It’s no secret that global energy demand continues to rise, with some estimating an increase of a third by 2040.
Meanwhile, the energy industry is on the cusp of a 100-year change away from oil and coal hydrocarbons towards renewables and natural gas. Every stakeholder in the industry has a role to play in the energy transition, including within the industrial sector which accounts for 50% of global energy consumption.
In the long-term, businesses will naturally have to adapt to new models and deal with pressure to reduce their energy consumption – but it is legislation that typically drives change at first.
Energy efficiency is no different as various motivations include protecting earth’s atmosphere, national security concerns, and reducing overall energy cost to improve business competitiveness.
In a new white paper, IHS Markit has shown how technology can help drive the energy efficiency measures– from reducing energy cost to residential consumers, to reducing energy usage from industrial customers.
Just from the four case studies of smart metering, energy storage, switchgear and motors, the potential exists for global savings of 14% in energy demand and for some consumers to reduce their energy cost by around 10%. If even half of those savings can be realised, it becomes a huge offset against the growing global energy demand of the future.
New technology as an efficiency driver
While residential and commercial buildings consume around one-third (30%) of global energy, the industrial sector consumes 50%. With just two examples of technological changes from each of these areas, the four case studies of smart metering, energy storage, motors and switchgear can sum to create meaningful energy efficiency savings worldwide:
- Advanced Metering Infrastructure (AMI) gives consumers greater visibility into their energy consumption, which is shown to result in a reduction in energy demand. More than 100 million communicating electricity meters now ship to consumers and industry each year, in addition to the 700 million smart meters already installed worldwide.
- The installation of energy-storage technology alone does not reduce the total energy demand on the grid, but it allows better flexibility for consumers and the utilities to decide whether to use the energy from their energy storage systems or from the grid itself – potentially reducing their energy cost.
- Motors account for 60% of industrial energy consumption – in fact, the single largest area of improvement infor energy efficiency that can be made is by upgrading from international efficiency class-one and class-two (IE1 and IE2) motors to IE3 and IE4 motors.
- Redesigning switchgear through size, weight, and power (SWaP) can lead to reductions in energy use and heat loss by up to 80% versus traditional designs.
Each technological piece of the puzzle is moving at its own adoption rate and it’s highly unlikely that even half of the full savings will be realized in the next 10 years. However, the potential savings are clear for consumer and industry and will become a neccessity through increased legislation and growing energy demand placing strain on generation in the future.
Different approaches for different industries
A clear difference in approach exists between energy utilities as infrastructure (and power) providers, and industrial companies as energy consumers. Financial incentives for these two companies differ, despite the same core legislation packages forcing action from both, and this reflects in their approach to investment. Transformational technologies such as IoT are also helping to drive this transition across all industries.
The result is a clear difference in technological trends within the two industries:
- The Industrial Revolution 4.0 shows how technology and IoT is driving change within the manufacturing industry, but so much can still be achieved in energy efficiency through hardware improvements and replacement. Power consumption is one of the biggest costs for industrial automation. There is therefore a direct and significant financially-driven incentive towards energy efficiency as it reduces one of their largest cost factors.
- While the focus of industrial automation companies is on efficiency cost savings created through investing in hardware improvements, energy technology companies are increasingly focused on software solutions and energy management. The energy industry is undergoing a fundamental shift as the three D’s of transition take hold; Decarbonization, Decentralization, and Digitalization. The addition of scalable renewable solutions (e.g. solar) are changing the supply-side of the grid, whilst technology changes such as Electric Vehicles place new demands on the infrastructure. New technology hardware continues to ship quickly, for example IHS Markit forecasts that the US market alone will install over 850 MW of residential energy storage from 2018 to 2022. However, it is through a combination of new hardware but also software solutions that will help to reduce energy consumption and optimize demand cycles to reduce costs.
Energy efficiency goals will only increase, as more legislation comes to fruition, and as the business case for improved hardware and software continues to grow. There will be even more focus on legislation in the coming years, as the European Union Energy Strategy, China’s 13th Five-Year Plan and other regional legislative efforts reach major milestones in 2020 and 2030.
The financial incentives of energy efficiency differ, but the same core legislation packages are forcing action in all industries, which is reflected in their varied investment approaches. From simple hardware improvements to transformational technologies such as IoT are here to help expand the transition toward energy efficiency across all industries.