Energy transformation isn’t something for the future. It is happening now. PwC can help you make the right moves in an era of new energy sources, distributed generation, smart grids, digital transformation and increasingly empowered customers.
The power and utilities sector is more resilient than most. But the COVID-19 pandemic has created a unique supply-and-demand shock for the industry, resulting in both near- and long-term uncertainty and operational challenges.
Companies also need to rapidly transition to net zero to prevent the worst impacts of climate change. This will require a new energy mix – including green hydrogen and other alternative fuels– that will break down the traditional barriers between energy sectors, and with other industries as well.
All of this will accelerate industry consolidation and drive utilities to explore new business activities.
Adapting to climate change and a new energy mix will require the power sector to think differently about every aspect of operations. This includes embracing new kinds of relationships with consumers, critically examining how it measures and uses performance data, and reevaluating what business success looks like.
Moving away from carbon-based sources of energy to renewable ones will radically reshape the energy ecosystem. For the power and utilities industry, this transformation brings both risks and opportunities. The leaders will be those that can build an energy infrastructure that’s more diverse, more flexible and more distributed. Those that can’t – or won’t – will fall behind.
The future energy infrastructure will be more complex than today’s. And it will create new paths for generating molecules that deliver energy where it’s needed. Instead of using carbon molecules to power the transport and industry, tomorrow’s energy systems will rely on electricity produced through renewable sources. Electricity has the potential to become the dominant form of power delivery for everything from industrial processes to home heating to transport.
Decarbonizing the power and utilities sector requires a large-scale shift to renewable sources of energy. This will mean significant investments in new energy infrastructure. That includes not only wind and solar energy development but much wider deployment of battery-based or thermal energy storage to smooth out volatility in supply and demand.
This is feasible, and many of these needed changes are already seeing considerable momentum. For example, the generation of electricity from renewables continues to accelerate around the world (Source 3). The International Energy Agency (IEA) expects that, by 2040, renewables will account for 47% of the global electricity market, up from 29% today.
3. IEA, Press Release, https://www.iea.org/news/renewable-electricity-growth-is-accelerating-faster-than-ever-worldwide-supporting-the-emergence-of-the-new-global-energy-economy
The energy sector’s path to net zero, the IEA notes, is “narrow but still achievable.” (Source 4)Transforming an industry that’s currently responsible for about three-fourths of all greenhouse gas emissions will mean a push to deploy clean and efficient energy technologies on a massive, global scale.
Governments will need to invest heavily in energy research and development. Support will also be needed from both businesses and individuals, as this energy transition will demand behavioral and societal changes as well as technological ones.
4. IEA, Net Zero by 2050, https://iea.blob.core.windows.net/assets/deebef5d-0c34-4539-9d0c-10b13d840027/NetZeroby2050-ARoadmapfortheGlobalEnergySector_CORR.pdf
Efficiency improvements are critical to temper the growing demand for energy. Without more efficient technologies and significant change in energy policies, global energy consumption is projected to increase by 50% by 2050. (Source 5)
The power and utilities industry will also benefit from ongoing efficiency increases on the supply side. Even with recent increases in commodity costs, the cost efficiency of renewables such as wind and solar has risen dramatically over the past couple of decades.
5. eia, https://iea.blob.core.windows.net/assets/deebef5d-0c34-4539-9d0c-10b13d840027/NetZeroby2050-ARoadmapfortheGlobalEnergySector_CORR.pdf
Around the world, many regions need to make large investments to bring their grid and power infrastructure up to date. Even more upgrades will be required to defend it against climate change risks that include extreme weather, droughts and wildfires. Without resilient energy systems and up-to-date digital technologies to help balance supply and demand, utilities face the growing potential for rolling blackouts that could affect large areas for days, weeks or even months.
Utilities must also have IT defenses that can protect the grid against ever-evolving cybersecurity threats. In addition, modernizing systems will be critical to meet rising energy demands.
The electricity grid will provide the backbone for a transformed, net zero energy system that will include more renewable energy sources, wider adoption of electric vehicles, home-based solar generation, storage and more. So grid companies must take the lead. They have a critical role to play in bringing about a cleaner, more distributed energy system – from educating consumers about required behavioral changes to integrating innovative energy storage technologies to supporting net zero industry and government policies.
Fuelling a resilient future through cross-industry convergence, powerful alliances, greener investment and greater use of renewables will deliver radical decarbonisation, creating greater value for people, planet and performance. It is an imperative for today.
The emerging smart mobility era requires innovation across many sectors, including power generation, utilities and chemicals. Sustainable electric transport will depend on an entire ecosystem of technologies, strategies and policies built through public-private collaboration.
The green hydrogen economy will be an essential element of global decarbonisation. So it’s essential to understand what will be needed to develop sustainable hydrogen technologies and markets.