How can the energy industry adapt to meet the needs of a growing population while supporting low-carbon growth? Katherine Hamilton says that this essential transition will not happen without collaboration between large energy companies, entrepreneurs, the finance sector and consumers
Why should we be thinking about the future of energy?
The energy sector is already changing very rapidly. It is transitioning, we hope, towards a greater ability to meet the energy needs of a growing global population while reducing the use of carbon, and supporting continued economic growth in an environmentally sustainable way.
However, such a transition will not happen on its own. We have to get key players together who can bring different experiences and perspectives, and collectively come up with better ideas than any of us could produce on our own. Then we have to work out how to implement those ideas. Hence the need for the Global Future Council.
Which key players have to be involved?
The key players are important, of course – the large energy companies who own and control the infrastructure, especially in industrialised countries. They are often criticised as part of the problem, but they also have to be part of the solution. In addition, we need the innovators – entrepreneurs who are coming up with ideas to disrupt the sector. And we need input from energy consumers, including large corporations and municipalities.
Representatives of the financial sector are important – experts in bonds, risk and insurance. There is plenty of capital out there looking for good projects to finance, but the main constraint for investors is the assurance that those projects will find a market. Creating certainty is one important contribution politicians and policymakers can make to help. Ultimately, they are the ones who will need the vision to define goals for the energy sector and devise policies to achieve them.
What are the biggest emerging trends in the energy sector?
The decentralisation of energy generation is an enormous trend. Innovation is also being democratised; it is no longer just the incumbents who can innovate. Consumers find themselves increasingly in the driver’s seat. There is more real-time interaction between energy service providers and consumers – from the operator of a factory with sophisticated demand response to the Indian farmer who uses a mobile phone to manage crops.
We continue to see drastic reductions in the cost of many renewable technologies as well as greater accessibility to energy storage and efficiency.
How far are we from the point where renewable energy sources will no longer need subsidies to be competitive?
When talking about subsidies for renewable energy sources, you have to remember that incumbent players have benefited from built-in subsidies for decades through support in the form of policy and the power of a monopoly. There is often a misconception that the provision of energy was a free market before the idea of subsidising renewable sources came along. That is not the case, and we have to recognise that when we ask how best to adjust the market for innovation going forward.
What kind of innovations are we seeing in energy, and what can we expect in years to come?
The sharing economy will be increasingly important in the transport sector. There is potential to improve efficiency and greatly reduce emissions as we move towards electric and autonomous vehicles.
There is also room to harness data to make the grid and entire energy ecosystem more efficient. The data is available, for example through advanced meters and mobile applications, but we have yet to fully exploit that data to move energy to where it is needed, smartly and in real time.
I expect to see more ‘community solar’ projects as collective consumers invest in generating and storing power. There will be more distributed generation using a variety of technologies, such as solar, wind, geothermal, fuel cells, and hydro power. We will see further innovations in multiple uses of energy storage, such as re-purposing car batteries to store electricity.
In the coming years we could see breakthroughs in carbon capture and storage and, undoubtedly, there will be innovations and applications nobody has thought of yet.
What has to be on the agenda for energy stakeholders?
Above all, we must have a solid plan to reduce carbon emissions. To achieve that, we have to define what we value – not just improving access to energy and guaranteeing energy security to meet the needs of economic growth, but doing all this in a sustainable way and with a drastic reduction in carbon emissions. We also need clear, transparent benchmarks against which to measure our progress.
Furthermore, we need a vision that combines the decentralised and the centralised, embracing more distributed generation while looking at the larger system and how we can move energy around globally in real time.
What could the energy sector look like by 2030?
I fear that we will be paying for our previous failures to reduce carbon emissions, and for being increasingly preoccupied with adaptation to climate change. But I also believe that we can have a sector that delivers much more access to energy than at present, with greater use of renewable energy sources, which will incentivise innovation and create economic growth while reducing our impact on the planet.
Author: Katherine Hamilton is director of the Project for Clean Energy and Innovation and co-chair of the Global Future Council on the Future of Energy
Attribute: World Economic Forum