Clean Energy & Decarbonization: The Future of Energy is 3Ds
The energy industry is at a tipping point. Where before, the future of energy seemed tenuous and uncertain, now we have a clear path forward.
If you’re looking for a more condensed version of this article, we have the infographic 3D at the core of energy transition with just the best parts for you right here.
Energy Crisis in the United States
It might seem that people are always complaining about gasoline prices, no matter the year, but the truth is that the current state of gas prices is no fad, and it isn’t alone.
Energy costs for household electricity, combined with other economic issues that cropped up due to the consequences of the pandemic, have banded together to make this crisis a severe problem.
This issue has been compounded even further by the government’s promise to lower country-wide emissions. While renewable energy technology is getting cheaper, it isn’t ready to take center stage.
The International Energy Agency (IEA) predicts that renewable energy sources, responsible for 22% of electricity generation in 2022, will increase to 24% in 2023 in the United States.
While a 9% increase in just a single year might seem like a strong step in the right direction, the pace at which renewable energy needs to grow in order to fill the shoes of traditional fossil fuels is still a ways off.
The United States government projects that 45% of all energy consumed in the country will be from solar sources by 2050.
According to this scenario, solar energy would represent 37% of total electricity in 2035, and the rest would be produced by wind energy (36%), nuclear (11 % -13%), hydro (5% -6%), biomass and geothermal (1%).
This would represent a radical change from the current situation: in 2020, renewable energy was responsible for producing 21% of the electricity in the US, while the rest was generated by sources such as natural gas (40%), nuclear energy (20% ) and coal (19%).
According to the US Department of Energy, achieving this goal requires “significant cost reduction, public policy support, and large-scale electrification” of solar energy.
In 2020, photovoltaic panels and solar thermal plants generated just under 80 gigawatts (GW) in the United States, which is equivalent to 3% of the country’s electricity demand.
However, to achieve their goal, it will be necessary to increase the generation of solar energy per year, on average, from 15 GW in 2020 to 30 GW by 2025, and eventually to 60 GW annually between 2025 and 2030.
Joe Biden, whose fight against climate change is one of his main pledges, is betting on massive investment in infrastructure, which is still being discussed in Congress.
US energy companies are facing a supply crisis that could hamper their ability to keep the lights on as the country moves into the heat of summer and the height of the hurricane season.
Clean Efficiency & Energy Transition
Renewable energy has allowed the multiplication of self-producers, which will play an essential role in the sector’s future.
With the forecast of an increase in demand for energy in the coming decades, the market will have to rebalance itself to serve industries that will be permanently and gradually powered, such as transport and urban mobility.
And to meet this demand with maximum efficiency, the solution is to decentralize production and further explore alternative sources.
In countries like Norway, electric vehicles are already a reality. The country intends to have only electric cars running on the streets by 2025.
As was the case in Norway, this shift to renewables in areas like infrastructure and transportation has to be gradual for adoption by citizens and implementation to succeed.
The issue the United States is facing now is that they haven’t been able to successfully implement this transition. Much like skipping gear changes from first to fourth, it could have catastrophic consequences for the health of the energy industry.
The only way for other industries to keep their heads above water is to start swimming fast enough to reach the energy transition “boat” before it leaves them behind for the sharks (I promise to slow down with the analogies).
What that means for companies is that they need to start investing in green technology and renewable-friendly solutions if they plan on staying ahead of the curve.
The government has the money it needs to rev up its energy transition to keep its promises for the future, but if companies (especially those that rely heavily on fossil fuels) want to be a part of that future, they’ll have to start investing just as much, and soon.
What Is Decarbonization?
While the pandemic showed us the extent of the negative impact that lockdowns can have on the economy, it also showed us the positive impact of our inactivity on the environment.
For instance, the lockdown decreased electricity demand by 30% in Italy, India, Germany, and the USA, and by 12–20% in France, Germany, Spain, India, and the UK. Additionally, the expenditure of the fuel supply decreased by 4% in 2020 as compared to the previous years (2012–2019).
In terms of harmful emissions, the lockdowns reduced the emissions of nitrous oxides by 20–30% in China, Italy, France, and Spain, and by 77.3% in São Paulo, Brazil.
Similarly, the particulate matter level was reduced from 5–15% in Western Europe to 200% in New Delhi, India, which in turn has enhanced the air quality to a never-seen manner in recent times.
In some places, such as New York, USA, CO2 emission was also reduced by 5–10%. The water quality, in several polluted areas, has also been remarkably enhanced. For example, the dissolved oxygen content in the Ganga River, India, has increased by about 80%.
All of this led to a drastic decrease in our total global pollution, something our planet has not seen since the industrial revolution.
But all this fresh air and water came at a cost. The percentage of people in poverty has skyrocketed. This came hand-in-hand with a global wave of depression and stress that has been dubbed a global mental health crisis.
We obviously can’t put the world on pause every few months to keep emissions low, but that doesn’t mean that there isn’t a path forward.
Ho do the 3Ds come into play?
Simply put, the 3Ds are the new driving force of the energy sector. The pandemic inaugurated a scenario of retraction in energy demand. This decline, combined with a drop in CO2 emissions and an increase in energy generation from clean sources, signals what the future of energy will be: digital, decentralized, and sustainable.
In this context, the 3Ds of energy savings emerged. The tripod represents fundamental paradigm shifts, with a promise to guide innovation efforts in this market for the foreseeable future. Those 3Ds are: Digitization, Distribution, and Decarbonization.
Digitization is easy enough to grasp. Governments and companies need to start investing in technology designed to increase transparency, energy use tracking, and efficiency monitoring.
Distribution is a little more complicated. It involves a complete revamp of our current energy system. Ensuring that renewable energy is supplied to every home and business that previously relied on fossil fuels.
But the most important and possibly the most interesting of the three is Decarbonization. This obviously entails adapting low-carbon technologies and practices, but it also refers to tech and equipment aimed at taking CO2 out of the atmosphere.
We’ve reached the point where simply pumping less carbon into our atmosphere isn’t going to cut it. We need to start reversing the damage we’ve caused by literally “taking it back.”
While this technology is still expensive and inefficient (you can think of it like how other renewable energy sources used to be two decades ago), investment in this field will make the process of decarbonization cheaper and more efficient in the years to come.
ESG’s Role in Energy
ESG is no longer some strange concept you’ve only ever heard of in an obscure internet article. But just in case you’ve been living under a rock for the past three years, the acronym refers to the terms environmental, social, and governance and includes policies and themes related to the environment, social impact, and corporate interest.
The key role of ESG in the future of the energy industry can be briefly summarized within the following list:
Environmental – energy efficiency, emission of pollutants, and the use of non-renewable natural resources, among others.
Social – human rights, diversity and inclusion, employee engagement, social impact, labor policies, and workforce training, among others.
Corporate governance – diversity in the board of directors and independence of the board, tax (and carbon tax) audit committees, ethics, and transparency, among others.
The essential idea is that companies and governments need to start focusing more on issues that relate to these three areas. Putting forth policies, laws, and investments that seek to put these issues on their radar and in their line of sight, taking responsibility for them, and leading the way in making these concerns a thing of the past.
If you need any extra incentive, know that consumers are beginning to put their money where their hearts are. People are beginning to weigh whether brands and politicians actually care about these issues and choosing to invest their money into those that do.
What is the Future of Energy?
The fact is that the rise of a digital economy has added new variables to the business equation in the segment, which still suffers from the analog mindset.
With digital, new values emerge. And to thrive in this new market context, companies need more than just cutting-edge technology and technical knowledge, they’ll have to redefine the bases of their relationship with consumers – since, soon, purchasing an “energy product” from a specific energy provider will be completely optional.
In the past (and present), your energy provider wasn’t a choice you made. Depending on where you live, you pay the “energy landlord” their due. In the future, we will see the rise of smaller, more decentralized energy providers.
People will probably even be able to generate their own energy at home. Maybe even become a small energy provider for their neighbors as well. Can you imagine? Powering your fridge with electricity provided by the guy living in apartment 42B because he sells it cheaper than your previous power company?
These kinds of innovations might be very far off, but they’re never as far off as you think. In 1903 the New York Times stated that:
“Man won’t fly for a million years – to build a flying machine would require the combined and continuous efforts of mathematicians and mechanics for 1-10 million years.”
Nine days after they published this quote, the Wright brothers made their first successful powered flight. Innovation always seems impossible, until it arrives.
And if you’re looking to be one of the pioneers of modern renewable energy innovation but just don’t know where to start, know that you don’t have to go it alone. Go far, with MJV. Reach out to one of our consultants.