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.
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.
ABOUT THE PERSON
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.