Energy: What Does the Future Look Like?By Juan Manuel Ávila Hernández | Thu, 07/30/2020 - 15:00
We are definitely not the first generation to imagine what the future might look like, and how our lives are going to change in the years to come, the way we’ll dress, the way we eat, and also the way we generate and consume power. The answer would definitely be different if we had asked the view of people from the mid-‘50s, when nuclear power was the fastest-growing technology, and all the scientific magazines pointed us in that direction, and governments all over the world set up strategies and public policies to encourage the use of this technology.
Certainly, we know that’s not the case now when we imagine the future in terms of energy. Today, the future looks like a sustainable one, where the challenges are not about generating power efficiently and cheaply, but how to integrate new business models and flexibility into the grid. This poses the next question: Does the future still look at transmission and distribution as it did many decades ago, or has that also changed along with how power generation has changed? The answer is yes. Although we are still transmitting power via wires through transmission and distribution lines, the way the grid operates has changed. We are now looking at major technological breakthroughs that will encourage more grid flexibility, but also new business models.
Transmission and distribution lines have always been a monopolistic market, mainly because of the nature of the business. It would be close to impossible to operate multiple interconnected lines with different operators. Plus, the expenses related to OPEX would lead to a surge in the price of energy. This is one of the main reasons the number of participants is lower in that specific industry in comparison to the power generation side of the business. But how can small-scale startups join the business if CAPEX is expensive and there is already a natural monopoly in the T&D industry?
Smart grids are the solution. For a long time, the market has theorized what the future for T&D would look like, and how technology would play a major part in this business. Never did we imagined 15 years ago or even six years ago a flexible microgrid that could self-operate with AI and by doing so, could incorporate a vast amount of renewables or run with renewables only. This is what the future of energy looks like. We need to understand that innovation not only applies to the generation of power but also to T&D. By making the grid more flexible and more affordable, we can now start thinking about running private grids, where the next big business opportunity will be.
Traditional utility-scale projects will continue to be constructed, but the focus for the big companies as well as startups will be how to explore, build, operate and maintain power lines rather than looking at the generation factor. This will not only provide ancillary revenues for companies that are already generating power, or working as ESCOs, but also provide legal loopholes and faster interconnection than using the national grid.
This could be a solution for the Mexican market, where the self-proclaimed fourth transformation has stalled the energy transition and the participation of private companies. It can be a clear path to continue doing business in Mexico, because not only is this solution feasible in terms of cost but it is also an attractive idea for companies. Imagine having your factory set up in a 100 percent renewable energy industrial park with a microgrid managed through blockchain technology and AI. In addition to the flexibility this grid could offer, as well as the impact on investors that want to have a social impact or that have higher CSR (Corporate Social Responsibility) goals, this type of microgrid-powered industrial park could offer better energy prices than the grid and less volatility, mainly because the grid and the generation is operated by the same participant, thus making costs more competitive. By also integrating a large amount of generation from renewable energy, the LCOE would definitely be more competitive than with a regular industrial park. The other good thing is that this solution could work basically everywhere, not only in Mexico.
Let’s remember that technology will always bring us closer to economic development and new opportunities, but also let’s remember that technology is always the smartest way to go when we talk about beating regulations. There are many examples of this but the biggest of them all is Uber. Before Uber, regulation of transportation made it impossible for individuals to just simply start driving a taxi. The decision of who could enter this business and why was always a governmental decision. Then Uber came and changed everything. In the same way, technology will change the way we do business and we will always find a way to do business, regardless of the regulation.