The energy crisis: a catalyst for transformation of the energy market

Ionut Farcas, Senior Vice President, Europe & International Hub, Power Products Division at Schneider Electric further explores.

It’s tough to take positives from such circumstances. But alongside uncertainty, the energy crisis is also driving a sustainability transformation. Energy security issues and global warming are two sides of the same coin, and there’s a strong likelihood that this crisis will finally reduce our dependence on fossil fuels and accelerate the renewable energy transition – and renewables are already estimated to become the world’s top electricity source in the next five years.

We know electrification powered by renewables makes energy green. It’s the most efficient energy and the best vector for decarbonisation. Meanwhile, digital makes energy smart. It turns the invisible visible, allowing us to optimise our usage and reduce the massive 60% of energy currently lost or wasted. Fortunately, modern technologies can already enable us to move to an electric, digital world. In fact, more than 80% of CO2 savings through 2030 will come from deploying technologies that are on the market today.

With the tools already available, and energy prices still so volatile, there's no better time to decarbonise energy supply and demand. There are a few strategies that partners, businesses, and their customers can harness today to kick-start their own energy transition.

1. Replace

Energy models are changing as generation is decentralised, driven by worldwide trends for resilience, digitalisation, and decarbonisation. The first step to sustainable energy transformation is enabling supply-side decarbonisation through renewables. Thankfully, we’re already seeing acceleration here. For example, through the REPower EU Plan, the EU is aiming to deliver 45% of its energy supply from renewable sources by 2030.

To achieve this its energy ecosystem will need to become increasingly decentralised.  Producing energy closer to the point of consumption not only helps tackle today’s cost challenges, it also creates a more efficient and resilient energy grid. Powered by renewable sources like rooftop solar panels or on-site wind turbines, microgrids provide self-contained networks that enable organisations to generate, store, consume, and even sell their own energy. Users can expect a reduced carbon footprint, fewer expenses during periods of peak demand, and improved reliability even through outages.

One successful example is Schneider Electric and ACCONIA’s partnership to develop Spain’s first industrial microgrid. The project, which can be replicated in any industrial plant, combines distributed energy resources (like solar, storage and electric cars) and digitalization to create low-cost, resilient, and sustainable infrastructure for a minimised carbon footprint. To leap towards net zero, other businesses must follow suit.

2. Reduce 

Eliminating energy waste is the fastest and least capital-intensive solution to cutting energy use, costs, and emissions. Digitalisation is a key enabler of this efficiency. Digital solutions like smart energy management systems equip building inhabitants with intelligent insights to optimise their energy needs. They bring together factors like electrical switchboards, appliances, solar energy, and backup batteries, giving consumers the power to set monthly savings targets, spot and reduce energy waste, store electricity to be resold, and much more.

Building information modelling (BIM) systems help to create more comfortable and productive work environments by offering flexible control over temperature, lighting, air quality and more. They also feature quicker returns on investment (ROI) than many might guess. When sustainability experts like Schneider Electric and its partners work with customers to install digital management solutions in existing buildings, we often see an ROI of between just two and five years. After all, the adoption of smart home energy management can bring typical energy cost savings of 40%, sometimes reaching as high as 75%.

3. Electrify  

Demand-side electrification is critical for achieving net zero goals. To date, much of the investment and focus has been on decarbonising energy supply. However, in every energy transition supply has always followed demand. There is huge potential for demand-side electrification in every area of the economy.

Electric vehicle sales are a great example of what’s possible and scalable. In markets where charging infrastructure is well established, with incentives and legislation driving adoption, sales of EVs now outstrip petrol and diesel cars. We now need to drive the electrification of heating and cooling through similar incentivisation, regulation and legislation.

Industry also has huge potential to decarbonise. It’s one of the largest sectors for global CO2 emissions, accounting for 8.7 gigatons or 26% of the total. Yet with only 22% of industry’s energy currently electrified, the opportunities to make processes greener are vast. By focusing on sectors where electrification is both technologically feasible and attractive, the share of electricity in the overall energy mix could jump from 20% to 50%. This could potentially halve the amount of natural gas and oil required, cutting CO2 emissions by around 1,300 MtCO2/year.

Schneider’s own experience electrifying ArcelorMittal’s steel production has prevented 170 metric tons of CO2 emissions and saves 20% of the cost via a circular economy approach. With steel demand set to increase by more than a third by 2050, efficiencies in this area are no longer a choice, but a necessity.

4. Partner

IDC research found that just 7% of businesses are delivering on their sustainability plans, and over 40% rely on strategic support from partners to achieve their environmental targets.

There’s a huge opportunity here for partners to capitalise on the acceleration of the energy transition by helping customers to address the energy crisis and speed up decarbonisation. However, to do so, they must be equipped to provide the right technologies, tools, and skills. Comprehensive education and training, open and collaborative support ecosystems, digital knowledge and expertise, and strong product portfolios are available for partners in the marketplace.  Ensuring that together we can help customers navigate the current crisis and accelerate the road to net-zero.

The future of energy

The energy crisis is accelerating the convergence of digital solutions as we strive to overcome rising costs, energy security risks, and vulnerable supplies. While the energy crisis has brought about challenges, it has also presented us with an opportunity to put the technologies in place to ensure another crisis of this kind can never happen again.