“We Are Currentely Building the Internet of Energy”

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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.