In the run-up to COP26, extreme prices and supply constraints in today’s global gas markets have re-focused people’s minds on energy security. Our newly appointed Director of Sales & Marketing, Tim Rogers, explains why a greener future is likely to be a more secure future too.
Gas prices in October reached ten times their level a year ago, and with very little gas in store, many are calling for the UK to face up to the issues of energy security and its continuing reliance on fossil fuels. In winter, 90% of UK homes are heated by gas, and at peak times gas generally supplies around 50% of our electricity. To cover shortfalls the UK is heavily reliant on gas and power imports from continental Europe and LNG from increasingly volatile global markets.
How might we address these issues? Kneejerk reactions might focus on securing additional gas supplies or increasing gas in store. In today’s short-term traded world, large increases in gas storage are off the table (without large subsidies) and further imports weaken the UK's energy security. Therefore, it’s critical that we double down on decarbonisation because ultimately, this is where the real answer to energy security lies.
Decarbonisation strengthens our energy security
It could be argued that the root cause of today's energy crisis is the UK's continued reliance on a fossil-fuel-based market, with its exposure to global commodity markets and geopolitics. This is much less of an issue in a renewables-based energy system where we own or control most of the generation and storage, harnessing abundant energy resources, particularly wind and solar.
Clearly, renewable energy sources have inherent weather-driven volatility, arguably moving the industry from the mercy of market forces to forces of nature. Also, renewable generation assets tend to be relatively small and distributed in large numbers presenting grid complexities not seen with large-scale fossil fuel generation. So, managing complexity, storing energy and operating in real-time will be key to unlocking a secure energy future.
Distributed renewable generation - increased resilience with new challenges
A green energy system will be a vastly more decentralised one than it is today; there are multiple smaller, distributed generation sources, rather than a low number of large power stations. The system will rely on dynamically orchestrating a finely-tuned balance between different renewable generation sources, supported by dispatchable energy flexibility such as batteries, demand side response (both industrial and residential – especially as we continue to electrify our transportation and heating/cooling), and longer-term energy storage solutions under development.
Such a distributed and diverse set of solutions needs to be coordinated efficiently to maintain our energy resilience, and the only way to achieve it is through powerful real-time digital solutions crunching through many different streams of data.
Digitalisation enables intelligent management of the complexity
Technology will be critical to profitably navigating our way through these increasingly complex and fast-paced energy markets.
In a renewable-centric future, there will be a new set of variables to the ones that dominate today. Physical assets, financial markets, and location-specific weather will become increasingly interlinked. In the emerging market design, complexity, volatility and fine granularity are ‘the new normal’ and digitalisation is essential to transform these challenges into opportunities.
Fortunately, we’re standing on the shoulders of giants – the tech boom over the last 20 years has given us powerful digital communication, software tools and AI to rise to the challenge. We can now apply them to make the green energy world work.
How will we do it?
This new market dynamic will be increasingly based on energy flexibility, innovative commercial models, and new customer propositions… all managed with intelligent, digital tools. It will require various forms of flexibility delivering over differing timescales; such as batteries for short-term response measured in seconds or minutes, along with longer-term forms of storage to plan for hours and days ahead and Demand Side Response to take advantage of customer flexibility. The diversity of this market is complex, but the unpredictability caused by the variable supply of renewable generation is manageable. Insecurity caused by the forces of global supply and demand (and international politics) is much harder (and more expensive) to deal with.
The complexity inherent in these distributed systems can only be managed by harnessing the vast amount of data churned out by generation assets, the markets, and the forces of nature in real-time. AI-based decision-making and automation tools can help manage this amount of information with the time sensitivity required for energy companies to remain competitive and for asset owners to see an attractive return on their investment.
Transforming these seemingly disparate data streams into inter-operable, modular software solutions will be key.
The challenges of balancing a system based primarily on renewables are not insurmountable and system operators are making great progress in preparing and transforming the network for distributed generation. The energy system will look completely different, with a shift from a centralised model to a vastly more distributed network. It requires harnessing real-time data to enable faster, more informed decision-making, and, critically, it requires adopting the digital tools that can enable a green and more secure energy future.
We’re looking at a difficult winter ahead but consider the long game: if calls of a climate crisis aren’t enough motivation for our society to achieve net zero carbon emissions, then perhaps a price crisis will be the catalyst we need to act… and with urgency.