Infrastructures Venture

Mise à jour 27/09/2023

Decarbonising cities: the New Electricity Era

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Eurazeoviews2-Cohen Devillard
19/09/2023 - 6 mins

Cities account for over 70% of global CO2 emissions, making them an urgent priority for decarbonization. Encouragingly, most of the technology required to achieve this has already been developed. Today the biggest challenge lies in rolling out those proven solutions at both a vast scale and an unprecedented pace. Melissa Cohen and Pierre Devillard explain why the implementation of this “New Electricity Era” will require further digital innovation and massive investment.

 

The urgent race to deploy the New Electricity Era at scale

The time has come for the foot soldiers of decarbonization to roll out the campaign against greenhouse gases across the cities of the world. We have reached a point where there is a need for massive deployment of proven technologies on the ground to future-proof the world’s domestic, urban, and industrial infrastructure on the most granular scale.

This means finding the means and the teams to develop those assets that now appear relatively low-tech but are essential to implementing the shift from a fossil fuel economy. This will require a mass electrification of multiple applications, bringing us into what we could call The New Electricity Era.

These applications include heat pumps, EV charging infrastructures, building insulation, LED lighting, solar panels with batteries, shared mobility facilities, smart delivery boxes, and building management systems that need to be installed in homes and buildings worldwide. The urgent and obvious need for such a campaign opens attractive opportunities, to be sure, but there are a number of challenges still ahead. We will need clear thinking and close cooperation between policymakers, technology providers, infrastructure operators, and investors.

 

Distributed assets need to work together

First, although it is true that the large-scale roll-out of small-scale or “distributed” assets itself is a relatively low-tech mission, there is still a major technological challenge to be overcome. These scattered bits of equipment - some of them generating electricity, others consuming electricity -- all need to be able to talk to each other.

Matching supply to demand in a distributed-assets model is very different to what we are used to. As this New Electricity Era dawns, we are shifting from the previous centralized model, in which massive power plants pumped out electricity on demand through the grid one way to end users, to an interconnected and variable model, incorporating a digitalized tech component to balance supply and demand.

This equation is not easily resolved. On the generation side, the large and unwieldy power plants operate alongside multiple smaller renewable and intermittent sources, including input from end-users’ roofs and, increasingly, storage batteries. On the consumption side, significant new usages have to be taken into account, such as massive deployment of EV charging stations and heat pumps.

All these elements will need to be interconnected and able to respond to the fluctuating supply and demand in real-time, a complex and costly goal to achieve, calling for significant digital innovation to get there.

 

Any blue-collar workers with a flair for digital?

A second pressing issue is purely human. Who is able and available to do the heavy lifting required to get all this equipment installed in cities and towns around the world? This is a job that is at the crossroads of the industrial world of engineers operating hardware, and the digital world of programmers coding software.

Finding enough teams conversant in both the mechanical and the digital skillsets to be able to address these huge demands is a sizable HR challenge, one that calls for education, training and, perhaps more profoundly, a revalorization of the blue-collar employees who will actually be doing the work, incorporating their new digital skills.

Digital tools and AI themselves won’t do the job of installing the equipment. However, they can play a significant role in helping on administrative, commercial, financial tasks so that our electrification heroes can focus on decarbonizing our cities.

 

Persuading the home and office owners to get the work done

A third aspect that needs to be addressed to succeed in this transition to the New Electricity Era relates to the end-users themselves. Telling someone that they ought to invest in climate-friendly installations on their own house or apartment block for the sake of the planet is one thing. Getting them to actually do it is another.

It’s a simple fact of life that many individuals will not be prepared to spend money on something until they can either see their self-interest in the investment or they are obliged to make the investment.

This is where some creative thinking is needed by the regulators, policy makers and the service providers.

In some cases, it will be the regulators who will need to impose obligatory new standards, for example on elements such as new construction regulations and insulation.

In others, policymakers and governments must offer subsidies to alleviate the homeowner’s cost in installing, say, solar panels, EV chargers or a heat pump.

A third, more innovative but complementary approach by the service providers is also emerging as some of them start to implement “energy as a service”. This will allow the massive capital investments required to rapidly develop these assets at scale to be shifted from end-users to the service providers themselves; leaving the end-users to pay the costs over time as an operating expense. However, this will require clear and strict regulation to ensure that private investors feel secure enough to put up the funds required.

One further incentive for the end-users will likely be the introduction of new, user-friendly digital applications, making their life easier and more comfortable as they adopt the new installations.

 

Building a sustainable & local supply chain for the new equipment

The massive demand for new equipment to realize this decarbonization will itself open another significant challenge: the industrial production process itself must be carefully considered to ensure that it doesn’t undo the positive results once the equipment is installed.

This will mean, to the extent possible, drawing on local production facilities, providing local jobs, favoring low carbon intensive & energy-efficient factories, employing recycled materials, and drawing on renewable energies for power. Crucial to achieving this goal of a regenerative production process will be the digitalization of factories, new hard tech players, digital tools such as satellite monitoring and environmental DNA surveys, as well as climate & biodiversity reporting tools, all of which will play a key role in the monitoring & reward of climate-positive companies.

 

Europe as a launch pad for the winners of the new Era

The potential for investors to play an important role in this massive deployment of distributed assets is particularly strong in Europe. That’s because the alignment on environmental issues between regulators, governments, entrepreneurs and the broader population is arguably more advanced than in other regions.

As a result, European companies in this sector themselves on fertile ground, giving them the opportunity to use Europe as a launch pad for developing services related to the New Electricity Era, prior to rolling them out on international markets.

The good news here is that we see growing awareness among investors, policy makers, entrepreneurs and corporations of the need to combine new digital know-how with our society’s long experience in infrastructure to obtain the best of both worlds for the sake of healthier and cleaner cities.

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