During the past 30 years, companies have sought to improve operational efficiencies and cut costs in all manner of ways, but one of the potentially biggest savings and “quick wins” for businesses – energy efficiency – has yet to be fully exploited.

Energy is one the largest operating expenses for business of all sizes and in all industries. Reducing its cost can help a company’s bottom line and reduce the strain on electricity networks.

Technologies such as the Internet of Things, artificial intelligence (AI) and energy storage are helping companies improve their energy efficiency and save money.

Energy efficiency is becoming a high priority for business, particularly heavy energy users. In 2016, in the US alone, 190 of America’s largest “Fortune 500” companies saved a total of about US $3.7 billion through energy efficiency and renewable energy projects.

Internet of Things and “Demand Side Response”

Demand side technologies are transforming how businesses use and deliver energy. The technology works by automatically adjusting the power consumption of equipment on a second-by-second basis to help manage fluctuations in electricity supply and demand. These adjustments have zero impact on a company’s operations but help to build a smarter, more responsive system which supports renewables and the wider energy transition.

Businesses on a Demand Side Response (DSR) scheme commit to reducing or shifting their energy consumption when electricity demand from the Grid threatens to exceed supply. Businesses which can be flexible with their consumption are rewarded for shifting or reducing demand, or by making capacity available through onsite generation, when needed.

United Utilities, one of the UK’s main water companies, is using a “smart box” from Open Energi, a DSR technology company, which allows its equipment to ‘talk’ to the UK’s electricity grid, National Grid.

The company’s motors and pumps automatically adjust their energy consumption in seconds, in response to variations in power frequency. By 2020 United Utilities aims to provide the National Grid with 50MW of energy capacity − allowing the company to reduce its energy consumption while getting additional revenue from the grid.

In the United Arab Emirates, Dubai is considering demand side management technology to support its goal of reducing its energy consumption by 30% by 2030.

Artificial Intelligence and automation

AI is poised to revolutionize the way we produce, transmit and consume energy, by becoming the brain of this future smart grid. 

The technology could continuously collect and synthesize data from millions of sensors across a city or country to make decisions on how to best allocate energy resources. As AI is more widely adopted, it will become even smarter by spotting patterns and anomalies in large data sets, which further revolutionise both the demand and supply side of the energy economy.

DeepMind, the world leading AI research company, has been working with Google to improve the energy efficiencies of its data centres. By applying its machine learning technology, DeepMind has been able to achieve a 40 percent reduction in the amount of energy used for cooling.  

At present data centres consume around 3 per cent of the global electricity supply – with this figure expected to treble in the next decade, putting an enormous strain on energy supplies. By applying AI to data centres alone to make them more efficient could have a major impact on our electricity networks.  

Energy Storage

Business are using new energy storage systems to improve energy security and generate new revenue streams. They do this by storing low cost energy when demand is low and selling it back to the grid at peak times, when costs are higher.

Alternatively, a business can use its stored energy at its own peak times or to cope with changes in seasonal demand.

When storage is combined with renewable generation, such as solar and wind, business and industry have the potential to be self-sufficient and work off the grid.

At a grid level, energy storage has a number of applications beyond time-shifting energy, which are key for making the grid smarter and more efficient.

Improving energy efficiency is a quick win for business. It allows them to reduce costs, improve energy security and potentially generate new revenue streams. To stay ahead of the curve, businesses and industrial players must begin to invest in technologies and processes for managing energy − a resource which is now a key factor in business success.

Water scarcity is a global challenge. A growing population, which is expected to increase from around 7.5 billion today to nearly 10 billion by 2050, according to a forecast by the United Nations (UN), is putting growing pressure on a finite supply of water. Global demand for water is expected to increase by 55% by 2050. Within the next decade, two thirds of the world’s population could be living in “water stressed” countries.

Regions affected won’t be limited to arid regions, such as Sub-Saharan Africa and the Gulf States in the Middle East. The strain on the water supply will be particularly acute in cities. The number of people living in cities is expected to rise from about 55% in 2016 to 66% by 2050, according to the UN. This population increase could cause major disruption to cities if suitable water technologies are not in place to serve demand. In the United Arab Emirates (UAE) − one of the most arid parts of the world with little rainfall − groundwater levels are low and in steady decline. What groundwater there is, is typically very salty (saline). For the UAE and about 150 other countries on or near the coastline, with minimal rainfall and little freshwater, there is currently little choice but to rely on desalination technology. Desalination involves pumping and processing sea water to remove excess salt and other minerals to obtain fresh water suitable for human consumption or irrigation. The technology is already widely used, with more than 300 million people relying on desalinated water for some or all their daily needs, according to the International Desalination Association.

Desalination has been vital for the UAE’s rapid growth and development. The country gets 96% of its domestic water through desalination. Two of the big disadvantages of desalination technology are closely linked to each other – firstly, desalination is energy intensive, and secondly these energy needs have historically been met by fossil fuels. In the UAE, seawater desalination needs about 10 times more energy than surface, freshwater production. In the Gulf region alone, desalination plants account for 0.2% of the entire world’s electricity consumption. However, these challenges are now being addressed and desalination technology is expected to play a key role in serving growing demand for fresh water. Energy accounts for around 70% of the cost of desalination and is typically derived from fossil fuels. By reducing energy intensity and running desalination plants on renewable energy, operators could both reduce their operating costs and minimise their carbon footprint.

In the UAE, Abu Dhabi Future Energy Company (Masdar) has piloted five energy-efficient seawater desalination projects at a testing facility on the Ghantoot coast. The long-term goal is to implement renewable energy-powered desalination plants in the United Arab Emirates, as well as the wider region, and to have a commercial scale facility operating by 2020. Once rolled out, this project is likely to have implications well beyond the Middle East. Elsewhere, island countries including Japan, Taiwan and South Korea have been using variations of desalination technology, which involve sucking up seawater through long pipes running hundreds of metres out to sea so that they gather water from deep under the ocean’s surface. Water from more than 300 metres deep is purer and has more nutrients, making desalination simpler and cheaper because less energy is required to process the seawater.

Desalination technology has played a key role in helping the UAE and other countries in water scarce regions grow their cities and industries. Over the next decades, desalination will also be vital in helping emerging economies develop, although how these countries power their plants will be different. Desalination, when combined with renewable energy and potentially energy storage, will significantly improve the economic viability of processing sea water and make it more environmentally sustainable. This will play a critical role in responding to the growing global challenge of water scarcity.

LCOE has reached its limits  We regularly read about new record lows for the Levelized Cost of Energy (LCOE); such as US$ 1.79 ct/kWh for solar photovoltaic (PV) projects in the Kingdom of Saudi Arabia or US$ 1.97 ct/kWh in India. Those who are more familiar with the subject know that these numbers sometimes represent the levelized cost of energy, and at other times they indicate the anticipated levelized revenues for the energy sold under the terms of an auction. If you dig deeper, you start to understand that this number is based on multiple assumptions: not only about Capex and Opex but also debt and equity levels, the cost and term of financing, the life time of the asset, availability, wind speed and solar irradiation, the period and method of depreciation, residual value, and the exchange rate. Where the number represents levelized revenues, you also need to factor in assumptions about how the offtake agreement is adjusted over time and what the market price for energy will be after this agreement expires. With all these considerations in mind, you may wonder what the value is of an LCOE? Can you rely on the figure; or should you only trust LCOEs when they come from one source, because then at least you can compare one LCOE with another? Or is the LCOE about as insightful as the typical statement in a press release where the new owners proudly announce that their project will supply so and so many households with electricity? Let’s take a step back and ask ourselves if cost per kWh is the right number to look at? Is the underlying assumption that every kWh has the same value correct? Can I use the LCOE index in a world where storage is becoming more and more prevalent? Batteries typically increase the LCOE, but perhaps these higher costs increase the value of the system at the same time? And if so, by how much? We all like a method that allows us to compare different solutions and technologies in a simple way. As long as LCOEs are calculated using the right assumptions, then they provide a straightforward comparison. But we should be cautious. There is an old saying, “what gets measured gets done”. But is a low LCOE what we want to get done, or would we rather demand and supply are matched at the lowest possible cost? Do we want to have security of supply that is sustainable environmentally? If the answers to these three questions are ‘yes’, or even if it is ‘yes’ to just the first question, then we need to go beyond a simple LCOE number. In future, we need to work with a “function” rather than with a single “index”. Our new Cost of Energy Function (COEF) needs to start by capturing the system cost of power generation, and then progressively show how this cost changes, typically increasing, if the generation (supply) profile is adjusted to a demand profile. The resulting curve may well end before full adaptation has been reached as this amount of flexibility may not be possible technically. The demand profile will be a new assumption that is factored into our equations. We may also need to accept that two demand profiles are necessary: one for summer daily demand, another for winter. We will also need to include whether we are considering a base load or a peak load generation source. In addition to generation curves, we can construct demand curves that start with demand today. By creating two curves, we can show the cost of energy efficiency (how much investment would be needed to reduce energy consumption) and the cost of flexibility (how much it would cost to move the point in time when energy is consumed by 30 minutes or one hour, for example). Moving from a LCOE index to a function is not an easy undertaking, and it may well progress in stages. The car industry currently measures gas consumption using different driving profiles, depending on whether it’s in the city, on country roads, or on the highway. Regardless of the question, if we use a function or a group of values that are profile-based, we need to ensure that we all mean the same thing. Here, an independent body or workgroup could play an important role in developing and codifying a workable framework: a framework that captures the complexity of demand and supply, that captures the value of storage, and that helps regulators to set policies because it measures what needs to be done.