April 12, 2024

Prioritizing climate technology investments in the clean energy economy

Steve Smith is the chairman of National network partners and group head of Strategy, Innovation and Market Analysis at National Grid.

The global shift to renewable energy is well underway – a transition underlined by a COP28 agreement between more than 130 governments to triple renewable energy capacity by 2030. This surprising agreement strengthens the tailwind already provided by the green energy incentives of the US Inflation Reduction Act.

Now we are faced with inevitable questions: What are the next steps? Where do we go from here? How do we avoid the mistakes of cleantech 1.0, when government spending programs in the early 2000s artificially accelerated many green business models that ultimately failed?

As head of the utility industry’s only Silicon Valley-based investment and innovation arm, I’d like to share my perspective on how the business world can spend money wisely in this transformative area. In other words, how can we ensure that the sustainable energy economy is equally viable both financially and environmentally?

Curbing climate change by accelerating the global transition away from fossil fuels is the most important challenge of our generation. However, the growing demand for renewable energy exceeds the ability to supply it. Investments in the companies and technologies that enable change must become smarter and more targeted.

On-the-ground conditions require that any model for advancing the clean energy transition must recognize some of the realities of the 21st century. Sources such as solar and wind energy are subject to variability and due to their nature are not always available to supply electricity. Users’ peak demand does not always match the peak generation potential, a phenomenon illustrated by the so-called duck curve. Add to that the electrification of transport, home appliances and heating (which will double or triple electricity demand), and the challenge becomes even greater.

The electricity grid needs more automation if it wants to be flexible in matching supply and demand. Naturally, customers expect significant benefits and minimal hassle if they want to join the clean energy revolution.

The investments that pay off are those that address this reality in innovative ways. I believe companies that fit into one of the following categories have the greatest potential for success. I consider them the four pillars of the clean energy transition.

1. Digitally enabled electricity networks

The news arises when supply and demand become out of balance, putting so much pressure on the electricity grid that outages occur in extreme weather. The reverse can also sometimes happen, with supply being so plentiful that electricity prices drop below zero. As we add more electrical assets to the grid, from electric cars to backup batteries that can power an entire neighborhood during a power outage, we will see a more complex and dynamic grid than we ever envisioned.

Using predictive analytics and artificial intelligence, dynamic software platforms can coordinate the abundance of solar energy on a sunny day to divert demand away from conventional energy suppliers. In this way, automated electrical networks simultaneously reduce CO2 emissions and deploy renewable energy sources on a scale that is not feasible with conventional network designs.

2. Improved operational efficiency

Managing renewable energy production is just one of the challenges utilities face. The existing infrastructure often limits the ability to supply that power to the customer.

In the long term, that means new transmission lines. In the meantime, the efficiency of current energy networks can be optimized by using artificial intelligence as well as cloud and edge computing.

For example, current line capacity is often based on estimates that include weather conditions and other factors. Real-time monitoring using remote sensors can detect actual line conditions. We found that better data on how much electricity a given line can carry without overheating can add as much as 30% more power to the existing transmission system. This new capacity can in turn help the industry scale up new energy generation sources to support broader electrification.

3. Decarbonizing gas pipelines

Recognizing today’s reality also means recognizing that natural gas still has a role to play as a transitional step toward fully decarbonizing the electric grid. The extensive, established network of pipelines in the US will be in use for the foreseeable future as we transition to cleaner solutions. In the long term, they also have the potential to transport renewable natural gas and hydrogen, a carbon-free energy source that is increasingly the focus of technology innovators.

For practical reasons, excavation work will remain necessary to maintain existing networks and add or replace pipelines. To meet the pace of climate change, this infrastructure work will increase the need for technologies such as accurate subsurface mapping. A parallel green technology opportunity lies in the increasing adoption of electric excavators and backhoe loaders that reduce CO2 emissions by replacing diesel equipment.

4. Putting customers first

Last but not least, a customer-first culture is one of the requirements for achieving net zero. There are clear business (and planetary) benefits to customers seeking out carbon-reducing solutions and behaving in a network-friendly manner, rather than tricking them into embracing the concept.

Climate awareness and lower costs (including tax incentives) are already proven incentives. However, optimizing vehicle charging and making it more cost-effective can not only make customers happier, but it can also help energy providers balance periods of high demand, which can reduce the need to charge fossil-fueled backup generators. start.

Pursue a clear vision of the future

Whether for energy companies, technology innovators, investors or customers, the opportunities created by the clean energy transition are enormous – limited only by imagination and creativity. To achieve a zero-carbon economy that is sustainable, renewable and financially viable, we must apply the most relevant technologies developed today to the challenges of tomorrow.

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