Ditlev Engel brings a wealth of knowledge of the global energy industry and international leadership competence. From 2005 – 2013 he had the position of Group President & CEO of global wind turbine manufacturer Vestas. Prior to Vestas, he has 20 years of experience at coatings manufacturer Hempel A/S, of which 10 years as executive leader moving from EVP Marketing and R&D to Group President & CEO. He has degrees in business administration, finance, accounting and general management from Copenhagen Business School and INSEAD.
Ditlev Engel has been a driving force behind many global green investment initiatives, pushing the energy transition to the next level. He has been a Member of the Energy Partner Network of the World Economic Forum, Advisor of the International Energy Agency, Chairman Green Growth Working Group at three consecutive G20 Summits, co-founder of the Green Growth Action Alliance and member of UN’s Sustainable Energy for All.
Renewable energy is crucial to Asia, as energy demand in most countries is rapidly growing due to industrialization and urbanization. Solar and wind are good solutions to meet this need, as they are faster to deploy than conventional energy technologies. Solar is also tremendously flexible, as it is viable on tiny rooftops and in large, utility-scale power plants. On top of that, energy efficiency greatly multiplies the value of these energy sources.
That said, it is still early days for solar and wind in much of Asia. People are understandably cautious and solar and wind energies are not perfect. Additionally, their capital cost is higher than that of conventional energy, leading planners and investors to perceive renewable energy as more expensive. Yet at scale, renewable energy is competitive with conventional energies – even coal – at a cost per kilowatt-hour basis. We are already seeing this in India, for example.
Renewable energy sources also bring value as they do not harm health, ecosystems or the environment. IMF and WHO estimates show that the health and environmental costs of using fossil fuels are astounding. If the prices of fossil electricity reflected this, they would be significantly higher than renewable energy. Carbon pricing, which we are beginning to see in China and South Korea, is an important step towards improving prices and decision making.
In addition to carbon pricing, there are several factors that can help renewable energy options better meet Asia’s growing energy needs. These include an integrated systematic approach to development of solar and wind, adapted financing and business models that suit Asia’s diverse economies, and accelerating the deployment and use of microgrids.
Half of the world’s urban population – or nearly 2 billion people, according to UN estimates, live in Asia. That figure is rising by the fastest rate in the world, 1.5 per cent per year. This is important because urban areas account for about 70 per cent of global energy use and energy-related Green House Gas (GHG) emissions.
There is much cities can do to offset this. Cities can implement water-saving and recycling programmes, create energy efficiency standards for buildings, develop low carbon public transport systems, and secure low carbon energy supplies. They can also stimulate climate friendly behaviour by making climate actions visible to citizens on social media, for example.
But this may only scratch the surface. To minimize urban energy demand and ensure our energy supply is clean, secure and resilient, we will need a more integrated and deeper approach. For example, virtual power plants are able to harness, optimize and synchronize the full range of distributed system assets such as PV, batteries and demand response.
Another option is to lower emissions through smart, energy-producing buildings. Buildings have the potential to become energy hubs, helping the grid remain stable by providing power to other residential, industrial and commercial customers. For Asia to accelerate the benefits of zero net-energy or energy-positive buildings, they will need to progress on two developments. The first is to create and implement strong and clear policies that allow stakeholders to minimize risks and maximize opportunities. The second is to create an environment that enables energy storage technologies. The latter will be essential to scaling up and lowering costs.
The share of renewables (particularly solar) in the electric power mix is rising rapidly, while prices continue to decrease. Commercial-scale grid parity for storage and solar PV is possible as early as in 2020, and utility-scale PV will start competing with traditional sources of peak and base load power by 2025.
As solar PV reaches or exceeds grid parity, it will become attractive for homeowners and companies to invest in on-site solar PV systems, reduce grid dependence and become electricity prosumers. However, consumer-centric distributed renewable power systems will still require grid connection for flexibility services. Rapid up-scaling and cost reduction of on-site storage solutions will require a push from regulation or policy to reach economies of scale. Once (autonomous) microgrids become reliable, they will likely trigger the disruption of the power system, and the emergence of new business models.
Long-term investors are beginning to realise that climate change undermines the financial performance of their portfolios and, combined with the effect of regulatory mechanisms, this will drive an accelerated shift of investments away from coal-fired power and the extraction of marginally economic oil resources.
Integration of digital technologies into everyday life allows global interconnectedness 24/7 and offers the ability to combine, analyze and generate actionable knowledge from large and complex data streams in real time. Innovation opportunities also arise from the emergence of more `intelligent´ digital systems that assist or replace human judgment or decisions.
As a result, digitalisation fuels technology innovation across industry sectors: helping society do things cheaper, faster and better; allowing individuals and businesses to obtain more control and influence; and pushing the boundaries of current technology frontiers.
Digital technologies also offer opportunities to better operate the ever-more densely woven web of mechanical and electrical systems in cities, including smart building applications, transportation systems, power grids, and water supply and waste removal networks. Optimizing the operation of city functions will require a digital sense process-respond system consisting of the following technology elements:
Digitalisation will irreversibly disrupt existing business models and provide opportunities for new entrants into existing markets – but more importantly create new markets worth hundreds of millions globally. Digitalisation expands the scope and scale of virtual power plants.
That said, we must recognize the cyber security challenge raised by digitalisation. Already, power plants and power systems worldwide are subject to increasing attacks. Thankfully, most are not particularly successful. It raises a difficult question: should we digitise everything? Is that a risk worth taking with something as fundamental as electricity? In many cases the risk trade-off is going to be worth it, especially if concurrently we design systems that are safe to fail, that are anti-fragile. Even so, with some systems we might have to eschew the benefits of digitalisation because the impact of a small risk is simply too great. We keep an open mind.
The theme touches on the current energy transformation prompted by: technological innovations in renewables, batteries and control systems, and the ever more-pressing climate realities. The world is increasing its focus on climate change – an important step as its impacts are posing greater challenges to the security of Asia’s energy infrastructure, and thus livelihoods.
Fortunately, we see exponential growth in the energy industry as many new technologies will reach the stage of maturity. Technology and innovation will move faster than we think. We have the technology to solve many of our challenges and the technology is getting cheaper and better for the foreseeable future. Take EVs, for instance. Switching to EVs is switching fuels and switching systems plus opening the prospects for a dramatic improvement in urban air quality and health. How can we bring the benefits of that new energy reality sooner? In that way EVs sum up the challenge and opportunity of the unfolding global energy transition and system transformation. The challenge of the new reality is not so much the technology, we have that, but getting policy and finance right.
In my mind the future of the electricity ecosystem will look like a Mandelbrot fractal, forming an intelligent ‘plug and play’ electricity grid in which every device down to our solar cells on the roof, and our coffee machines in the kitchen can communicate and adapt for an overall optimized generation, grid and demand performance. That won't happen overnight – but as usual probably much faster than we imagine today.