The end of a year is traditionally a time for reflection on things past and things yet to come. For energy, 2018 was a year of continuing transformation, with some obvious paradoxes. Efforts to mitigate climate change continue to drive energy policy and practice. All participants at the recent United Nations climate conference in Katowice, Poland, committed to “operationalize” the Paris Climate Agreement to constrain average post-industrial global temperature increase to 1.5 degree Celsius. Despite the United States’ 2017 announcement of its intent to withdraw from the agreement, it will officially remain party to it until at least late 2020.
Irrespective of the machinations of political leaders at international conferences, the underlying drive to decarbonize the world’s energy systems continues to accelerate. This is nowhere more obvious than at the community level, which offers new opportunities and challenges for manufacturers.
For most of the past 100 years, cities have relinquished most of the responsibility for safe, economical, and reliable supply of energy to regional and national utilities. Energy supply policy in terms of pricing, environmental impact, service levels, and choice of technologies and fuels was essentially negotiated between national or regional governmental bodies and the utilities. In this picture, communities and other major end users, including industry, had minimal impact on choices that affect them for decades.
This energy-supply-driven world also tends to undervalue efficiency, for obvious reasons. The result was that most changes in efficiency were created through mandatory policy rather than market-driven self-interest. Industry globally has arguably been something of an exception through its implementation of efficiency programs driven by cost control and market reputation. But even in industry, the potential to further increase efficiency is substantial.
As we move into 2019, the shape of emerging energy transformation is becoming clearer. More communities are recognizing that the cost, resilience, social, and environmental aspects of their energy use could be far improved. They’re also recognizing their market leverage, given that more than 70% of energy is used in an urban environment.
National and regional climate-change policy is a major factor in raising local energy understanding and ownership. If, as in the United States, there is a pullback from national targets and frameworks, the policy vacuum will push states and communities to make choices. Many choose to continue to accelerate efforts to reduce greenhouse gas emissions through efficiency initiatives and the promotion of clean and renewable energy supply. This reaction may be based on policy disagreements or on a purely pragmatic view to hedge bets for the future and ensure community competitiveness.
If, as in most of the rest of world, national policy attempts to align with the Paris accord, the need for communities to actively manage their energy and carbon footprints becomes clearer. The need for communities to quantify their energy use and develop approaches to cut emissions by at least 60% in the next two or three decades becomes nonnegotiable.
As every plant energy manager knows, this kind of performance change can happen only through an integrated approach that encompasses efficiency from end use through distribution and supply. The fuel choices for supply, from sunshine to coal, factor into this integrated view. Technology, for its part, is enabling energy system transformation.
Low-cost, cloud-based information networks are beginning to allow cities to see the whole pattern of their energy use and supply in near real-time. This transparency allows stakeholders from homeowners through business, industry, utilities and political leaders to understand their role in the overall energy system. This kind of data transparency will point the way to new market models. In parallel, the cost to generate energy locally is falling and the flexibility to operate a clean and renewable supply portfolio is increasing.
The emerging bottom line is that communities and their major industrial end users will increasingly take the lead in localizing energy use and supply as much for their own economic interest as their interest in being prepared to meet the challenges of climate change policy. As major energy users and employers, industry has a unique opportunity to accelerate the migration to community-based energy systems.