5 minute read 29 Mar 2018
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Why business and government need to act now to democratize access to energy

By

Benoit Laclau

EY Global Energy Leader

Experienced energy leader and advisor.

5 minute read 29 Mar 2018

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Access to energy is one of the greatest barriers to building an inclusive world. Government and business need to act now.

Electricity and inclusiveness are intrinsically connected. It’s a struggle to go to school without energy, or to cook a family meal and live in warmth and safety. Yet, according to the World Bank, more than a billion people in developing countries still live without any access to electricity. Meanwhile, energy poverty is a rising issue in many more mature markets.

One of the key themes at this year’s World Economic Forum (WEF) is the energy system of the future and how it will be influenced by urbanization, innovation and shifts in high-growth energy demand from developed to less-developed countries. Indeed, making affordable power accessible to everyone is a dilemma that has long preoccupied governments, philanthropists and organizations such as the WEF. But progress toward achieving this has been incremental and slow.

Now, the rapid digital transformation of the global energy market may finally offer the opportunity to address electricity injustice. But for this to become a reality, the right regulation and policy signals will be critical if we are to make the most of what may be a once-in-a-generation opportunity.

Change is coming – fast

Sweeping change across the energy sector has been on the horizon for some time. More renewables, cheaper battery storage options, a powerful consumer culture and digital technology are now converging to create a perfect storm of disruption in our industry. And every aspect of energy delivery and provision – how we generate, use and sell electricity – is undergoing a radical and irreversible shift.

But until now, a lack of clarity about exactly when change will occur has hampered efforts to prepare for and realize the potential of a different energy world.

With this in mind, EY has worked with a leading global analyst house to determine exactly how and when the impact of 10 different technologies will converge to make grid parity a reality – making it as cheap for consumers to go off-grid as it is to stay on it. The results were startling.

The research estimates that in Oceania go off-grid energy will reach cost and performance parity with grid-delivered energy by as soon as 2021. In Europe, everything is set to change by 2022. And in the US, where the energy sector is highly regionalized, change will materialize later – initially by 2028 in California and 2031 in Northeast states.

Let’s be clear about what this means for energy generation and provision. This tipping point marks a critical milestone on the journey to the end of the current centralized distribution model for energy generation and consumption, and the dawn of an entirely new energy system. And it’s only the beginning.

Two further tipping points will follow shortly afterward.

  • At Tipping Point 2, electric vehicles will reach price and performance parity with traditional cars.
  • And at Tipping Point 3, the mere cost of delivering electricity will amount to more than the cost of production and on-site storage.

These tipping points put the utility sector on a countdown to change – and to potentially closing the energy gap.

Solar panels in rural community

Already, we are seeing a rise in competition from other sectors: automakers are now offering home solar and storage solutions to complement the roll-out of the next generation of electric vehicles. Oil majors have bought electric vehicle charging companies and even retail energy suppliers, giving them access to the domestic market for the first time. Time is short to radically reinvent business models and mindsets in response to these changes. But, while the industry is possibly facing its biggest challenge yet, the opportunities are equally vast.

Digital disruption is a license to innovate. Utilities, long characterized by a risk-averse, engineering-focused mentality, can redefine what it means to be an energy company.

One way this could manifest is through the adoption of a more open and outward-focused perspective that encourages greater engagement with the communities in which they operate. For example, we are seeing cases of utilities working with cities and neighborhoods to build microgrids that bring power to previously off-grid – and excluded – communities. In one Ghanaian farming village, the solar microgrid installed by an American start-up now allows for the refrigerated storage of life-saving yellow fever vaccines. And in Tanzania, the introduction of solar is helping to improve children’s school grades: electricity means they can study at night.

In developed markets, innovative applications of digital technology can ensure that the benefits of renewables extend to those who don’t own their own homes or are on lower incomes. In Sydney, Australia, for example, the “Stucco” apartments – home mostly to students – installed solar power and batteries, and built an “embedded network” to share the energy generated with all residents.

Energy transformation can build a better, more inclusive world

Stucco’s story is a great example of how a digitally enabled energy system can bring affordable energy to all parts of the community. But it comes with a cautionary footnote – the initiative took months (and lots of pro bono legal support) to win regulatory approval.

This highlights a key truth about the energy transformation: it’s not by any means just about the technology. Digital will enable changes – but those changes have to be driven by a commitment to energy justice across sectors, global agencies and governments.  

A collective vision can harness the potential of the rapidly accelerating energy transformation to finally empower communities – and build a better, more inclusive working world. And I believe the following key actions are necessary to work toward this vision:

  • Energy companies need to have the courage to engage with their communities in new and collaborative ways;
  • Utilities should reach across sectors and join forces with more unconventional partners; and
  • Government need to step up with energy policy and initiatives that encourage, rather than hinder, innovation.

Summary

The transformation of the electricity sector offers business and government an opportunity to democratize access to energy. Will they be ready to seize it when the energy world changes forever?

About this article

By

Benoit Laclau

EY Global Energy Leader

Experienced energy leader and advisor.