Smart grids, decentralised power and the gradual phasing out of fossil fuels are going to have a dramatic effect on the future of energy. That means energy companies must adapt, or risk being displaced by a new breed of provider.
“The changes taking place within our energy markets are irresistible,” says Ernesto Ciorra, head of innovation and sustainability at energy multinational Enel. “From the way in which energy is produced, to the way it is used, the whole model is changing, so it stands to reason that we need to change, and move with the times, too.”
In January, Enel unveiled its response: rebranding itself under the heading of Open Power. It is, in effect, a guiding philosophy for the future – setting themes that will shape all of Enel’s work.
Key themes include opening up to new technologies and ways of managing energy for people (such smart meters), and allowing Enel’s infrastructure to be used for new purposes (such as vehicle to grid systems for electric cars, or home solar power generation).
“Open Power demands a lot more than just being a generator and distributor of electricity,” says Ciorra. “Only if we rethink the way we innovate can we truly disrupt the industry, and develop technologies and solutions that have the power to shake up old markets and create entirely new ones.”
The firm also wants to open up Enel’s services, powering more people in more countries and widening access to energy. And it says it will seek to share ideas and knowledge with customers, employees and partners (such as green technology startups), developing and introducing new technology that will benefit its customers.
But what exactly will the energy market of the future look like? According to the International Energy Agency’s World Energy Outlook 2015, global energy demand is set to grow by nearly a third by 2040, with all this growth coming in non-OECD countries.
Coal use, which is already set to plateau in China, will dip dramatically across the globe, and there will also be a huge drop in the use of oil – in the US alone by perhaps by as much as four million barrels per day. Gas, however, is set to grow by some 47%.
The report predicts that renewables will overtake coal as the largest source of electricity by the early-2030s, with renewables accounting for 50% of generation in the European Union by 2040, around 30% in China and Japan, and above 25% in the United States and India. Coal’s share of total electricity generation will drop to around 30% by 2040.
Enel has already taken a big role in leading this shift to renewables – and has even bigger hopes for them.
“We’d like to see a future in which renewables make up 100% of the energy we use,” Ciorra declares. “I think the only thing that will hold this back is a lack of ambition when it comes to innovation.”
Karl Rose, director of studies and policies at the World Energy Council, a global network of energy leaders and practitioners, says: “Renewables will have a larger role than it has today, that’s a safe bet.
“There will also be a lot less coal in the system,” he adds. “If I was in the coal industry, I would start to really worry about this.”
But while coal may be dropping off, and oil will increasingly be used as a raw material rather than as a fuel, Rose still believes that fossils fuels will continue to make up as much as 50% of the energy mix over the next 40 years, due mainly to the huge growth in gas.
There will also be a growth in nuclear, with a trend for more nuclear generation outside of OECD, he says, which, along with large hydro and renewables, will see non-carbon generation account for the rest of our energy needs.
Another, potentially revolutionary change in the energy market is the rise of “prosumers” – ordinary people who generate and sell their own energy, often using solar panels or small wind turbines.
Just as Facebook has revolutionised communications, and Uber is shaking up transport, such prosumers – who decentralise the production of energy – will have a dramatic impact on the energy business, says Ciorra.
Rose agrees. “There will be millions of points of power generation and a lot less power running through the grid,” he says. However, such generation will be “unevenly spread” across the world, because “while in Europe we choose to do it, in Africa and South America, where they are never going to build a grid, they do it out of necessity”.
Another huge change, says Rose, will be within generating companies themselves, as they adapt to grids that may have lost up 40% of their load, due to decentralised generation.
He says that the companies will need to learn a lot from the likes of Google and Apple about understanding consumers, which is something power companies have never had to worry about before.
“The new companies will be much more like smart phone companies, and may not even produce power themselves,” Rose explains.
There will be more competition too, bringing prices down and forcing many power companies out of business. Rose predicts that as many as 50% could disappear.
“There will be a new crop of companies, those that really understand consumers and who provide energy in a very flexible way, and also take energy from prosumers and act as an intermediary,” he says.
This opening up of energy production – with millions of roof tops in effect becoming micro power stations – is exactly the kind of the thing that Enel is preparing for under the umbrella of Open Power.
“We have constantly embraced new technologies to make our energy more reliable, more affordable, and more sustainable – from the introduction of the first smart meter to becoming the world’s largest producer of renewable energy,” says Ciorra.
“Now we are at the beginning of a new, exciting era for energy; an open era of participation, where everyone is connected and has the opportunity to get involved and tackle the world’s big challenges.”
Of course a central part of the future for Enel and other energy companies is playing their part in the global response to climate change.
As a global business (with more than 61 million customers), Enel is committed to becoming a carbon-free company by 2050. This year, its green subsidiary Enel Green Power will be fully integrated into the main business, allowing the business to innovate in renewables faster, and on a much bigger scale.
The business currently generates just under half of its power from carbon-free sources, preventing 70 million tonnes a year of CO2 emissions. But carbon-free energy is just one element of a greener future. Enel will also continue to work on smarter, data-driven ways to analyse energy consumption and distribute energy most efficiently – notably through smart grids – delivering it exactly when and where it’s needed.
As well as changing what it does on the ground, the company also aims to change the way it is managed and the way it reports on its activities. The guiding philosophy of openness here means bringing in new, transparent ways of doing business. That, Enel says, means opening up to its biggest critics, something it has already done in building bridges with Greenpeace.
Such new ways of doing business suggest it is not just the energy market which is changing but the whole environment in which energy firms operate. That environment will be one where companies are judged not just on how agile they are in response to market changes, but also how seriously they take their heavy social and environmental responsibilities.
Content on this page is paid for and produced to a brief agreed with Enel, sponsor of the energy access hub on the Guardian Global Development Professionals Network.
