Germany has decided to work towards a sustainable and digital energy system. The days of the old centralized, nuclear- and coal-based system are numbered. Christine Lucha and Lisa Meinecke point out the trends and challenges that shape the transition towards the New Energy World. Their conclusion is as simple as it is pressing: active political design is the key – now!
Old Energy World and New Energy World – Where do we stand?
The Energiewende means a transition from the old, nuclear-and-coal based, to a sustainable and digitalized energy system.
This is a complex endeavor as the number of actors involved increases and their functions overlap. While digital technologies bring automation and potential for relief, they are an ambivalent phenomenon: with no comprehensive laws on data protection, it is unclear what is going to happen to the tremendous amount of data collected by digital appliances such as smart meters. Besides, technologies like blockchain are often so energy-intensive that they eat up the amount of resources that they are trying to save. Therefore, political design must actively shape a digital and ecologically sustainable energy transition – it will not happen by itself.
Looking a little closer at the challenges, the energy system’s development can be divided into three time periods: The Old Energy World, the current phase of transition and the New Energy World.
Old Energy World
Before the liberalization of the energy markets, the energy system was comparably clearly shaped. A few power producers supplied consumers with mainly fossil and nuclear energy within monopoly-like structures. So far, so good, so outdated: the Energiewende needs different structures, and a clear commitment to climate protection and sustainability.
A time of transition: It gets complicated
We are in the midst of the transitioning process. Structures change. The following trends are strong:
- Decentralisation: The old energy system was designed to transport electricity from a few large central power plants to consumers. Solar and wind energy work differently: The number of power plants has grown exponentially. Their energy generation depends on the weather and is less predictable. Consumers produce their own energy at home and become prosumers. This makes the whole system much more complex to handle.
- Volatility: The situation becomes even more complex because electricity cannot be stored on a large scale yet. Instead, it has to be produced and consumed at the same time. With more renewables that are less predictable, the electricity grid needs to be so flexible that supply and demand are matched at any given time in an efficient manner.
- Digitalization helps by automating processes. But digitalization also bears risks:
- Data protection gains a priority that is equally important to physical security. People reveal a lot of sensitive information about themselves and society wants to prevent abusive data processing and protect privacy. Yet our laws do not address these pressing issues.
- The prevention of rebound-effects is a major issue. Digital technologies are often so energy intensive that they eat up the amount of power they are trying to save. Smart infrastructures have the potential to increase resource efficiency, but only if they are managed right.
- Participation: Renewables increasingly allow private individuals to generate their own electricity (what we call prosumers, producers and consumers). Citizen energy cooperatives have the potential to add value to local economies and enhance political co-determination. This is why they were legally privileged in the EEG 2017. However, the privileges were suspended in 2018 as they did not have the desired effects.
The transitioning process will re-define the roles of all involved actors. Actors used to have clearly defined and separate roles. As structures become more circular and interconnected, the roles become more versatile and overlap. The actors facing the biggest changes and challenges are the following:
- Prosumers: As producing own energy becomes easier and easier, their numbers will grow. Intermediary agents bundle their supply and demand to help asserting them on the market. Thus, they are likely to gain market power and political influence.
- Consumers: With respect to data protection, consumers seem like a plaything of digital companies and their data-hungry technologies. They are often confronted with the choice of convenience versus privacy. But with respect to market power, their influence seems to grow: see for example the trend of increasing demand for green electricity.
- Energy supply companies and utilities: Their role used to be purely the supply of electricity at marketable prices. In the New Energy World, they will have to develop intelligent and individualized products and services for the various consumer groups. This can lead to revenue losses in the traditional utility businesses.
- Grid operators: The increasing number of prosumers and actors requires increased management efforts. They need to be interconnected on a large-scale level and on a close meshed level simultaneously, for example in the form of micro grids.
New Energy World: We are not there yet, and the to-do-list is long
The good news is that we have the cornerstones for what we want: clear climate and energy goals, as well as coal and nuclear phase-outs. These are drivers for change. At some stage, we want 100% renewables also in our cars and heating, smart and automated processes, and less energy and resource consumption overall.
Then again, we lack a comprehensive, big-picture view of the New Energy World. Instead of actively designing a framework for our vision, politics rather focus on small-scale adjustments and lag behind in answering big questions like data protection.
Concerning digitalization, this is especially unfortunate. The energy transition in its current form depends on digitalization. Therefore, society has an interest in framework conditions that promote digital technologies. But digitalization will not automatically be sustainable. We need regulation with a steering effect towards sustainability.
The Energiewende is happening, no doubt. But in order to make it truly sustainable, we need to shape it more actively.
The study „Alte Energiewelt – Neue Energiewelt: Trends und Akteure in einem zunehmend digitalen Energiesystem“ is available here.
“Digital technologies are often so energy intensive that they eat up the amount of power they are trying to save. ” Not often, please. This is a problem specific to blockchain, an insane libertarian pseudo-solution to an imaginary problem of systematic mistrust. In practice, consumers everywhere trust their monopoly electricity distributor not to rig the meter. They would not mind at all if the same regulated intermediaries ran a two-way market for distributed electricity using frugal record-keeping (basically three copies, with the seller, the buyer and the clearing-house) and a central counterparty.
The multi-trillion dollar interbank foreign exchange market clears through a single clearing-house in New York. It’s never SFIK been hacked. It’s not a problem-free market : but Herstatt risk, speculation, forgery and simple mistakes would not be solved by blockchain.