The future of smart energy and power generation13 January 2016
With rising costs, subsidies drying up and a global oil glut not set to end anytime soon, the energy market is more open than ever to innovative and disruptive ideas that balance profitability with sustainability and efficacy. So where does the future lie and where should the investments be? Oliver Hotham visits General Electric's Global Technical Learning Center in Berlin to hear some of the industry's key players, including Jean Francois Gagné of the International Energy Agency, and General Electric CEO Jeff Immelt, discuss the future of smart energy and power generation.
By the time this magazine goes to press, world leaders will have gathered in Paris for what is intended to be a historic conference: to decide, at last, on a unified plan of action to tackle global climate change and mitigate its already devastating effects. It's not going to be easy; there's real disagreement over the best ways to accomplish this and any solution will have to be a compromise.
But it's certainly going to be a step in the right direction, argues Jean Francois Gagné of the International Energy Agency (IEA), a long-time expert in the use of technology to make energy more sustainable, efficient and affordable.
"There's a big challenge because we know that over the past year, the past decades, growth has been intrinsically linked to increased emissions," he says at GE's Electrifying Innovation 2015 conference. "But we're fairly confident that what Paris is doing is actually helping us get to where we need to go.
"When you look at the contributions that have been flagged by different states, we see that we are on the right trend to bend the curve."
This won't be easy. The industry is still a long way from a total sustainable energy transition, and much of IEA's work, according to Gagné, is to push negotiators and decision-makers to be more ambitious about their ability to really transform the market.
"We've been doing this for many years," he says. "Through different pieces of analysis, understanding what the cost-effective solutions are that exist, to go from how we get energy today to how we need to deliver energy services in the future. But clean energy is not ramping up fast enough."
Two years ago, IEA produced what it called a 'carbon intensity net', designed to understand the quantifiable impact of the energy sector on the environment. The results weren't extremely uplifting: over the past 40 years, not much has changed. Despite all the progress made on developing sustainable sources of fuel in the last decade, a large part of our energy still comes from fossil fuels.
In many ways, Gagné was preaching to the choir, at an industry get together for figures from across the business of energy to think seriously about the rapidly changing environment - and where they fit into it all - as well as a chance for General Electric to show off its newly built innovation centre just south of Berlin.
"Building on the long legacy of industrial expertise, General Electric is committed to leaving the world better than we found it for our future generations," says Joe Mastrangelo, CEO for the company's power conversion division as the conference began.
"With this thought in mind, we are happy to host some of the most credible and influential innovators and industry mavens to put forth, openly discuss and exchange ideas, opinions and technological advances that are shaping the future of energy."
The problem is that renewables simply aren't developing at the speed they could be, and Gagné's work involves helping governments and policymakers understand the potential they have to accelerate this transition. Much of this could be in the form of research and development investment, he argues.
"What's happening is we're not rolling out the best technology," he argues. "There's still a lot of work to be done. Governments have to triple energy R&D funding."
There's also a significant role for government when it comes to regional challenges. It seemed fitting, for example, that General Electric's conference should be taking place in Germany, a long-time powerhouse of energy innovation fuelled by its people - a strength that will be key for the next few years in overseeing this transition to more diverse and sustainable types of energy. "What we invest in when we come to Europe is innovative people," says the company's chairman of the board and chief executive officer Jeff Immelt. "The engineers, the manufacturing teams and people on the floor.
"I think the hope is that we can match this innovative team with innovative markets, and this is going to require some liberalisation of the markets and some harmonisation. That's going to take Brussels and it's going to take governments to make that happen."
General Electric is 140 years old, but these days, argues Immelt, it also has to be a software company to stay competitive and drive productivity.
"A gas turbine today has maybe 500 sensors; a jet engine has maybe 200 sensors; an MR scanner is a computer," he says. "These instruments are taking continuous data, and this data can be modelled to really drive better fuel efficiency, better environmental performance and better customer outcomes."
It's clear that, for General Electric, this meeting of minds between technology and analysis, between industry and analytics, will be crucial to the energy shift. The intersection where these two worlds merge is where, increasingly, the interests of multinationals and small businesses alike meet.
General Electric, among many others, is spending big money to be able to really harness this kind of data, which could transform the way energy is regulated by consumers and producers. It's part of the company's transition from an industrial company to an 'industrial digital company' and developing usability that runs all the way from its engineers to its customers.
"This really means merging the physics and the analytics around the products," says Immelt. "Every one of our products has a digital twin that can be used to optimise its performance."
When worlds collide
Merging the physical and the tech world can also enhance tracking systems technologies, tools like smart grids and energy storage, allowing customers to better monitor usage and consumption, as well as to better regulate fuel use.
"We need to work with governments on new technologies and new mechanisms to better understand how the whole energy system is moving," Gagné says. "One of the key aspects we're discussing is understanding what type of information do we need to be able to track and see where we are making the right kind of progress?
"We're still seeing good news: there is tremendous progress happening in renewable power, and the ability of renewable to become mainstream technology. But none of these are moving as fast as we see them being able to move."
Much of this is about joining up ecosystems; bringing customers and suppliers together to drive efficiency of the products they use. There are lots of terms for these types of relationships, from the 'industrial internet' to the 'internet of things', but what it all adds up to, at least from General Electric's point of view, is the potential to decrease unplanned downtime, optimise assets and drive better fuel efficiency.
"I truly think that this has to be led in the industrial context, and not from the software context, in order to be successful," says Immelt.
General Electric is doing what many energy firms are doing, spreading investments across many different sectors and making sure it doesn't rely on any one source of fuel for its future. The company is large enough that it can place bets on a variety, from gas and coal, and nuclear to renewables such as wind power and solar.
"It's very difficult to predict exactly where the future's going to go," says Immelt. "But placing bets across the framework and working with our customers is very important to the world of energy."
The finance line
Optimising performance also makes technology more cost-effective. Despite the enormous investments needed for the slow transformation to fully sustainable energy, Gagné argues, which he estimates to be roughly $40 trillion, the fuel savings associated with the shift will massively offset this, amounting to $115 trillion. In other words, it isn't a costly transition but a long-term investment.
"But what is needed is strong and clear policies that make investment less risky so it can actually deliver on its benefits," he says.
In a time of tightening belts across Western Europe - traditionally a leader in clean energy investment - governments are scaling back on investments in sustainable fuel sources. With a view to bringing down bills, the UK Government, for example, recently announced that it would be phasing out its subsidies to renewable, much to the chagrin of the industry. As this increasingly becomes the norm, it seems, the private sector will have to lead the way.