The energy transition: challenges and concluding remarks
We have reached the last part of the energy systems week. We hope that you now have a better understanding of what energy systems you find around you, and how they are integrated into your, and other regions in the world. You are now able to explain where and why energy is ‘lost’, and how to assess energy system performance. By using the ‘systems thinking’ approach, you obtained an overview and an understanding of how our energy systems are interrelated. This understanding can help to identify the problems and challenges of energy transition.
To be able to live sustainably, we need to drastically reduce our fossil fuel consumption worldwide by improving end-use efficiency, conversion efficiency and by introducing renewable resources. To stay ahead of depletion of fossil resource, we need a timely transition to renewable energy sources.
We need to transform our energy systems. Why does this present such a challenge? We already see many solar panels on rooftops, and horizons are sometimes filled with windmills. The prices of these technologies are decreasing, making them available for more and more people. In some cases they are already competing economically with fossil fuel based systems. Is it then not just a matter of time? If we wait long enough, will renewables eventually take over our energy mix because of availability and price? A number of changes in energy systems are beginning to work their way. To mention only a few:
- Large-scale adoption of affordable PV-systems in a number of countries
- Rapid development of wind technology; development of large-scale wind farms
- Electrification of transport
- Network developments
- grid modifications to facilitate decentralised energy systems
- transforming distribution networks to smart grids to allow intelligent matching of local demand and supply
- expanding and interconnecting transmission networks to connect large-scale wind farms and solar parks in favorable locations to centers of demand
- Inclusion of large-scale energy storage -- pumped-hydro systems and compressed air storage systems
Figure 1. The integrated and intelligent electricity system of the future.
Our electricity networks have largely been built to connect many users to only a few points of production – a centralised system. Harvesting renewables implies decentralisation, where many consumers also become producers, who at times export electricity to the grid. To accommodate large numbers of solar panels and wind mills, our distribution and transmission networks need to be adapted and expanded to avoid network congestion and failures.
At the same time, large-scale systems are developed and built to harvest renewables, which presents challenges for grid development at a continental scale. To connect large offshore wind farms, for example, may require grid extension and grid capacity expansion to transport energy from remote locations to cities. And expanding the geographical scope of our grids can unlock so many places to locate wind farms, solar plants and other renewables, that intermittency may not be a problem anymore – eventually, there may always be sufficient systems that produce energy. Furthermore, grid development may augment the role of large-scale storage provided by pumped-hydro systems.
A system largely built on decentralised solar-PV, hydro- and wind power requires flexibility – users may adjust their demand to when power is available. Smart grids may allow an exchange of energy within neighborhoods and intelligent shifting of demand in time. Users may decide to adopt battery storage for some of the energy harvested bytheir solar panels to cover periods when there is no sun. Such storage systems preferably have decent ‘round-trip’ efficiencies – they should yield at least a decent share of the energy stored as useful output at affordable cost. Indeed, much effort is put into developing affordable battery systems to store energy harvested from renewables. Technologies for electricity considered range from batteries for small-scale PV-systems, to large-scale conversion and storage of chemicals (hydrogen, ammonia). For heat, underground storage is now a proven technology.
The cost of energy counts, of course. Presently, renewables compete with fossil-based systems. With energy demand increasing and the fossil resource horizon shortening, at some point energy prices will increase, favoring renewables. Renewables, however, have different characteristics. For one, the ratio between investment cost and operating costs is radically different.
A gas-fired power plant requires a decent investment. Operating it usually incurs substantial costs for gas. Coal-fired and nuclear plants are more costly to build, but their fuel costs are substantially lower. In contrast, realising wind, solar, geothermal systems requires substantial up front investments, but to operate them only incurs maintenance cost. Revenues expected or contracted should suffice to recoup investment. The financial sector already has ‘engineered’ new financing and business models to match these characteristics of renewable energy systems.
Wind and solar only deliver when there is wind or sun; they are intermittent sources. When the share of these renewables in the electricity-generation mix is low, electricity from a wind farm may fetch a decent market price, and the grid may serve as backup. If the share of renewables increases, however, electricity from wind produced at zero marginal costs may flood the market, and drive prices down. We thus may need new market arrangements. The challenge we face in the energy transition is to replace a system that is built on fossil fuels with all its advantages that we have become accustomed to. Fossil fuels have a high energy to volume ratio; they can be transported all over the world at acceptable cost. Their production is continuous, while capacity used can be regulated. Oil products, coal and (liquefied) gas can be stored as is. Together, this has led to a continuous availability and supply of fossil fuels and systems supplying transport fuels, electricity and heat at competitive price.
Encouraging developments are under way. In 2015, the share of hydro power (7%), nuclear (4%) and renewables (3%) together where at 14%2. Solar and wind continue to grow – they have become attractive. Indeed, the cost of electricity from solar-PV in some countries already is lower than the electricity market price. Furthermore, the scale of wind mills has increased dramatically, reducing their cost per Megawatt, and electric vehicles have emerged to revolutionise transport.
Figure 2. Global energy consumption from 1820 to present by different fuels.
The energy transition decision-making process involves many players, who take into account our legacy system, consider many, sometimes competing developments, opportunities, evaluate barriers and make trade-offs. Energy systems inevitably change and develop over time; the systems of today are the result of many years of development. The energy transition requires new systems, new technology, new and expanded networks, new storage systems. Inevitably, these require investments – in equipment, but also in education, knowledge, to teach people how to build and use them. To let the energy transition materialise.
Optional links for further reading on specific topics:
- The integrated and intelligent electricity system of the future, by IEA’s Energy Technology Perspectives (page 7).
- BP’s Statistical review 2015
- Our finite world’s energy consumption chart
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