“We Are Currentely Building the Internet of Energy”

Futur­ol­o­gist Lars Thomsen explains the power grids of the future and demon­strates why the energy sector should act quickly.

Mr. Thomsen, if I had a giant pile of money in the bank, what should I do with it?

I would advise you to get into the energy sector, either with a clever busi­ness idea or as an investor.

I see. Why?

Because things are happening in the energy sector right now. It is changing faster and more funda­men­tally than we have seen in the last hundred years. And things changing means that there are plenty of oppor­tu­ni­ties for people who recog­nize the signs of the times. Oppor­tu­ni­ties to make money.

So how is the energy sector changing?

We’re seeing two major trends. Both include a few other sub-trends. Trend one—and this will surprise no one—is that renew­able energy produc­tion is booming and its share is constantly growing. In 20 years, it will be the domi­nant source in almost all power grids. Trend two is that the demand for energy is growing in general, and partic­u­larly the need for elec­tricity is increasing. Not by just a little, either. We expect that, glob­ally, in 20 years we will consume twice the amount of elec­tricity that we do today.


Twice as much as today? What about all the efforts to produce and consume energy effi­ciently — is that all for nothing?

It would be easy—but incorrect—to say that growing energy consump­tion and greater energy effi­ciency contra­dict each other. Rather, it is primarily a ques­tion of substi­tu­tion. According to the Inter­na­tional Energy Agency, humans currently consume around a third of their energy resources for elec­tricity produc­tion, another third for mobility and the last third for heating and cooling. Note that we’re talking here about all energy sources: oil, gas, wood, coal, and so on.

„The Energy sector is under high pres­sure für inno­va­tion right now. It´s not accus­momed to it.“

At the moment around 95 percent of global transportation—trains, planes and automobiles—uses fossil fuels, with heating and cooling at around 75 percent. The propor­tion of fossil fuels will sink rapidly for both—and be replaced by elec­tricity. Cars currently powered by diesel will run on elec­tricity in the future, and so on. This alone will double the demand for elec- tricity, even with the fore­casted effects from energy effi­ciency measures already being taken into account.

And what makes you so sure that the propor­tion of renew­able ener­gies will grow dras­ti­cally?

Well, a lot! There is the polit­ical will in many coun­tries. The climate crisis is moving us in that direc­tion. But don’t get me wrong, you don’t have to be an envi­ron­men­talist to bet on wind and solar. You just need to be able to do the math. In the US, for ex-ample, where the pres­i­dent has tout-ed “clean coal” in recent years, a coal power station has closed down every two weeks on average. And will stay closed forever. Because it’s no longer worth it for the oper­a­tors.

And with solar energy, we have long since hit the turning point in terms of price. You would have to be rather stupid not to put photo­voltaic cells on a newly constructed roof—no matter whether you are building a hut in Yemen or an indus­trial plant in Switzer­land.

The period for a return on invest­ment is about six to eight years in Europe and the US. If you compare that with the equity market, it corre­sponds to a return of about eight percent. The solar system pays for itself and, in the mean­time, produces clean energy for you.

OK, so more renew­able energy sources, more demand for elec­tricity. What does this mean for power grids?

We are currently building the internet of energy. By that I mean a breathing grid, which first of all distrib­utes loads intel­li­gently and, secondly, adjusts to volatile avail­ability. Let me explain: Volatility simply means that the sun doesn’t always shine and the wind doesn’t always blow. More wind and solar power in the energy mix there­fore lead to greater fluc­tu­a­tions in the supply.

This is common knowl­edge nowa­days, I think. Intel­li­gent distribution—this means ensuring that over­loads are prevented. There are two possible solu­tions for both of these: Energy accu­mu­la­tors and smart grids. This is equip­ment that can detect, predict and respond to consump­tion patterns.

Could you elab­o­rate on that?

Sure. Breathing grids draw energy in when it is avail­able, store it temporarily, and then let it out when energy is needed. In this regard, elec­tric cars will present both a problem as well as a solu­tion at the same time. When you buy an elec­tric car, you double your elec­tricity require­ments in one fell swoop. But you suddenly also have an intel­li­gently controlled energy accu­mu­lator – the battery.

„Elec­tricity consump­tion will double. That is why we need intel­li­gend, breathing power grids.“

For the sake of simplicity, take a single-family house, ideally a smart home. When everyone comes home in the evenings, plugs the car in to charge, turns on the lights, tele­vi­sion, stove—electricity require­ments increase dramat­i­cally all of a sudden. If all your neigh­bors are also doing the same, the grid won’t be able to handle it anymore.

But the car is not stupid, it can say, I’ll charge myself later when everyone has gone to sleep. Or it can charge during the day, when the sun is shining, and provide elec­tricity from its battery to the smart home in the evening, thus unbur­dening the grids. I think there will also be a new price mech­a­nism that supports this behavior.

What kind of price mech­a­nism?

We will get vari­able elec­tricity rates down to the consumer level. Almost all prices of goods follow a logic of supply and demand. A carton of straw­ber­ries costs 99 cents in Germany in June because there are tons of them locally, and 4.99 euros in winter because they are flown in specially from Morocco. If they were sold for 2.99 euros all year round, that would create the wrong incen­tives.

In winter, more straw­ber­ries would be flown in from Morocco and in summer, the German crops would rot because they would be too expen­sive for people. With elec­tricity, however, end consumers today pay per kilo­watt hour, no matter when they get it. Renew­able elec­tricity, however, is like the straw­ber­ries: We always have either too much or too little. This will also be reflected in the price. Intel­li­gent control — that would require a lot of soft­ware and, where possible, even arti­fi­cial intel­li­gence.

What will earn the most money in the future of the energy sector, soft­ware or hard­ware?

I think both will remain prof­itable busi­ness fields, including grid infra­struc­ture. The vision of more autonomous energy units has existed for a while—houses, facto­ries or entire commer­cial areas. I’m skep­tical of that. I think all consumers will continue to be reliant on a distri­b­u­tion grid that is main­tained by tradi­tional providers and util­i­ties. This is also just the most sensible solu­tion. One thing is clear, however: The energy industry is under high pres­sure to inno­vate right now. But it’s not accus­tomed to this.

Will the energy industry succeed?

Good ques­tion. I’ve been following the discus­sion about smart meters for about 20 years. The industry says, we need 20 to 30 years to roll these out. Compared to other indus­tries, such a state­ment is unusual, to say the least. If you just look at the sales figures of elec­tric cars and plug-in hybrids, we are already only 150 weeks from the point when our grids won’t be able to handle it anymore.

We won’t solve the problem by building gigantic trans­formers, digging up every street and doubling cable cross-sections. It will only work with smart tech­nology that distrib­utes the load intel­li­gently. Now the energy sector is saying, oh God, we need to be ready in two, three years with new prod­ucts, tech­nolo­gies and soft­ware. They have never been in this situ­a­tion!

Couldn’t the energy industry just remain stub­born and prolong the trans­for­ma­tion?

Yes, to a certain extent, it could do that. The market is regu­lated and re quires high start-up costs. This protects estab­lished compa­nies from compe­ti­tion in many ways, espe­cially on the hard­ware and infra­struc­ture side.

„For the first time in decades, invest­ments will pay off quickly.“

However, there are two reasons why I believe that the industry will nonethe­less follow the inno­va­tion pres­sure. First, these compa­nies won’t want to miss out on the impor­tant busi­ness field of soft­ware and AI solu­tions. Compa­nies like IBM or Google are already at the starting block here. But the energy industry still has the oppor­tu­nity to take things into its own hands if it makes the effort now.

And secondly, which seems to me to be even more impor­tant: For the first time in many decades, the energy industry is in a phase where invest­ment in inno­va­tions will actu-ally pay off quickly. This will ensure suffi­cient action.

But what inno­va­tions are we talking about, exactly?

In addi­tion to the soft­ware I mentioned: Switching, measuring and regu­lating loads. Converters, inverters, trans­former tech­nology. Due to the variety of new, dispersed energy sources and inter­me­diate storage units, we will need many more of these systems than we did before.

Speaking of dispersed energy produc­tion, is the trend moving in that direc­tion?

Yes, but not exclu­sively. It’s not black and white. At the same time, there will also be large central­ized energy sources, such as giant solar parks at the equator or in the desert, where sunshine is reli­able, or large offshore wind parks. Which brings us to the next major chal­lenge: Trans­porting elec­tricity over large distances via high-voltage DC trans­mis­sion or HVDC lines. There are inter­esting ideas there.

What ideas?

With an eye on solar energy, the Chinese have suggested a type of energy back­bone for the earth, that is, a thick HVDC trans­mis­sion cable that wraps around the equator, with lines branching off from it. They have an impres­sively simple argu­ment here: From a global perspec­tive, it is never night — the sun is always shining on one half of the earth.

Around the whole globe?

That’s not as much as it sounds. It’s only about 40,000 kilo­me­ters. If you gath­ered up all the wires in all the high-voltage lines between Munich and Hamburg, you’d have the same amount. The trans­mis­sion loss of 1.5 to 2.5 percent per thou­sand kilome-ters is also manage­able. You don’t need to send every elec­tron around the entire world, after all.

It might be enough to contin­u­ously swap the periph­eral areas at the tran­si­tion from day to night. I believe it will end up being some­thing like that. Some say they would rather send tankers full of hydrogen around the globe. But I think it will likely come to HVDC trans­mis­sion. And there is yet another big project ahead of us.

Ugh, another big project? What is it?

Seasonal storage facil­i­ties, large and small, in coun­tries that are not on the equator—in other words, basi­cally in all indus­tri­al­ized coun­tries. Even our ances­tors had these. In the winter they sawed blocks of ice out of lakes which they then packed in cellars and covered with straw in order to cool their beer in summer.

We should start following this prin­ciple again: store power from sun and wind when we have them in excess, and thus bridge the seasons in which there is a prepon­der­ance of calm and dark­ness. But it’s not just power—heat and cold can also be stored for heaters and air-condi­tioning systems. So to answer your orig­inal question—thermal and elec­trical accu­mu­la­tors. If I were you, I would invest my money in these tech­nolo­gies. Because there’s still a lot of room to inno­vate in these areas.


Lars Thomsen, trend researcher and futur­ol­o­gist, was born in Hamburg in 1968. He is an expert in the future of energy, mobility and smart networks. Since the age of 22, he has provided consul­ta­tion to compa­nies, corpo­ra­tions, insti­tu­tions and those close to the govern­ment in Europe in the devel­op­ment of future strate­gies as an inde­pen­dent contractor. In addi­tion to his busi­ness activ­i­ties, he is also a member of numerous think tanks as well as the World Future Society in Wash­ington, D.C. Lars Thomsen lives with his family on Lake Zurich in Switzer­land.