The World Is Moving Towards a Volatile Power Market Sooner Than We Thought
If you’re following the news, you would know that recently decision-makers have been setting the pace for the transition to a fossil-free world.
Last week’s Leaders Summit on Climate hosted by President Joe Biden was a great signal that the US is rejoining the international effort to fight climate change.
At the same time, the EU has adopted ambitious new targets to curb climate change. It will cut carbon emissions by at least 55% by 2030. By 2050, Europe will be climate-neutral.
And earlier in April, seven European countries, including Germany, France, and Great Britain announced that they would stop public subsidies for fossil fuels abroad and focus on financing sustainable projects.
China has also set ambitious goals for phasing out fossil fuels.
These commitments are a clear sign that the transition to clean energy is going ahead at full speed.
The share of oil, gas, and coal is diminishing, giving way to renewable energy such as wind and solar.
The good news is that in addition to funding and political will, we now have the technology to drive this change.
Prepare for a volatile market
As the share of renewables in global electricity generation steadily grows, so does the volatility in the market.
While today’s power market is still dominated by a few hundred players, we’re likely to see thousands or even millions in the future.
The distinction between producer and consumer will become increasingly blurred. The market will be dominated by “prosumers” – those who produce as well as consume.
And when the supply side depends on the weather, keeping the lights on becomes a challenge.
Simply put, we’re entering a power market that is too complex for humans to manage on their own.
Power companies should prepare for a volatile market ahead by doubling down on investment in energy optimisation.
Technology companies have the key
The solution lies in a combination of digital technology and deep industry knowledge.
Our experience in the European power market, working with 8 of the 10 largest utilities has taught us that the power industry needs support to optimise energy production, trading, distribution, and consumption.
Power companies need to examine data in minute details, make it tangible, harness its complexity, and translate it into effective real-time decision support.
For example, some of our customers in hydropower use instrumentation and automation to increase the accuracy in the monitoring of hydropower dams, improving both production planning, securing supply, and the sustainable governance of regulated watercourses.
The replacement of fossil fuels with renewable energy is not trivial and we all need to do tremendous work to accomplish the green transition.