Despite improvements in electricity access in recent years, there are still 155 million people that remain without electricity connections in developing Asia.[1] This is compounded by the very low rates of access to clean cooking. According to the International Energy Agency (IEA) database report, there are only 57% of the population of developing Asia that has access to clean cooking.[2] Meeting the combined objectives of sustainable economic growth, poverty reduction, and tackling climate change—known as the Energy Trilemma—will require innovative technologies and business models.
Innovations are evolving around multiple “Ds”:
- decreasing demand through energy conservation and efficiency measures;
- decentralization with distributed energy systems;
- digitization of energy supply chains and services; and
- decarbonizing energy supply chains mainly via renewable and clean energy interventions, including carbon capture and utilization.
These four “Ds” are mutually compatible and along with other technological advances offer the prospect of disintermediation of traditional centralized energy systems and disruption of existing business models.
Decreasing demand by adopting energy-efficiency measures. Energy conservation and efficiency are straightforward in principle: use less energy and use energy more efficiently to reduce pollutant emissions (including greenhouse gases), reduce consumption of precious natural resources, and improve energy security by reducing reliance on energy imports. Energy conservation is dependent to a great extent on changing human behavior efficiency, while energy efficiency measures can now be automated, e.g., through the use of smart thermostats and other smart building energy management systems, and other automated demand response systems. At the macro-economic level, electrification of transport and other infrastructure which historically rely on fossil fuels is necessary to improve energy efficiency at the scale required to meet global climate change and national energy security objectives.[3]
Decentralization through distributed energy systems. A global shift is occurring from highly centralized systems to smaller-scale, localized systems that optimize demand, consumption, and management by offering tailor-made energy supply solutions at the consumer level. A combination of clean technologies such as distributed generation from renewable resources and modular energy storage will help organizations operate both on-grid and autonomously from the traditional electrical grid.[4]A key business model is a microgrid, and a key enabling technology is an artificial intelligence (AI) which is also critical to improvements in end-use energy efficiency.
As more and more community-level renewable generation is connected to electricity grids, the challenges of balancing energy flows within that grid are getting more acute. AI increases system efficiency and stability through rapid analyses of large data sets. AI can also be used to monitor the energy consumption behavior of individuals and businesses. Many AI-based startups are now offering practical solutions to optimize this energy usage, such as a system that can reduce energy consumption by adapting to user behavior.
Digitization by integrating information technology into the energy system. Increasing digitization of infrastructure (including energy, water, transport, etc.) presents a two-edged sword. Application of digital technologies such as AI can optimize system operations and when combined with blockchain can enable new business models such as peer-to-peer energy trading (which can evolve into “virtual power plants”). At the same time, digitization exposes infrastructure to cyber-attacks, which is an immediate and ongoing threat.
Digitization introduces an additional challenge to defend energy supply chains and services from cyber-attack, which is an immediate threat to be addressed simultaneously with improving the climate resilience of energy infrastructure. In the context of cyber-resilience, blockchain is promising in that it is inherently resistant to cyber-attack (although not 100% “bulletproof”).
A pilot project in the center of Bangkok, Thailand’s capital, is one of the world’s largest peer-to-peer renewable energy trading platforms using blockchain. Commercial operation started in the fourth quarter of 2018, with 635 kilowatts of generating capacity that can be traded between a hospital, a school, a shopping mall, and an apartment complex using the city’s electricity grid. The project is expected to encourage increasing numbers of people to switch to renewable energy as the cost is offset by selling excess energy.
Decarbonization by expanding the use of clean energy. During the last 10 years, solar, wind, and battery storage have exhibited the most rapid growth in large part due to rapid hardware cost declines. Solar, wind, and battery technologies are inherently modular with demonstrated manufacturing economies of scale and quantified “learning rates”: the more that is built, the cheaper it gets. Cost reductions for can be expected for other modular technologies, e.g., Organic Rankine Cycle technology for low-enthalpy geothermal energy recovery and ocean thermal energy conversion. The manufacturing scale-up of solar, wind, and batteries has been driven largely by national policy commitments or private sector investments[5] that created economies of scale. Similar long-term commitments are required to commercialize other renewable energy resources using new technologies, for example, “green” hydrogen production via electrolysis of water. Green hydrogen is a rapidly evolving segment, which promises full decarbonization and transformation of global energy supply chains: in effect, green hydrogen may become the “new oil” if the cost of production can be reduced to around $2 per kilogram.[6]
The cost-effectiveness depends primarily on reductions in the cost of electrolyzers, which are inherently modular. Green hydrogen dovetails with the development of offshore renewable energy resources including wind, solar, tidal, wave, and ocean thermal energy conversion (OTEC), which are also all inherently modular technologies. Offshore production avoids land-use conflicts and enables the terawatt scale production necessary for complete decarbonization of global energy supply chains. Offshore green hydrogen production is not unlike conventional oil and gas production, but with no drilling risk, no “dry hole” costs, and minimal decline in energy reserves after production commences. Multiple projects are underway in the North Sea led by renewable energy companies and traditional oil and gas companies which have the expertise to build offshore infrastructure which will survive for decades in the harsh marine environment, and which can attract the financial resources for terawatt-scale green hydrogen production.[7]
[1] International Energy Agency. World Energy Outlook 2020.
[2] IEA. World Energy Outlook 2019.
[3] Electrification of transport generally delivers 15% energy savings, with multiplier effect going up the supply chain. For a more detailed discussion of the “electrify everything” approach, see for example: https://www.vox.com/energy-and-environment/21349200/climate-change-fossi...
[4] https://www.iea.org/digital/
[5] For example, construction of the Tesla “gigafactory” in Nevada was encouraged by energy policies, but the decision to build the factory was made by Tesla’s CEO in an effort to drive the market through brute force investment.
[6] Green hydrogen production costs today range from $4 - $10 per kilogram. The “tipping point” of $2 per kilogram is at parity with natural gas at $6 per million BTU. The energy content of 1 kilogram of hydrogen is equivalent to 1 gallon (3.94 liters) of gasoline.
[7] ADB is supporting offshore renewable energy and green hydrogen development under a new regional technical assistance approved in 2020; see: https://www.adb.org/projects/54137-001/main#project-pds