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Robert Kwan on the Future of Decentralized Energy

As residential and commercial energy production grows in popularity, what will it mean for the future of energy?

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By Robert Kwan
Published July 19, 2023
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Key Points

  • The next stage of the energy transition will see the continued rise of the “prosumer”: individuals producing - as well as consuming - energy.
  • Grids of the future will grow in complexity, becoming smart, bi-directional and sustainable. Microgrids will emerge as energy is decentralized.
  • Resiliency will be a key driving force. Extreme weather and Europe’s ongoing energy crisis will catalyze the global quest to secure energy supplies.
  • This new energy era could drive a bigger wedge into society’s socio-economic divide, as some could monetize their energy supply, while others may face higher utility costs.

Technological advancements, the growing climate crisis, Russia’s invasion of Ukraine, and the trend towards working from home will all play a role in the new era of energy.

Balancing the need for renewable energy solutions with the insatiable global appetite for cheap, reliable power is a challenge. Looking towards expected trends in the energy industry, RBC analysts believe the role of the individual will come to the fore.

The rise of prosumers

The traditional energy customer is transforming into an energy producer. Known as ‘prosumers’, the rise in individuals with the resources to generate energy from home, is set to change the face of the energy industry.

The significant reduction in the cost of rooftop solar panels, microturbines and other power generation technology is contributing to the acceleration of this trend.

Alongside this, is the growing need for energy resiliency. Weather-related outages have increased in frequency in the US alone by 77%. Whilst Europe is facing soaring energy bills as a result of Russia’s invasion of Ukraine. Seizing control of energy production is seeming more desirable than ever.

Prosumers will be able to determine where and how their energy is produced, choose to go off grid, or take steps to supply the grid and potentially monetize their energy supply. These producers will benefit from improved energy resiliency, and will secure their digital world at home as a result.

This will create a new moment for the energy sector: a time of decentralized, renewable power.

Transforming energy’s infrastructure

However, there must be a radical transformation in energy infrastructure for these developments to occur. Today’s electricity grids are simple constructs that reply to supply and demand from a limited number of energy sources. For prosumers to supply the grid, it must become smart, decentralized and bi-directional. Energy infrastructure companies will be required to lead the change, making this an interesting investment space.

The grid of the future will be complex, using power from intermittent sources such as wind and solar. Microgrids of prosumers with their own decentralized energy assets are expected to spring up.

Other technological improvements will also contribute to the adoption of individual energy production. Electric vehicles are expected to play a large role in this space, as when unused, they can provide invaluable battery storage space, help manage grids, and create customer savings.

A new form of inequality?

One obstacle in realizing a greater number of prosumers is tied to cost pressures. While the affordability of renewable energy technology has improved, the current inflationary environment and overall socio-economic divide means that there will likely be a disparity between those who can afford the upfront costs, and those who will not have the opportunity to profit from energy generation.

Moreover, the latter may well face higher utility costs as a result of wealthier individuals going off grid. On the other hand, for many able to embrace some transition, the benefits may be immense. Lower electricity bills, greater energy independence, and improved reliability could be enjoyed by many.

From an investment perspective, the commercial and industrial proposition may also prove interesting. These larger entities could develop a combination of panels and battery storage systems which would provide support to the grid at peak times.

Even today, the energy industry is in a state of flux. Fighting for critical commodities, mitigating sustainability regulation, and attempting to keep up with global demand is no mean feat. As a result, the prosumer future could be closer than we think. Decentralizing energy solves a huge number of problems - for both the industry, and the individual.

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