Past performance is no guarantee of future success

October 18th, 2017, Published in Articles: EE Publishers, Articles: Energize, Featured: Energize

The World Energy Council released its 2017 Annual Report recently. The report, sub-titled “The energy transition: How innovation is driving change”, considers information from 17 industry leaders from a number of countries from South America to the Middle East. It concludes that new technologies will introduce dramatic changes to the energy sectors of both developed and developing nations.

This is the introduction to the report. Click here to download the full report

The one thing above all else that is keeping energy leaders awake at night is the impact of digitalisation on the future of the global energy system. The reality is that the energy system of the past is changing and this is not only a challenge for developed economies who are struggling to come to terms with integrating new approaches into existing infrastructure.

In emerging markets, new opportunities lead to choices that have little history to base important judgments upon. Industry leaders and policymakers across the globe are considering the impact of innovation with a mixture of excitement and unease. A world where big data, machine learning, and artificial intelligence enable automated system analytics and instant demand response is very different from the analogue world where many leaders started their careers. Predictive maintenance and supply chain management can dramatically decrease outage times and offer greater efficiency with traffic and congestion management.

The world in which the internet of things and blockchains will enable direct and low-cost transactions between parties and between appliances is fast approaching, with at its core precisely recorded transactions in unfalsifiable ledgers that also open new opportunities for supply chain tracing and product labelling by origin, materials used or emissions caused. These new technologies not only change the way we operate the energy system but revolutionise the potential for a sharing and leasing economy through new platform solutions, which also will affect traditional business models in energy.

Mobile technology and cloud support already enable new financing models, such as micro-leasing schemes in the developing world, greater customer choice and control for all. The price of the digital revolution for infrastructure and companies is increased exposure to cyber risks and planning uncertainty as a result of lowering entry barriers for new players. Energy leaders clearly believe that technology innovation, unleashed by effective trade and guided by coordinated climate action, is the key to a decarbonised energy future. We will see an electrification of final demand, with electricity rapidly becoming the “new oil”.

Advances in electric storage and renewable energy, both empowered by digital capabilities, are key areas that have the potential to dictate the pace and the scale of the energy transition. The dramatic increase of renewable energy capacity across the globe, notably for wind and solar PV, will continue and further advance the role of renewable energy in the global energy mix. Natural gas is the only fossil fuel for which we don’t see demand peaking over the next few decades. However, there is a cloud of uncertainty hanging over the “golden age of gas” and our future demand scenarios vary widely. Natural gas comprised 22% of electricity supply globally in 2014.

By 2060 this could change to anything between 17 and 32% — an absolute increase of between 300 and 1500-billion m3. It is well known that Asia is set to dominate global gas demand rises over the coming decades. The question is at which point a heavy dependence on imported gas will be perceived as a risk. Overall, fossil fuels will still play a significant role in the energy mix over the next few decades but the question of how rapidly e-mobility and other alternative fuels can ramp up is an issue being discussed in the boardrooms of the world’s oil companies. We have recently seen significant announcements from mainstream car manufacturers about the future direction of their product development and countries such as Norway are leading the way with electric vehicles comprising 20% of their total fleet today.

The new energy world is one with more stakeholders playing by different rules in new markets. What are great opportunities for some, represent new risks for others. As the finance community often reminds us, past performance is no guarantee of future success. This is now most relevant for the energy sector. We need to be open to the future and its new realities so we can build a new energy system that provides prosperity for all.

This is why we have adopted the theme of “Energy for Prosperity” for our next congress in Abu Dhabi with a firm focus on innovation. As an organisation, and with our members in 100 countries, we need to invest heavily in understanding innovation and the necessary enabling ecosystem so we can not only face the future, but successfully shape it.

This is the introduction to the report. Click here to download the full report

Acknowledgement

This introduction is republished here with permission.

Send your comments to energize@ee.co.za

 

 

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