Powering the Future

Since the beginning of its existence, man has needed energy to survive and advance. But what is energy, and why is it so important in economics?

In physics, the term energy is defined as the capacity to do work. Still, in technology and economics, which is the area that interests us, it refers to a natural resource that can be renewable with a low impact on the environment, such as wind or hydroelectric power, or non-renewable and limited or finite, i.e., it can run out at some point, such as oil, natural gas or coal.

Most countries base their economic and social development to a large extent on energy use. However, in 2021, tensions began to emerge in energy markets due to several factors, including the extraordinarily rapid post-pandemic economic rebound, which escalated into a full-blown global energy crisis following the Russian invasion of Ukraine in February 2022. According to the Goldman Sachs index, in 2021, the price of energy rose by 59%, far outpacing the rates of other commodities such as metals, agriculture, or precious metals.

The situation has led to inflation that has slowed economic growth and threatened recession in some countries. In addition, a large number of emerging economies are paying much more for energy; in Europe, some gas-intensive factories have cut production, and in China, some have suffered outright power cuts. In emerging and developing economies, rising energy bills have increased extreme poverty and reversed progress toward energy access.

Energy Consumption

What is energy consumption? It's the total energy expenditure, which includes more than one energy source. Generally, it's considered the consumption of electrical energy in light, but it also has other sources such as gas, coal, oil, renewable, hydro, and nuclear energies. In addition, energy consumption is connected to energy efficiency.

While the world population is increasing rapidly, total primary energy consumption is increasing much faster. That is, energy and electricity consumption per person is increasing worldwide. People in rich countries tend to have high energy consumption to maintain a high quality of life. In turn, developing countries, especially the BRICs (Brazil, Russia, India, China, and South Africa), have rapidly growing primary energy consumption in an attempt to improve their economic opportunities.

Your business energy consumption (measured in kilowatts per hour or kWh), is the amount of energy consumed in your facility during a given time; knowing this is key if you want to see if you are being energy efficient and if you need to make savings.

You should remember that many factors influence energy consumption, such as the type of activity your business performs, the number of employees, consumption habits, and even the energy performance of the building where your business is located. However, with the right information and thanks to technology, it is possible to make responsible use of energy and reduce your energy bill.

A Mayor Edad, Mayor Consumo

A study published in the journal Energy Research & Social Science concludes that we consume more energy as we age, climate changes energy demand patterns, and energy demand increases among older people in warmer temperatures.

Hossein Estiri, a researcher at the Massachusetts General Hospital Informatics Laboratory and one of the study's authors, says that residential energy consumption increases with age and begins when young adults leave the family home in their early 20s; after age 50, their consumption begins a slow rise; and after age 70, consumption increases rapidly.

Using survey data on "degree days," which measure heating and cooling demand, the researchers showed that the change in demand due to aging was highest in warmer temperatures, increasing among those over 70, probably due to cooling needs.

The results, Estiri said, warning that the energy needs of the rapidly growing elderly population may need special consideration. "The aging population will have a big impact starting shortly. There will be a lot of problems that we'd better start thinking about."

Renewable Energies

It is a fact that the global energy crisis is driving a sharp acceleration of renewable energy installations, such as solar or wind, with total global capacity growth set to nearly double in the next five years. According to Renewables 2022, the latest edition of the International Energy Agency's (IEA) annual report, global renewable energy capacity is expected to increase by 2,400 GW over the 2022-2027 period, equivalent to the entire electrical capacity of China today.

According to the report, renewables will account for more than 90% of global electricity growth over the next five years, becoming the largest source of global electricity by early 2025. According to Fatih Birol, Executive Director of the IEA, "The current energy crisis can be a historic turning point towards a cleaner and more secure energy system. The continued acceleration of renewables is critical to help keep the door open to limiting global warming to 1.5 °C."

For its part, the Statistical Review of World Energy 2022 report prepared by BP warns of the importance of energy "security" and "affordability," along with "reducing carbon emissions."

The report asserts that in 2021: primary energy demand increased by 5.8%; renewable energy increased by more than eight exajoules (EJ); carbon dioxide emissions from energy use increased by 5.7%; oil consumption increased by 5.3 million barrels per day; natural gas prices rebounded strongly in all three major gas regions; global natural gas demand grew by 5.3%; and coal prices rose sharply, but coal consumption grew by more than 6%.

The same report reveals that electricity generation increased by 6.2%, but wind and solar reached a 10.2% share of electricity generation, surpassing the contribution of nuclear power.

Renewable primary energy (including biofuels but excluding hydro) increased by about 5.1 EJ, exceeding the previous year's rate by 15%, and solar and wind capacity continued to grow, rising by 226 Gigawatts (GW). At the same time, hydroelectric generation decreased by about 1.4%, and nuclear generation increased by 4.2%.

Solar PV and onshore wind are the cheapest electricity generation options in most countries worldwide. As a result, global solar PV capacity will nearly triple in 2022-2027, overtaking coal and becoming the world's largest source of energy capacity. Together, wind and solar will account for more than 90% of the renewable energy capacity added in the next five years.

Producing and using electricity more efficiently reduces the amount of fuel needed to generate electricity and the number of greenhouse gases and other air pollutants emitted. Electricity from renewable sources such as solar, geothermal, and wind does not generally contribute to climate change or local air pollution, as no fuels are burned.

Smart Cities

Given the above, many countries, mainly in Europe, are beginning to generalize the development of smart cities.

A smart city uses the potential of technology and innovation, along with other resources, to promote sustainable development more efficiently and improve the quality of life of its citizens.  The internet of things (IoT), big data, mobile applications, and industry 4.0, among others, are improving the efficiency of cities.

Several European Union (EU) policies promote sustainable, healthy, and competitive urban areas while addressing climate challenges by providing citizens and businesses with secure, affordable, and clean energy. Some of these policies include the following:

·   The European Strategic Energy Technology Plan (SET-Plan) supports the technologies with the greatest impact on the EU's transformation to a low-carbon energy system and fosters cooperation between countries, companies, and research institutions.

·   Through its Explore-Shape-Deal process, the European Innovation Partnership on Smart Cities and Communities has matched approximately 130 projects with a value of more than €610 million in investments.

·   Launched by the European Commission in 2008, the Covenant of Mayors for Climate and Energy brings together nearly 11,000 signatories working on sustainable energy and climate action plans, reducing greenhouse gas emissions by 55% by 2030. This will strengthen the resilience of local and regional communities with access to affordable, secure, and sustainable energy, and alleviating energy poverty. In May 2022, the Compact launched the Cities Energy Savings Sprint Covenant to accelerate energy savings under the REPowerEU plan.

·   In September 2020, the "100 Climate Neutral Cities by 2030" mission began promoting systems innovation across the entire value chain of investment in cities, focusing on multiple sectors such as governance, transport, energy, construction, and recycling. Employing digital technologies, it aims to ensure that participating cities act as innovation hubs enabling all European cities to follow suit by 2050.

But beyond Europe, renewable energy growth over the next five years is also driven by China, the United States, and India, which implement policies and introduce regulatory and market reforms faster than expected. For example, due to its recent 14th Five-Year Plan, China is expected to account for nearly half of the world's new renewable energy capacity in the 2022-2027 period. Meanwhile, the U.S. Inflation Reduction Act has provided new long-term support and visibility for renewable energy expansion in the United States.

The Renewables 2022 report notes emerging signs of diversification in global PV supply chains. New policies in the United States and India are expected to drive solar manufacturing investment by as much as $25 billion over the 2022-2027 period.

The report also makes a case for renewable energy capacity growing 25% more than the main forecast. In advanced economies, this faster growth would require addressing various regulatory and permitting challenges and faster penetration of renewable electricity in the heating and transportation sectors, and in emerging and developing economies, it would involve addressing policy and regulatory uncertainties, grid infrastructure deficiencies, and lack of access to affordable financing that hinder new projects.

Faster growth in renewables would bring the world closer to a pathway consistent with achieving net-zero emissions by 2050, which offers the potential to limit global warming to 1.5°C.

Store Energy

The electricity grid operates based on a delicate balance between supply (generation) and demand (consumption). Balancing fluctuations in electricity supply and demand requires storing electricity during high-production and low-demand periods. This storage could help the power grid operate more efficiently, reduce the likelihood of brownouts during peak demand, allow more renewable resources to be built and used, and provide indirect environmental benefits.

Electricity storage can be used to help integrate more renewables into the grid, support optimal generation levels, and reduce the use of less efficient generation units. It can delay or avoid the need to build additional power plants or transmission and distribution infrastructure.

Energy can be stored in various media, such as hydroelectric dams, rechargeable batteries, thermal storage, compressed air storage, flywheels, or cryogenic systems. But other new technologies are currently being developed, including the following:

·   Sand batteries - These are high-temperature thermal energy accumulators that use sand or similar materials as a storage medium in the form of heat. They function as a high-power, high-capacity reservoir for excess wind and solar energy and help increase the production of renewables.

·   Diamond nanowires (DNT) - Formed by one-dimensional carbon threads, they store and release energy when stretched or twisted. Similar to a wind-up toy, the energy can be released as the twisted bundle unravels. Scientists say that compared to lithium-ion batteries. The diamond nanowire bundle has up to three times the energy density.

·   Red bricks - Researchers have discovered a way to convert the red pigment in common bricks into an electrically conductive plastic that connects to star honeycombs to store energy. Their porous structure provides a larger brick surface area than solid materials have and is suitable for storing energy; the larger the surface area, the more electricity a supercapacitor material will hold.

Conclusion

The energy landscape is poised for fundamental change between now and 2050. What does this mean for companies? For starters, the core business model may be put to the test, and new opportunities and challenges will almost certainly arise. Forward-thinking leaders should start preparing now.

Consider that energy demand parallels economic growth, so during the second half of the 20th century, with rising living standards in the West and other advanced economies, the growth in energy demand accelerated further and has continued into this century.

The decoupling of the rates of economic growth (steadily rising) and energy demand growth (rising, but less pronounced) will depend to a large extent on the following four forces:

1.  A sharp decline in the energy intensity of GDP, mainly as a result of the continuing shift from an industrial to a service economy; an increase in energy efficiency resulting from technological improvements and behavioral changes; the growing use of renewable energy; and a trend with the potential to completely change the way we think about energy.

2.   The increased efficiency with which energy is used. While the growing middle class in many emerging economies will lead to increased demand for products such as refrigerators, washing machines, and air conditioners, advances in LED lighting, smart appliances, and other applications will substantially reduce the energy intensity of households around the world.

3.  A third reason is the promise of electrification. Combustion engines have a maximum efficiency of 40%, while electric engines can exceed 90%. Considering the projected declines in electric battery costs, electric passenger vehicles could reach cost parity with their internal combustion engine counterparts before 2025, and many larger vehicle types would reach price parity shortly thereafter.

4.  The growth of renewables is essential to understanding why the primary energy demand curve will stabilize between now and 2050. When we think about how much gasoline our cars need, or how much electricity has to come out of a socket, we naturally start from the amount of fuel needed, which does not make sense with renewables; we do not measure what powers a solar panel or pushes a windmill, but the energy that comes out. Moreover, sunlight or wind power does not need to be generated in large centralized plants; businesses, and indeed individual consumers, can harness the energy on-site in many cases.

Of course, these types of renewable energy must be captured and stored. However, technological improvements are being introduced to solve these problems and substantially reduce costs.

Energy use has become much more prevalent around the globe. Technological advances and new work tools such as portable equipment or electronic devices have meant that in the last 70 years, humankind has used much more energy than in the previous 12,000 years.

This conclusion was reached by a group of experts, including German paleontologist Reinhold Leinfelder, in a paper reported in the journal Nature. According to calculations made by the scientists, energy consumption amounted to × 22 zettajoules (energy of a sextillion joules), compared to only × 14.6 zettajoules in the 12 thousand years before the 1950s. This trend is due to the use of fossil fuels, which, experts say, accelerates climate change.

Next time you use an electronic device, think about where electricity comes from and how the entire infrastructure behind it is in a huge transition. Let's keep Leinfelder's comment in mind: "We must hope that humanity learns to see itself as a part of the earth system, which must remain operational and vital. We human beings as a collective have gotten ourselves into this mess. We must cooperate to get out of it again."