The International Energy Agency (IEA) declared that the world was in the middle of “the first truly global energy crisis” in October 2022.
The combination of soaring energy and food prices, volatile supply issues and rising inflation is sending shock waves through the global economy.
For millions of people, the energy crisis has become a personal matter. In parts of Europe, energy costs have quadrupled, and shortages have led to concerns of potential blackouts if a harsh winter depletes energy reserves.
With energy now a precious commodity, it is essential that we make the most of it. Currently, much of the advice is focused on reducing consumption through basic measures. For example, turning down thermostats, taking colder showers, washing clothes at lower temperatures, or delaying energy use to off-peak hours. These are important measures, but with 60 per cent of energy currently being lost or wasted, we need to prioritise demand efficiency as the first step.
This is not a new concept. In 1990, American physicist Amory Lovins introduced the idea of the ‘negawatt revolution’, urging companies to make smart swaps to save energy and, as a result, make substantial savings. Lovins argued that the best energy policy for nations, businesses and the environment is one that focuses on using energy more efficiently. Indeed, energy efficiency is extremely important to reduce pressure on demand and is often overlooked. After all, the best and cheapest watt is the one we don’t consume.
But to tackle energy waste, you first need to be able to see it and measure it.
Digital innovation takes efficiency potential to a whole new level. First, digital tools can monitor, visualise and manage energy production, distribution and consumption, making the invisible visible. Second, we can then optimise energy use and eliminate any waste whether it is in grids, factories, data centres, buildings, transport systems or our homes.
Moreover, using digital technology has a faster payback than other approaches, such as better insulation. We estimate a quick return on investment of digital retrofits typically in one to three years. According to our research, smart building technologies also typically deliver a 30 per cent reduction in energy usage with similar savings in operational costs.
So, how can we start reducing energy waste? Here are three areas that could be tackled straight away with existing technologies:
1. In buildings
Buildings are already responsible for almost 40 per cent of energy-related carbon dioxide emissions, according to the IEA, with the impact of climate change further increasing demand for cooling and air conditioning. But with record energy prices and energy security at risk, saving energy must be the imperative for building managers and homeowners, helping them to mitigate risk, whilst also cutting carbon emissions.
Studies show that using digital energy management solutions in buildings can reduce carbon emissions by 20-30 per cent. These energy-saving technologies leverage the power of smart, clean electricity through digitisation – what we call ‘Electricity 4.0’.
What does this look like in practice? Take the example of Citycon's Lippulaiva, a new 150,000-square-metre urban centre in Espoonlahti, Finland where artificial intelligence-powered building software ‘teaches’ the building management system to predict and optimise energy usage. The combination of these solutions and a microgrid resulted in a 14 per cent reduction in annual energy costs and will achieve the complex’s €3 million investment ($3.15 million) payback within five years.
2. In homes
In January 2022, the Financial Times reported that one-third of European homes and 48 per cent of those in the USA still use gas for heating. However, in light of the energy crisis and recent climate legislation, the move to smarter and greener alternatives is picking up pace.
Installing and then operating smart heating systems, solar panels and electric heat pumps with home energy management apps (such as Wiser by Schneider Electric) are some of the ways that consumers are starting to control their energy bills, whilst simultaneously reducing their carbon footprint. Residents can now decide what to heat, room by room. They can even use weather forecasting to automatically decide when the heating needs to be turned on or off and avoid even more waste.
Technologies like these, coupled with households increasingly generating their own energy to live more sustainably will be essential to protect against price hikes and make our energy infrastructure more resilient. But this at-home energy revolution will only be considered a success if all homes can take advantage of energy-saving digital technologies. Support from governments will be vital to spur adoption and close the energy poverty gap.
3. In grids
The notion of a single, one-directional grid powered solely by large fossil fuel producers is fast becoming obsolete. Digital technologies, combined with an increasing share of renewables, are making grids bidirectional, resilient, cleaner and capable of balancing demand anywhere.
Using more locally generated, decentralised and renewable energy sources in microgrids will also be key for the grids of the future. Generating energy closer to where it is consumed helps to efficiently combine multiple incoming power sources safely and reliably, and reduces energy wasted across transmission lines. With climate change contributing to more extreme weather events around the world, innovations such as mobile solar microgrids can be deployed to help disaster-hit communities quickly restore power and build back better, and in a much more sustainable way.
Despite all these ready-to-go solutions, the rate of global improvements to energy-saving measures fell to its slowest in a decade in 2020, according to research from the Financial Times. And now with energy security a genuine concern for so many of us, it’s time to take more action. If we don’t, we risk exacerbating the energy crisis and failing to meet urgently needed emissions targets.
Long-term decarbonisation of the world’s energy will come from two sides. Around half will come from switching to clean energy, and this is widely accepted. The other half will come from tackling energy demand with increased electrification – with more things that can run on this clean energy – and energy efficiency to eliminate energy waste. The current energy crisis in parts of the world may well be the catalyst for the much-needed action on energy demand.
By arming ourselves with the digital technologies to fight each and every energy efficiency battle, we can curb energy waste, build up our resilience and reach low-carbon energy independence faster. And we’ll benefit both environmentally and economically in the process.
Olivier Blum is the executive vice president of energy management at Schneider Electric
This article was originally published in the Winter 2022 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.