Energy Trilemma

The gap between fossil fuel and renewable has narrowed and renewable are now almost at par with fossil fuel based energy. This gap is shrinking and in the near future renewable will deliver energy art a lower cost than fossil fuels. In the near past the gap between renewable and fossil fuel cost suggested that renewable will impose a cost upon society this is no longer true .Energy security had promoted some societies to go for nuclear energy this has also proven to be  a solution that does not form a part of the least cost solution . The term energy security is loosely used and has therefore multiple meanings.

Energy Trilemma

Introduction

As world population continues exponentially growing and becomes more urbanized and more affluent, demand for power, heat and transport will grow with it. Global energy demand is expected to increase just as fast and potentially double by 2050. To keep up with global energy demand, the investment requirements for energy infrastructure are nearly US$50 trillion between now and 2050.With such a large portion of money being invested, and the need for energy becoming ever so critical, the method of resource allocation is paramount. There are three challenges that have to be addressed when facing investment in energy and demand, and these three challenges imply a trade-off when choosing one over the other. These three challenges constitute the Energy Trilemma:

•   Energy Security

•   Energy Sustainability

•   Energy Affordability

It is most usually used to describe a balance between energy security, social impact and environmental sensitivity. These three things are presented as conflicting aspects of energy production.

The trilemma can be thought of as three independent axes, each with their own scoring or weighting. A good score will be on that is higher on a particular axis. No one axis is necessarily more important than the other two, so the optimum is to achieve high scores on all three. The challenge then becomes the achievability of this. The value of the Energy Trilemma as a tool is it powerfully communicates the relative positioning against all three.

Definition

In philosophy, a trilemma is a choice between three unfavorable options. In economics it is also known as the ‘impossible trinity’: a trade-off between three goals, in which two are pursued at the expense of the third. But the energy trilemma appears to be different: meeting it requires achieving all three goals, although within the parameters of the particular wishes or interests of the actor in question. The trilemma paradigm to present a problem – or ‘challenge’ – that can be solved with minimal trade-off between the elements

The Energy trilemma was first defined as an urgent global problem by the World Energy Council in 2011, and they have been helping different nations to work towards reconciling the three dimensions of the trilemma:

1.      meeting the ever-growing demand for energy,

2.      ensuring there is affordable, accessible energy for all, and at the same time

3.      minimizing the effect of energy use and production on climate change

The World Energy Council (WEC), an UN-accredited global energy body, described an energy trilemma comprising ‘energy security, social equity and environmental impact mitigation’ in a recent report. WEC’s view of the trilemma is focused on sustainable development and environmental impact.

Energy company  E.ON describes the energy trilemma as the interplay between carbon emissions, the security of energy supply, and energy costs. Its website positions low-carbon technologies (a combination of CCS, gas, renewables and nuclear) as the solution to reducing emissions and costs while ensuring energy security.

E.ON’s and WEC’s trilemmas contain the same elements as the others, they present a balanced trade-off hinging on sustainable, low-carbon energy. Again, this is not a trilemma in the traditional sense. The traditional concept of trilemma is used for ranking of countries and businesses on common parameters. In reality the three most crucial elements in energy planning will vary with time and with countries. The overall objectives of each society or country will vary and it is from these objectives that the energy sector parameters will be derived. The three most crucial factors are not absolutely mutually exclusive these can be viewed as three streams that are of importance , in the final analysis all three will not be completely achieved and some combination of the three will constitute the accepted plan.  

The lowering of CO2 emissions can be achieved but it requires long-term and significant investment at a time when meeting the challenges of fuel poverty and the provision of competitive energy costs is more important than ever. Combine these two vital objectives with maintaining the security of energy supply - considered central to national security - and we have what may look like an impossible triangle.

Building the low carbon economy we all need means reducing greenhouse gas emissions across every aspect of our society. Improving the security of energy supplies demands the better utilization of indigenous resources, the efficient use of all resources and increasing the capacity of low carbon and renewable resources.Our development of carbon capture and storage for coal and our investment in efficient, gas-fired generation continues to lower the carbon footprint of our own central generation. 

This is enhanced by our long-term commitment to modern nuclear power. Decentralised, renewable energy brings low and even zero carbon heat, hot water and electricity directly to local communities. It improves the security of energy supplies nationally and reduces the distribution losses from central generation.

From bio-fuelled combined heat and power (CHP) for low carbon villages, towns and cities through to micro generation for individual homes, we are working to keep the lights on, costs down and to protect us all from the impact of climate change. Our Sustainable Energy business has become a leader in low carbon, decentralized energy.

There is no silver bullet. Renewables may be low carbon but they rely on the wind, the sun or guaranteed supplies of bio-fuels and, while nuclear power can provide continuous low carbon energy, it requires high investment.

Gas has served many counties well for many years but, there are now gas shortages and it has to be imported as LNG at some cost   Coal may be cheaper but produces more emissions than gas. Our ongoing development of carbon capture and storage could lower the emissions from coal. The truth is we need all these energy sources and technologies to balance the risk. We continue to invest in all of them as we meet the challenges posed by the Energy Trilemma. The single most important factor for change is behavior and lowering of carbon emissions.

 

The World Energy Council states that its "definition of sustainability is based on three core dimensions

- Energy security, which encompasses things such as the reliability of infrastructure.

- Energy equity, relating to how accessible and affordable the energy supply is across a population.

- Environmental sustainability, which looks at, among other things, the development of renewable and low carbon sources.

In its most recent World Energy Trilemma Report, the WEC said that the energy sector was "at a transition point" and faced a host of challenges. The WEC says that its trilemma provides what it says is a "clear framework" to deliver a transformation in energy and make "sustainable energy systems a reality."

2015   COP21 agreement saw global leaders agree to ensure global warming stayed "well below" 2 degrees Celsius and to "pursue efforts" to limit the temperature rise to 1.5 degrees Celsius. It is within this context that energy security, energy equity and sustainability – the trilemma – will become increasingly important.

Some Solutions to the Enigma

Global energy markets are in a period of dramatic transition. The emergence of shale gas, mostly notably in the US, has been disruptive to the industry, leading to falling oil prices. This has challenged the long-time dominant position of international oil companies (e.g. BP, Shell, Exxon Mobil) in the petroleum sector. Natural gas has emerged as a potentially important ‘bridging fuel’ to a low carbon future, with several leading national economies, including China, making the switch from carbon-intensive oil and coal to this ‘lower-carbon’ alternative. Away from oil and gas, renewable energy sources are becoming increasingly cost competitive and are gaining societal and governmental support. The energy transition alters the global dynamics of energy security, with some countries finding their energy independence challenged, whilst others enjoy the economic growth that is inherently linked to energy abundance. A similar distinction can be made between populations with regards to energy equity: the accessibility and affordability of energy, and as with energy security this too is in a state of flux due to changing market conditions.

Policy advisers are seeking high energy security, low carbon emissions and low prices for heating and cooling. The fear of lights going out haunts the politicians. Everyone recognizes the need to move to a low carbon economy. The Treasury does not want to meet the costs in a time of austerity. These objectives are seen as irreconcilable – symbolized by an image of an Escher triangle that would be impossible to construct.

However, heating and cooling can be provided by heat transfer – with no emissions of carbon on-site. Heat transfer using heat pumps is cheaper than burning fossil fuels for heating, or employing roof mounted chillers for cooling. And the energy ultimately comes from the sun, not from imports.

Decarbonisation of the grid requires reducing combustion of fuels.

Decarbonisation of the grid means renewable electricity generation from wind and solar.

Decarbonisation of the grid points to the electrification of heat.

Electrification of heat implies the use of heat pumps to transfer heat from where it is available to where it is needed.

Heat Energy storage implies using ground source heat pumps to take advantage of the ground as a natural store of heat energy between summer and winter.

The search for a practical and affordable way to reduce carbon emissions continues. Governments all recognize the need to control the emissions of carbon. It is easier to recognize the problem of global warming than to know what to do about it Renewable Energy can be divided into Renewable Electricity and Renewable Heat: these two manifestations of energy need to be treated in different ways.

The most promising approach to reducing carbon emissions from heat is to arrange for the transfer of heat from the time of abundant supply (summer) to the time of need (winter). It is cheaper and more efficient to transfer heat when it is needed instead of paying to generate heat each time heat is needed. Heat pumps can be used to transfer heat out of buildings into thermal banks in summer. They can also be used to transfer heat back from thermal banks into buildings in winter.

There can also be opportunities to transfer heat from places of abundant supply (data centers or supermarkets) to places of need (like schools or hospitals). This can be achieved where the excess heat is reasonably close to the demand – and information and a heat sharing infrastructure is accessible so that the transfer can be organized and controlled.

 

There is a way of resolving the energy trilemma: it can be achieved by the integration of:

§  heat pumps

§  thermal energy storage in the ground

§  heat sharing networks

§  electrification of heat

§  electric load balancing

§  decarbonisation of the grid

If society wants to achieve a low carbon economy then governments must act to encourage companies and citizens to reduce combustion. This can be achieved by:

§  . increasing carbon taxes

§  increasing incentives for Renewable Heating

§  introducing incentives for Renewable Cooling

§  requiring the use of low carbon technologies via planning permission

 

Evolution in Energy Trilemma definition

The power balance in the energy trilemma will change between sustainability, security of supply and affordability. The importance of both security of supply and sustainability will keep increasing and become more or less equal in 20 years. As for affordability, its importance will increase but not substantially compared to the other two : Security of supply-Despite the need to transition to cleaner energy, people do not want to compromise the comfort the current energy system have been giving them through the reliability of power. The supply of energy to end users should not be disrupted. Since renewable energy sources (RES) are variable, they cannot be relied upon them without a backup. Therefore, to keep a secure and reliable energy supply, generation facilities running on fossil fuels must be kept connected to the grid and available. This is mostly done, thanks to capacity mechanism. However, as we make breakthrough in storage technology and find ways to implement demand-response efficiently, RES could be sufficient to ensure the reliability of power. Moreover, the construction of a large interstate  transmission grid and the coupling of electricity markets mark the transition from a national notion of security of supply, to a regional one. This encourages a better collaboration between countries with different energy mix; Affordability-Affordability was a major issue in the beginning of the 21st century,  but in the last decade, the cost of renewables and storage have decreased considerably. In the developed world, Feed-in tariffs, as well as other support mechanisms have been introduced to decrease the risk associated with investments in clean technology. However, as renewable technology matures and as fossil fuel based generations age, requiring the construction of new power plant, it becomes clear that investment in RES is profitable. Thus, countries are leaving those mechanisms and let the market work. Moreover, a well-defined carbon price should be able to steer the majority of investment in RES in the future. In the developing world and for those who wants to go off-grid, the availability of a cheap, clean energy source, which simple and rapid to install has boosted energy access.

Utilization

Countries, cities and large organizations can set policy or socio-corporate strategy by identifying where they want to be on each axis and what is the desirable resilient position. They can benchmark their current positioning. This enables a reality check and proper understanding of the existing influences and drivers to achieve an informed position and be able to compare performance relatively to the performance of other equivalent entities. A constructive dialogue is possible on a reasonably consistent basis, without getting lost in an impossible maze of data.

The power and value of the trilemma tool is then its ability to test whether new policies or projects are helping or hindering moving towards the desired position and what adjustments or change in emphasis of such new initiatives are needed

Energy sustainability

Energy sustainability is the indication of its propensity to create damaging pollution. There is considerable debate linking energy consumption to the creation greenhouse gases to their influence on adverse climate conditions; whether long-term global warming through carbon dioxide, increased climate volatility causing extreme disruptive events, or increased pollutants. It is generally considered that increasing the likelihood and prevalence of such conditions is unsustainable and that measures to constrain or reduce them are highly desirable. However, is it fair to impose very tough sustainability obligations uniformly or should there be some adjustment or compensation in the case of newer less mature economies? Since the newer economies tend to have less mature industrial bases their starting point is that in global terms they are lower contributors to climate pollution. It is only reasonable to provide some margin for them to catch up.  New technological developments have made some renewable technologies at par with conventional energy sources and this distinction in now blurring between renewable and fossil based energy resources. The technological development is ongoing and in the near future renewable will be at par or even cheaper than the fossil fuel based options.

Energy affordability

Energy affordability is the accessibility and affordability of energy supply across the population. Energy can be considered a public good and it is the national government’s responsibility to ensure that its entire population can access and afford energy. Energy is a good that can enable growth; without it, many daily functions are not possible. Energy allows for industrial growth, entrepreneurial activity and other public goods to be offered such as health and education. Much of energy policy becomes centered on affordability due to political incentives, and is the reason why many energy markets and utilities are forced into competition; to maintain fair prices for the public. However, this position is complex because energy has traditionally been a major source of tax revenue to many national economies, helping to fund national socio- economic infrastructure.

Some energy sources have a cost directly linked to rate of consumption. Others might have high initial capex costs but then their marginal cost of energy produced might be low and almost at no added costs for extra energy created. Zero net energy schemes may be affordable on the grounds that overall they have no net energy demand external to their system.  All three variables, security, sustainability and affordability cannot be thought of in isolation.

Low carbon and renewable energy requires significant capital expenditure and government support. So these more energy sustainable sources require a trade-off with affordability. Energy prices would rise to balance investment in renewables and the consequence would be more expensive energy. This, however, is no longer absolutely valid. Renewable generally are capital intensive but the delivered cost of supply is comparable to fossil fuel alternatives.

Energy security implies that there needs to be enough power capacity to generate electricity to meet demands, both in terms of security of energy availability and in terms of network stability and frequency control. However, to strengthen capacity and security, the choice has to be made between cheaper power sources to maintain affordability or more expensive renewable energy which builds on sustainability. Here the situation is mixed. Some renewable sources, wind and solar, do impose a cost on the system this is related to availability of these sources and additional transmission and control requirements needed to maintain system security and integrity, the cost of these renewable is now at par with fossil fuel sources , this has resulted in altered  generating capacity expansion planning  regimes.

If a country has poor energy infrastructure and low natural resources, it is forced to import expensive sources of energy and compromise energy affordability. Permitting it to import more affordable sources will compete with ambitions for more sustainable energy. When thinking of security, sustainability and affordability, the other two must always be a considered for a holistic, integrated understanding of any energy problem

Underpinning the trilemma is the concept of energy security, which is of significant rhetorical interest in itself. It’s obvious that energy security means many things to many people. It could mean being self-sufficient in renewables, having indigenous fossil fuel reserves, or having enough money to pay the gas bill. The often broad and unspecific use of the term creates a risk that it may become an empty signifier: a term that is used in so many different ways that it is emptied of all meaning, and so comes to mean nothing.

 Some manipulate this elastic term to promote renewable and low-carbon means of production, and bolstered vision with terms indicating reliability like “robust” and “comprehensive”.   renewable technologies are deemed  as the answer to the problem of energy security as they will protect bill payers from the “increasing costs of volatile fossil fuel imports from riskier parts of the world”.

 One version implies that energy security is achievable within the parameters of his reappropriated trilemma.  Whilst another view   appears to be saying that energy security and environmental sensitivity are separate, independent issues. Both can be delivered, but at considerable cost to the customer.

If we look at the global context, many countries are expressing energy security as the reason for switching to renewables and other low-carbon technologies. For example, China’s energy security strategy involves energy efficiency, and increasing investment in renewable technologies– hydropower, wind, biomass and solar – and electric cars. Energy security is aligned rhetorically with national security in language like   “volatile” and “riskier”, but also has a basis in policy and research, especially in the USA.

Recent Trends in Energy markets  

The global electricity sector is being transformed by three reinforcing trends: decarbonization; digitization; and decentralization. Meanwhile, empowered energy consumers are emerging with new choices in how they consume and manage their energy use.

Decentralization, marked by the increased use of distributed generation, such as electricity generated at a user’s site via solar panels, and distributed energy resources, such as storage, is having a huge impact on demand and supply dynamics.

The impact of distributed generation is examined in a new report, "World Energy Trilemma 2017 Changing Dynamics— Using Distributed Energy Resources to Meet the Trilemma Challenge." The "Energy Trilemma" — the challenge of balancing energy security, energy affordability and environmental sustainability — provides a framework to understand the disruptions and opportunities of increased decentralization in the energy system.

Consumer and technological pressures for increasing distributed generation will require fundamental changes to regulations and who can participate in the energy market. Decentralization not only adds new resources to the system, but also creates new actors in energy markets. Market entrants such as large industrial energy "prosumers" that are using onsite renewables to meeting energy demands, the growing number of distributed energy resources such as electric vehicles, energy service aggregators and rural energy entrepreneurs — particularly in countries with limited energy access — offer new sources of generation, supply and demand management.

Energy leaders worldwide surveyed and interviewed for the report are skeptical as to whether current regulatory frameworks can accommodate the shifting energy supply structure. However, regulators will need to adapt quickly. Countries that do not take the necessary steps to integrate distributed energy resources will face heightened energy security risks, potential infrastructure redundancies and investment challenges that adversely will affect their Energy Trilemma performance.

The digital revolution is affecting the power industry. If the last decade was about developing hardware capable of generating cheap, plentiful renewable energy, the next one will be about making energy generation systems smarter. Exponential growth in low-cost processing power advances in big data management and growing cloud capabilities, coupled with the acceleration in analytics and machine-learning, have the potential to transform the way we produce, buy and sell electricity. The advent of distributed generation, solar and wind options, roof tops and two way metering has made it mandatory to adopt digitization , in order to control run and use the power system whist maintaining its integrity . Smart metering and time of use meters plus consumer devices that can respond to signals from the system all make digitization essential to achieve cost reductions in supply and provision of energy.

The World Economic Forum estimates that $1.3 trillion could be generated by digitalizing electricity generation worldwide between 2016 and 2025. It lists five initiatives in particular – better management of asset performance, real-time platforms data, integration of energy storage and customer-centric solutions – that it believes will individually unlock at least $100 billion of value over the ten-year period.

Transformation of the industry is already underway,  it is happening now,   plant digitalization is a rapidly growing focus across the industry with most organizations working on their strategy and initiatives.  An overhaul of the power industry is long overdue. Power generation networks have become much more complex in recent years, thanks mainly to the rise in renewable energy power generation and the growing number of small, distributed power producers. Demand for power is also increasing in many countries, yet grid infrastructure is often old and creaking. Equipment is both difficult and costly to maintain, but tighter regulations are driving the industry to be more efficient and cleaner than ever.

Digitalisation comes with up-front costs, but technology’s ability to improve productivity can pay dividends. Digital technology can help to solve some of these challenges. For instance, intelligent data systems are enabling network operators to handle large volumes of intermittent wind, solar and other renewable power, and to accommodate more distributed power producers. For plant operators, building a database that forms a digital twin version of the physical plant can lead to the development of analytics that can trigger service and maintenance actions, even before problems occur.

 Power companies perceive that digital technology will support the core fundamentals of their businesses with  cost management as a major focus and also  as a means of optimizing processes.  Gains can also be made in operations and maintenance, alongside improvements in production capacity, safety and information management.

 Digitalization has the potential to boost the production capacity of their facility by at least 10 % although 40% savings are also expected by some . .  Companies think digitalization will reduce operating costs by anywhere from 10 per cent to 50 per cent, with an average of just over 27 per cent.

Economics and technical advantages will drive digitalization in the energy system, but major challenges remain. Power companies are awash with data – a modern gas-fired power plant is equipped with more than 10,000 sensors – but most have a long way to go before they can use this effectively to trim costs, increase sales, and boost efficiency and reliability not one uses more than half the data they collect. The average is 27 per cent.  Establishing an intelligent engineering master data management system can be key to helping organizations improve on these numbers , data analysis would be easier with digital information management and  it would enable them to make more informed decisions.

Digitalization comes with up-front costs, but technology’s ability to improve productivity can pay dividends  it is because of the enormous capital expenditures required by the industry that it becomes so important to wring every last drop of productivity from power assets, and software is indispensable in this effort. And digitalization will bring great rewards. But it will also bring change and uncertainty to what is a relatively conservative, risk-averse industry

More than 50 percent of energy leaders said they expect a rapid increase in distributed generation — to a share of 15 percent or higher — of the installed generation capacity in their country by 2025. Indeed, Oliver Wyman estimates that every two minutes a home or business in Europe and North America goes solar. This pace of change is expected to accelerate with technological developments in storage options that can support distributed generation. As one energy leader we interviewed noted, "The pace of innovation on batteries and re-charging has increased at a faster pace than expected."

Three trends are impacting the global energy sector at an unprecedented pace: decarbonization, digitization, and decentralization. Energy policy and regulations have to adopt quickly to respond to these technology-driven trends that are enabling empowered energy consumers and transforming demand and supply. Get the policy framework right and distributed generation offers new opportunities for countries to provide secure, affordable, and environmentally sustainable energy. Policy frameworks that do not integrate distributed energy resources will face investment challenges and may slip down the Energy Trilemma Index.

The World Energy Trilemma 2017: Changing dynamics - Using distributed energy resources to meet the Trilemma challenge’, tapped into the global insights of leaders across the evolving energy sector. Through interviews and surveys with utilities, transmission companies, energy entrepreneurs, storage providers, and e-vehicle developers, we identified three key focus areas for policymakers and industry leaders to balance the energy trilemma and meet evolving consumer demands.

Index

The annual Energy Trilemma Index ranks country energy performance in providing secure, affordable, and environmentally sustainable energy. The Index can be used to guide corporate strategy both in terms of their branding / positioning and their investment choices – e.g. help identify opportunities where projects and program benefit the Energy Trilemma outcome, the financial performance and socio-corporate objectives. It can help identify opportunities where projects and program benefit the energy trilemma outcome, the company’s financial performance and its socio-corporate objectives.

The countries that tend to be the best at balancing the resulting trade-offs between these interests [energy resources, political stability, wealth, affordable and environmentally sensitive energy] are those that have diversified their energy resources and actively manage demand for energy through well-established energy-efficiency programs. The Trilemma Index is a rating based on market dynamics of what a country or major organization should do, by taking into account constraints such as capital resources and natural resources.

 

By setting targets for countries, it gives a quantitative basis for policy  makers, energy industry professionals and countries a whole to see not just the impact of future decisions on the country but internationally as well, comparing it to its relative position in the index. Multi-national organizations can use it to assess the relative impacts and benefits of investing into different geographies.

It can also be used to look at project impact on a regional level. For example, when looking at the EU, countries must make security of supply decisions based on neighboring capabilities. As for sustainability, there are EU wide targets, so countries within the EU can see where other countries stand against these targets and devise national plans accordingly

The trilemma introduces a framework in how to view these three energy challenges together. Previously, security, affordability and sustainability have been discussed by policy makers and industry separately, but these three components have strong influence on each other. Each requires trade-offs to make the other component better.

Rather than having international and national policy focus on each component, policy and decision makers need to think within the trilemma framework. The Energy Trilemma combines three key aspects of the energy markets and brings about a framework to discuss the issues holistically.

With demand for energy showing no signs of slowing down, and a pressing need for an international effort to combat climate change, the trilemma framework is more pertinent than ever. The Arup Trilemma Index can be used for countries to observe their performance in each energy variable and can similarly be applied to Cities and organizations. Arup’s index can be modified to incorporate large energy-related infrastructure projects, to see the impact these projects would have on a country’s ranking in affordability, security and sustainability. It can also be extended to compare utilities’ performances, such as water companies, to advise corporate strategy.

The Trilemma Index is an important tool and framework that major consumers of energy and organisations in the energy sector can use for an integrated view and informed decision making. The trilemma framework can enable multi-dimensional thinking, allowing for policy to be tailored not just toward energy security for example, but also to see impacts on sustainability and affordability, and possibly improve decision making towards a more integrated  

Evolution from centralized model

Electricity systems are evolving from a centralized model dominated by large utilities to a hybrid decentralized model with multiple actors generating and supplying electricity. This represents a significant shift in the generating mix, but large regional variations exist based on countries’ current electricity grid structures and the extent to which regulatory systems accommodate the changes in energy supply.

The drivers for decentralization vary, but currently, energy leaders noted that increasing energy access is a key driver in many countries. However, by 2025, distributed generation will be driven by environmental sustainability targets and goals to increase energy security and resiliency.

In the near term, the shift to decentralization is raising concerns that maintaining system reliability will become increasingly complex. New approaches to system management, supported by enhanced information technology systems, including smart grids, are required to manage energy security challenges.  It is envisaged that   increased decentralization and the increase in penetration of distributed generation will challenge the reliability and security of energy supply.

Expanding opportunities

As countries evolve to a hybrid energy system, the role and responsibility of energy incumbents is changing. This is raising concerns about the flow of investments to maintain and expand new and existing infrastructure. Incumbents such as utilities are facing declining market share and uncertainties in tariff and pricing models to cover the cost of operating, upgrading and maintaining the grid, as well as their uncertainties in the ability to provide back-up capability. Energy policymakers and regulators are presented with new questions about how to ensure the right level of investments in necessary infrastructure.

However, the diversification and decentralization of energy resources can make electrical systems more resilient. For example, based on experiences during Superstorm Sandy, New York state has established a $40 million grant to create at least 10 microgrids as business model templates as part of a focus on distributed generation in the future energy system as a means to strengthen resilience.

Distributed generation presents an expanded opportunity to bring electricity to the estimated 1.2 billion people without access. In many developing economies, providing access to electricity through a standalone off-grid system is often much cheaper and faster than connecting households to the grid. As one energy leader noted, "The central grid can be like shooting cannons at birds — bringing an oversized solution to rural challenges."

Looking forward, policymakers must consider how off-grid distribution generation will shape their energy system over the mid- and long term. It is critical to set in place the right frameworks to stimulate the growth of entrepreneurial companies providing off-grid distributed generation solutions, mostly in the form of PV and solar, such as "backpacks" or mini-grids and electricity services to low-income communities and households.

Distributed energy resources, especially renewables, support progress on the environmental sustainability dimension of the Energy Trilemma. Moreover, distributed generation provides the opportunity to reduce the inefficiency of the existing large-scale electrical transmission and distribution network (between 7-15 percent of energy can be lost in transmission), increase energy efficiency of grid connected and support enhanced demand management. Distributed generation also enables harnessing of energy that otherwise might be wasted, for example, through a combined heat and power system.

New customers, new competitors, new partners

One implication of the growth in distributed generation is the increasingly complex web of energy system actors. To succeed, all actors in the energy sector must respond to new customers, new competitors and new partnerships across the sector. In an increasingly crowded marketplace, the providers most likely to capture a competitive position will be those that can offer customers choice in accessing or using energy or offer ways to simplify customers’ lives.

Responding to these challenges is complicated by the pace of regulatory change that will affect who and how businesses can participate in the energy market. Will regulatory policy move at a pace that allows the private sector to capitalize on new opportunities and meet rising customer demands?

In many countries, regulatory frameworks are trying to catch up with technology options and shifting energy users’ demands. As the energy buyer at one large manufacturing company noted, "Regulatory structure and utilities are simply not evolving fast enough to meet the needs of the changing power system."

Such fundamental change will not all be smooth and will call for serious thought from governments. Distributed generation is presenting new and fast-developing opportunities to balance the energy trilemma. Policymakers must move quickly to seize new opportunities in meeting their countries’ energy needs. Developing the right energy framework in the face of shifting technology won’t be easy energy will remain a space where political and technological disruptions meet.  

UPDATE

Future Gas Series

EUA believes that the only sensible, cost-effective and deliverable solution, for the vast majority of homes, is to decarbonizes the hard-to-tackle heat sector by “greening” our gas. The energy trilemma – a phrase that rightly describes the difficulty in balancing the competing demands of affordability, reliability, and sustainability – should be set against the UK’s particular needs.

There is no easy option for the UK. All means to decarbonize will cost consumers, but it is imperative to keep these costs to a minimum by utilizing existing assets wherever possible. As a result of natural gas abundance, the UK has the world’s leading gas grid infrastructure in place, directly supplying the energy to heat 85 per cent of UK homes. It would be a travesty not to use this existing infrastructure as part of the solution to the trilemma, and “green” gas, including biomethane, BioSNG and hydrogen, could be the key

Heat demand is, not surprisingly, seasonal, but its peaks during the winter either need to be met by supply, or people will go cold, and no politician I know wants that. Switching away from gas heating will mean households face considerable up-front costs, which are simply unaffordable. Not to mention the upheaval as heating systems are ripped out.