6 forces of disruption

Three areas of disruption consist of six forces driving change in the energy sector

Technological innovations paired with globalisation and evolved customer behaviour are creating a window of opportunity in the energy market

Energy sector transformation

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  • Multidisciplinary approach is becoming more and more important in tackling energy-related issues.

  • With increased geopolitical instability, surge of low-carbon solutions and a realisation that energy sources are crucial for economic growth, the topic of energy security raises global concerns.

  • Huge number of participants, countless variable parameters, external factors hard to predict, risks difficult to quantify – there is a string of reasons which make energy security analyses extremely complex and the choice of optimal course of development uncertain.

  • The need of having an environmentally and socially acceptable generation mix strongly influences policies and new investments

Areas of disruption

We have identified three areas of disruption that have a profound influence on the energy sector

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Evolving consumers and the emergence of disruptive players

Environmental challenges causing facilitated implementation of renewables and electrification

Rapid pace of technological innovation and digitalisation

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RES implementation

Renewable energy use is recording a drastic increase

Reduced investment costs mean that renewables are now on par with traditional energy sources.Renewable sources with low variable costs and independent from commodity prices’ volatility are the only sustainable way forward.
Only one issue remains in order to break the last barrier towards an even more significant implementation of renewables –the issue of flexibility.
Most renewables being deployed utilise solar or wind energy and these sources are quite volatile. Balancing out these variations in production patterns is essential in enabling a system based on renewable energy –a sustainable system of the future.
As a number of reports forecast, energy demand is likely to increase by around one quarter to what it is now, in large part due to population growth and urbanisation.
They also forecast renewables to make up around 40% of global generation (as compared to their current 25% share). This all means that the energy sector will become virtually unrecognisable in the next 20-30 years.

Boosted by the support of government policies technologies regarding wind farms, photovoltaics, various distributed resources, battery storage systems, smart grid solutions and energy efficiency recorded significant improvements.
Levelised cost of electricity (LCOE) for wind and solar power has been steadily falling for years. The cost of battery storage has also recorded a drastic reduction.
As the grid gradually gets “smarter”, new solutions offer new possibilities unimaginable before. These technological advances paired with the global process of digitalisation are revolutionising the way energy systems operate and how their participants interact.
At the same time, the changes imposed present a great challenge for standard energy planning and practices. Companies stuck within a surpassed traditional model of operation will soon face insurmountable obstacles on the market.
Electricity and gas, once low-engagement products, are now increasingly visible to consumers. Markets that operated with only a handful of players are now packed with dozens of energy providers offering numerous service packages.

Technological innovation

Innovation is the driving force of change

Evolving consumers

Consumers are becoming prosumers

Up until recently, consumers had virtually no insight into their respective consumption patterns.
The introduction of smart meters is now enabling them to raise their awareness and allows them to modify the way they use energy at their workplace or at home.
Thanks to data analytics, an increasing number of commercial, industrial and household consumers are finding ways to be more energy efficient in their daily processes.
With the aid of sensors they are able to predict heating or cooling requirements and limit the variations in energy demand.
Additionally, large companies such as Google, Wal-Mart, Samsung, Facebook etc., have all set various targets regarding the improvement of energy efficiency, purchasing green energy credits and supplying themselves with renewable energy.
Finding ways to optimise consumption and purchasing renewable energy is not the only thing companies and households do. In order to reduce their energy bills, more and more users are starting to install energy sources of their own.

As complex threads of data unravel, the electricity supply chain gets demystified.
The implementation of smart meters enabled the collection of data regarding customers’ consumption patterns. Various new business models and a range of pricing structures emerged leveraging this very data.
Apart from aiding customers in finding a tariff that best suits their needs, data collected is also used in various other ways, mostly aimed at gaining insights into consumers’ habits and then using those insights to tailor offerings and perhaps help in optimising energy demand.
Disruptors are born through innovation. Most companies are familiar with innovation, but they generally look for opportunities to improve their existing products, services or processes. This kind of innovation is branded as linear.
Disruptors are among the rare companies that don’t just look to gradually improve a certain business segment. They look for new ways of solving customers’ needs.
At present, innovation start-ups in the energy industry mostly focus on technologies regarding renewable energy sources. However, it only time until disruptors that found ways to offer completely new services enter the market.

Emergence of disruptive players

Disruptors will change the energy market paradigm

Digitalization

Digitalization will enable energy to become a service

After decades of silence, data is now starting to flow between providers and consumers. This is in many ways revolutionary, as it allows energy to flow between the two sides of the equation, as well.
Traditional one-way energy traffic is starting to be obsolete, while bi-directional flow of current is a thing of the future.
Data is one of the key enablers of the implementation of distributed energy sources and a key enabler for consumers to start acting as prosumers on the electricity market.
The increased complexity of electricity systems will no doubt have to rely on various machine learning algorithms that will predict when and where energy will be needed and how to optimise the supply chain flow in order to achieve maximum efficiency of the system.
This is a radical change of the existing top-down supply structure that characterised electricity systems for the past several decades. Digital transformation in progress will provide a foundation for disruptive innovation necessary to enable these processes.

Electrification is crucial to economic well-being and is often considered one of the main measurements of a country’s development.
At present, electricity only makes 19% of overall final energy consumption, growing from 15% in 2000. However, a number of analysts assume this share can more than double by 2050.
Companies have started to electrify numerous processes in an effort to reduce emissionsand improve efficiency. Electricity is an easily available and reliable source of energy while electric systems are often more controllable and lighter than fluid or mechanical systems.
In order to be able to reap the benefits of electrification, decarbonising the generation portfolio is crucial.
Electrification of processes, buildings, heat systems and the general shift from heavy to lighter industries are all factors increasing consumption.
Transportation sector is leading progress in electrification, but an increasing number of others is joining the race.

Electrification

Electrification is critical to decarbonization

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