The clean energy transition is bringing a major structural change in the generation profile of electricity systems around the world. The International Energy Agency (IEA) says that, while proper policies can ensure reliable energy access during the transition, the diffuse and decentralised nature of much renewable generation also raises the risk of cyberattacks, and many clean energy technologies rely on metals and minerals that are in tight supply.
Earlier in February, ministers responsible for energy from around 40 countries took part in an IEA Ministerial meeting on gas markets and supply security, discussing additional ways to work together in solidarity to limit the impacts of the invasion of Ukraine by Russia, as well as maintaining momentum on a clean and sustainable energy transition to keep the 1.5°C limit within reach.
Participating ministers considered the IEA’s analysis of natural gas supply and demand dynamics and concurred with the need to coordinate plans to mitigate the risks associated with the unpredictability of Russia’s use of energy as a weapon of political coercion, which has resulted in unprecedented price rises and volatility. Such risks need to be assessed in the context of the short-term limited global liquefied natural gas (LNG) supply capacity additions, as well as uncertainty related to the rebound of China’s economy and its potential impacts on global gas demand.
“While natural gas markets have suffered some bruises, they are today in a better shape than many expected one year ago,” IEA executive director, Fatih Birol, said. “But the reality is that winter 2023-2024 is likely to be the real test. The concrete steps we agreed on today, as well as the solidarity we demonstrated, gives me growing confidence that we will be ready to face the next wave of the crisis. There will be difficult days ahead, but the dividends in terms of energy security, affordability and climate neutrality will be long-lasting.”
Diversifying energy supply lines
Energy security has many aspects: long-term energy security mainly deals with timely investments to supply energy in line with economic developments and environmental needs. On the other hand, short-term energy security focuses on the ability of the energy system to react promptly to sudden changes in the supply-demand balance.
Alex Hunter, CEO of renewable energy storage company, Sherwood Power, says that while the transition to clean energy still faces several challenges, we can ensure a holistic and fair energy transition by taking a multifaceted approach that incorporates three key elements.
“Firstly, we must diversify our energy supply lines by incorporating multiple sources of renewable energy, rather than becoming overly dependent on one type of solution. This will increase resilience against supply disruptions,” explains Hunter. “We should also utilise mature supply segments where capital has already been invested, and there is spare capacity.”
“The clean energy transition has the potential to boost economic activity, create new jobs and pave the way for a healthier population. However, the transition requires a collaborative approach, to mitigate risk and to enable a transition which is holistic and fair to all,” agrees Darren Walsh, global co-head of energy at DWF. He says that it is imperative that those driving the transition to engage in a consultative stakeholder dialogue that involves proactive and comprehensive planning, and which allows societies reliant on existing energy resources to ‘keep the lights on’ in the meantime.
“The energy transition is building a more sustainable system but concerns around price volatility and supply chain issues remain during the period of rapid deployment of clean energy solutions. An increased demand for minerals will require diversified sources of supply and greater cross-border collaboration to keep up with the pace of demand growth and avoid a bottleneck.”
Embracing energy storage
Hunter also says that the energy sector needs to embrace solutions that do not compete against larger market segments, which often have greater buying power and can drive up prices for scarce resources. This is particularly relevant when thinking about energy storage solutions, where competition for resources required for batteries can be fierce.
For example, static batteries currently must compete with the automotive sector, which can offer larger contracts and drive demand, while Vanadium Redox Flow batteries rely on vanadium, which is used in stainless steel production; this demand has a dynamic effect on the price of the solution.
“Additionally, we must ensure that the commodities used in clean energy solutions are abundant, and available from broad and politically or economically stable geographic locations,” asserts Hunter. “This will help to ensure the stability of the energy supply and the sustainability of the transition.”
Moreover, the Center of Climate and Energy Solutions says that interest in microgrids is growing because of their ability to incorporate renewable energy sources and sustain electricity service during natural disasters – a prime example of which being the unusual cold weather events that disrupted power supplies in Texas in 2021.
Microgrids have several benefits for the environment, utility operators, and customers, offering the opportunity to deploy more zero-emission electricity sources, thereby reducing greenhouse gas emissions. They can also make use of on-site energy that would otherwise be lost through transmission lines and heat that would otherwise be lost up the smokestack; improve local management of power supply and demand, which can help defer costly investments by utilities in new power generation; and enhance grid resilience to more extreme weather or cyber-attacks.
“Access to electricity should be equal regardless of location and the maturity of existing grid solutions. In regions with less developed energy infrastructure, microgrids can and should play a crucial role in ensuring access to electricity,” says Hunter.
Taking advantage of decentralisation
Finally, while there may be some concerns about the decentralised nature of renewable energy generation, it is also capable of increase energy security by reducing dependence on large, centralised power stations. Security can be further enhanced by embedding energy generation next to critical infrastructure, such as hospitals, data centres, emergency services, manufacturing, and food supply logistics.
Ben Cooper – energy, commodities and utilities lead at BJSS – agrees, and argues that a decentralised energy system increases the opportunity to create innovative value propositions and services which could help realise further benefits for consumers and accelerate the path to net-zero. Technology and successful innovation are crucial to this process, and those who can successfully leverage the power of customer and business data, alongside the cloud, will be able to navigate industry volatility and maintain their competitive edge.
Last year, BJSS partnered with Elexon to deliver the Helix Programme, a major transformation programme to support the rollout of Market-wide Half Hourly Settlements (MHHS). In the current market, energy tariffs are settled based on the average customer usage profile and infrequent meter readings (taken over weeks and months). Under MHHS, smart meters will record the amount of energy consumed or exported within every half-hour of the day.
According to BJSS, this provides an opportunity to make the settlement process for the industry quicker and more accurate. This leads to the delivery of positive outcomes for UK consumers due to reduced overestimations, leading to less waste, reduced environmental impacts, and enhanced security of supply.
Recent conversations facilitated by the IEA are a welcome step in the right direction, with ministers noting the importance of detailed modelling and analysis, energy savings, and improved energy efficiency. But, with the war in Ukraine and its impact on energy security sharply felt, it is now imperative that action is taken quickly to bolster energy networks around the world ensure stability and security for the future.
