, bidirectional flows and generation controlled by customers or third parties. Managing DERs will also mean new communications and analytics.

What now? With renewables dependent on always-fickle weather, be prepared to provide dispatchable, flexible generation to manage their variability. That could include energy storage, demand response, and even electric vehicles. Regions currently without energy access may also find DERs more economical and less disruptive to implement than power plants to meet electricity demand.

Vehicle Electrification: Balancing Demands

What's driving it? Reasons for buying electric vehicles are many—lower fuel costs, reduced environmental impacts, and access to the faster HOV lane. Worldwide registrations of electric vehicles hit 750,000 in 2016, with China accounting for more than 40 percent of EVs sold and the United States only half that. China's predominance is no surprise, given that coal-fired plants have left the country choked with environmental pollution.

Why does it matter? Utilities can expect a defining moment in their futures: a jump in peak electricity demand due to EVs. By the 2020s, the cost to operate an EV should be on par with that of greenhouse-gas-emitting internal combustion vehicles in all but regions with the most coal-heavy power generation. More than 100 new EV models are expected to hit the streets, according to GTM Research.

What now? EVs will take from the grid, but they'll also give back. Innovative battery technologies plus fast charging could bring about use of EV batteries to supply power to the grid. A yearlong study in Denmark demonstrated that utilities can use parked electric vehicles to deliver grid power and provide owners with a monetary return for doing so, according to Forbes. Utilities need to be ready to manage the bidirectional flow and charging needs of a burgeoning number of plugged-in vehicles.

Energy Access: Bringing Electricity to Over 1 Billion People

What's driving it? Currently, 1.1 billion people, mainly in sub-Saharan Africa and south Asia, still do not have access to electricity. City dwellers are mostly covered, but some 27 percent of rural residents lack electricity. This deprivation hampers their economic and social development. Achieving universal energy access is a 2030 UN Sustainable Development Goal.

Why does it matter? Providing energy would allow shops and businesses to stay open after dark, improve health care access, and even make simple things possible, like study and sports after school. But meeting the UN goal requires an 18 percent increase in electricity-generating capacity, according to GTM Research. The goal isn't just about bringing in electricity, but also improving energy efficiency and increasing clean energy.

What now? The traditional approach says providing electricity requires infrastructure for coal-fired or nuclear plants. In areas with large populations and low coal prices, that may pencil out. But where the population or economics cannot justify this solution, the answer may be lower-cost, off-grid solar home systems coupled with efficient LED lights and appliances, according to MIT Technology Review.

These four energy trends promise to drive out carbon emissions from the power supply, deploy cost-effective technologies to generate electricity, change the equation for greenhouse gas emissions and oil demand, and bring electricity to 15 percent of the world's population. But utilities must prepare now for the corresponding advance of intermittent power sources, distributed generation, bidirectional flow, and technology that leapfrogs the status quo.