Utilities’ approach to reduce the use of fossil fuel

“Instead of a treasure, coals” is how the Latin proverb emphasizes the relevance of coal in our society. The coal used to power the juggernaut of the Roman Empire still holds immense relevance in current times. However, until the early 18th century, it was used only on a limited scale, when?Abraham Darby?of England and others developed methods of using it in blast furnaces. The invention of the coal-burning steam engine followed and created an insatiable demand for coal, which till date, is the primarily used fossil fuel owing to its lower cost and stability. What followed in the next century was the commercial exploitation of petroleum, leading to the use of oil, gas, and shale formed over a period from organic matter produced from photosynthesis. While fossil fuels make good fuel, it’s environmental effects, such as ground water contamination, acid rain, and climate change had been long neglected, despite its primary use for power generation across the globe.

Studies have chalked out the consequences of electricity generation by burning fossil fuels, which causes a large chunk of the greenhouse gases to blanket the Earth and trap the sun’s heat. Fossil fuels such as coal, oil, and gas, by far?have the largest contribution to global climate change, accounting for over 75% of global greenhouse gas emissions and nearly 90% of all carbon dioxide emissions.

The utility industry comprising companies that supply water, produce natural gas and electricity, process sewage, and more has an estimated worth of ~US$1.5tn in the US alone as of March 2021 and is largely dependent on fossil fuel. Utilities are crucial to an economy as they ensure the vital infrastructure by distributing water, gas, and electricity to consumers, using extensive networks. With a market value of?US$849bn, the utilities sector employs more than 960,000 US workers, and includes 99,699 different companies. Although the three biggest players in this sector – électricité de France SA (EDF), Enel SpA, and Engie – are energy companies, the sector includes water, natural gas, sanitation, and waste disposal companies as well. The fact that the International Energy Agency (IEA) estimates the energy sector to have an investment of US$7.2tn in the decade to 2025 conveys its worth in the US economy. As per a latest International Energy Agency report, coal’s share of power production started to decline in 2015 as the use of renewable energy began to grow steadily.

Renewable energy or clean energy, which comes from sunlight, wind, rain, tides, waves, and geothermal heat, is constantly replenished and is seen as advantageous. However, a complete switch from fossil fuel to clean energy is not the easiest task for utilities as it has various disadvantages, which might push them into a financial crunch. Some challenges of renewable energy that utilities face are wind, rain, and sunlight-related uncertainty, limited electricity generation capacity, and higher costs of renewable energy technologies than traditional fossil fuel-powered generation. These even include the complex safety and security features of nuclear reactors and power plants, which is otherwise considered ESG-friendly. Defying the odds, according to IEA, in 2019, renewables accounted for ~27% in the global electricity production – three points more than natural gas (24%) – and the share of nuclear plateaued around 10% for eight years, while oil accounted for less than 3% of global electricity in 2019.

The journey toward the wide use of renewables creates both risks and opportunities for the power and utilities industry. Those who can build a more diverse, flexible, and distributed energy infrastructure, will lead while others will fall behind.?Tomorrow’s energy systems are likely to rely on electricity produced through renewable sources, rather than the use of carbon molecules to power both transport and industries.?

To decarbonize, the power and utilities industry would require a large-scale shift to renewable energy sources. Transforming an industry, which is responsible for a majority of the greenhouse gas emissions, will mean efforts for the massive deployment of clean and efficient energy technologies globally. This hints at significant investments in new energy infrastructure, entailing not only solar and wind energy development, but also much wider deployment of battery-based or thermal energy storage to smooth out volatility in supply and demand. However, utilities must consider efficiency improvements to lessen the growing energy demand – including more efficient technologies and significant change in energy policies – which would keep global energy consumption from increasing by 50% by 2050. Moreover, the ongoing efficiency increases on the supply side will benefit the power and utilities industry. Energy research and development will involve heavy public sector investments.

Despite renewable energy-related unpredictability, utilities are witnessing a quick transition to prevent the worst impacts of climate change, and IEA expects renewables to?account for 47% of the global electricity market by 2040, up from 29% today. The rise in demand for advanced technology, smart cities, and electric transportation is converging with the rise in demand for renewable energy sources and sustainability. The utility business bears a large portion of the burden for this massive shift as its decisions now will have far-reaching consequences for the society for future generations. Whether a company oversees electricity, gas, water, or waste utilities, it must aim to develop intelligent solutions and energy efficiency in its operations while providing a safe and secure infrastructure for the environment today and in the future. Energy and utility firms, both traditional and start up, are preparing to save money and gain consumer trust through innovation, digital transformation, and resilience.

Energy storage will cause changes in consumption patterns because of dropping battery prices. The energy and utilities industry’s stance on energy output has shifted with the adoption of green energy. When combined with Distributed Energy Resources, energy storage has the potential to deliver steady energy flow at cheaper prices, free of pulls and pushes of power demand. Low-cost energy storage will reduce the demand for coal and natural gas while increasing renewable energy generation. It will pave the way for creative storage options and the utilization of smart energy gadgets. Energy supply and demand will independent. This will relieve energy and utility firms of the need to construct capacity for peak-hour demands, allowing them to focus on the sources of the least-expensive energy generation.

Renewable energy technologies and enterprises have already begun to disrupt the energy and utility industries. Even with recent rise in commodity costs, the cost efficiency of renewables, such as wind and solar has improved dramatically over the past couple of decades. Traditional energy and utility businesses are mostly likely to expand their renewable energy investments to remain competitive and relevant. Companies such as Google, Amazon, Apple, Walmart will boost the ante by establishing solar and wind farms to include environmental considerations, economic savings, and improved control over energy requirements. These firms will eventually emerge as alternative energy suppliers, supplying the rapidly expanding the clean energy industry. These ‘go-green’ champions, ranging from huge corporations to start ups, are poised to disrupt the energy-generating mix and ownership.

The dire need to achieve the net-zero goal will require a new energy mix including?green hydrogen?and other alternative fuels, which will diminish the traditional barriers between energy sectors. Such developments are expected to facilitate industry consolidation and drive utilities to explore new business activities. Soon, they will focus on identifying the sweet spot that combines customer needs for greater flexibility, better cost control, and novel service models.?