Another year, another decade. As we review the key trends to watch in 2020, the significance of this juncture looms large.
The past decade began with a global economy clawing its way out of The Great Recession. That same year, the Copenhagen Accord and corresponding Cancun Agreements signaled a (mostly) global commitment to hold global average temperature increase below 2°C preindustrial levels. The passage of the American Recovery and Reinvestment Act of 2009, introduced to stimulate a stagnant U.S. economy, injected more than $100 billion into federal infrastructure and alternative energy initiatives.
At the time, global atmospheric concentration of CO2 was below — but marching toward — 400 parts per million (ppm). The nascent global clean energy economy hovered around $75 billion. Emerging technologies such as solar PV, wind energy, and EVs combined with an accelerating digital transformation of buildings, cities, and the electrical grid were a harbinger of the global energy transition that would take root over the ensuing decade. As emerging technologies muscled their way to center stage, the luster of conventional technologies such as centralized generation and fossil fuels began to fade. The energy system today is substantially more clean, distributed, intelligent, and mobile than ever before.
Today, clean energy capacity continues to expand apace. According to recently updated projections from the U.S. Energy Information Administration, solar PV and wind — still the darlings of the renewables surge — are together projected to account for three-quarters of all new electric generating capacity in the U.S. in 2020. Navigant Research, a Guidehouse company, forecasts show new distributed energy resources (DER) capacity deployments, comprising a diverse portfolio of customer-sited assets, will outpace all new centralized generation installments globally by nearly 190% (or around 250 GW) through 2030. Innovative use cases for enabling technologies such as artificial intelligence (AI) and blockchain are bolstering the feasibility of customer-centric solutions such as transactive energy and energy origin verification. Meanwhile, increased adoption of EVs introduces an entirely new fleet of mobile storage that breaks the geographic constraints of a power grid composed almost uniformly of stationary assets.
At the end of 2019, the global clean energy economy was worth nearly $2 trillion, achieving an astonishing 40% annual growth rate since 2010. The technology challenges shifted from adoption and scaling of one-off solutions to ecosystem coordination that force us to collectively wrestle with the serious task of rebuilding a nearly 150-year-old machine from the ground up.
At the same time, key pieces of that machine are in rapid deterioration and well past their useful life. We could replace, or alternatively, embrace the challenge of achieving a better outcome with less. As widely acknowledged, we are rebuilding the engine midflight and, adding to the complexity, we are doing so while coordinating the same rebuild across a fleet, all maneuvering in close proximity with zero margin for error.
Raising the stakes, the energy transition will occur against a backdrop of increasing climate risk. Our society blasted through the 400 ppm threshold in 2016 without blinking. Two-thirds of the global economy measured by country-level GDP is considered not on track to meet the Paris Agreement targets established in 2015. Even more alarming, as measured by Climate Action Tracker, seven of the forecasted ten largest economies in 2030 are showing either minor or no progress toward Paris Agreement targets: Brazil, China, Japan, Mexico, Indonesia, Russia, and the U.S.
Wait-and-see, or worse, inaction and status quo, are becoming increasingly cost-prohibitive scenarios. In spite of significant technology innovation, the vulnerabilities our energy system faces have only grown in significance. The average number of annual $1 billion dollar weather and climate disaster events in the U.S., for example, has more than doubled from 6.5 dating back to 1980 to 13.8 between 2015 and 2019.
If the past decade brought us the technologies needed for the energy transition ahead, the next decade will need to deliver the business model innovation to unlock comprehensive, system-wide transformation. Looking ahead at 2020, there are many reasons to be optimistic. Here, our experts highlight five energy ecosystems where we expect substantial technology and business model innovation to occur: networked buildings, e-mobility, smart cities, the hydrogen economy, and the neural grid.
Building Decarbonization Hits an Inflection Point (Casey Talon)
According to the Navigant Research Global Building Stock Database, an estimated 25 billion square feet of new commercial buildings are added worldwide every year — the equivalent of 9,000 new Empire State Buildings. At the same time, a broadening focus on decarbonization initiatives are refocusing both new construction and retrofits of existing buildings on strategies to improve energy intensity across the diverse building sector.
Business-relevant and economically viable intelligent building solutions have already crossed critical thresholds. Meanwhile, the economics of building ownership are changing in the era of digital transformation and climate change. Building-to-Grid is an emerging platform for business model innovation at the intersection of digital facilities and homes and optimization of energy consumption, comfort, and experience. Data is the new layer of value creation stemming from investment in digital technologies that appeal to the demands of occupants and executives.
At the same time, corporate leaders are facing mounting pressures to implement wide-reaching sustainability initiatives. Employees, students, and customers are more discerning of companies’ dedication to sustainability than ever before, and they use it as a factor when making spending decisions. Investors are becoming more conscious of sustainability, divesting from carbon emissions-intensive companies and investing in organizations with lower carbon footprints.
These top-down and bottom-up pressures are driving investment in the networked building ecosystem. The evolution of the smart, networked buildings are only the foundation for more wide-reaching and impactful opportunities for corporate and commercial real estate. Looking forward, three major industry trends will change the trajectory for market development in 2020:
Intelligent building investment will become a priority for addressing the climate crisis.
The master systems integrator business will bolster market leadership.
The PropTech wave will attract an infusion of funding.
These trends are mutually reinforcing and will result in intelligent building solutions providers deepening their relationships with potential customers while bolstering their financial well-being.
E-Mobility Expands Beyond Early Adopters (Sam Abuelsamid)
The supply of electrified models is expected to grow dramatically in 2020 with mild and strong hybrids, plug-in hybrids, and new battery electric options expanding. As tens of gigawatt-hours of new battery production comes online this year and going forward, supply constraints on these vehicles should also be eased. Tightening greenhouse gas (GHG) emissions rules and mandates in China and the U.S. will also push manufacturers to put a bigger marketing effort behind these new offerings.
However, one of the key hurdles to widespread expansion of electrified propulsion has been lack of consumer demand beyond early adopters. Although upfront cost remains a challenge, more affordable offerings are around the corner. More importantly, electrification options will be offered increasingly in the vehicle form factors that today’s consumers prefer including crossovers, SUVs, and pickup trucks. Faster and more readily available charging infrastructure along with aggregated access to multiple charging networks are also reducing the friction in owning a plug-in vehicle.
Combined with a continued uptick in fleetwide electrification, expanding micromobility options, and continued innovation around automated and connected transportation, the e-mobility ecosystem will see an expansion beyond first adopters.
Smart Cities Take Up the Mantle of Climate Leadership (Eric Woods) With the international community lacking authority to enact universal climate action and the aforementioned inaction on the part of a majority of countries, we expect accelerated activity across urban centers as local authorities respond to mounting public support in favor of proactive measures and to capitalize on economic growth opportunities. As such, the next decade will see a profound transformation in how cities are designed, built, managed, and experienced.
This is not technology hype. It is a result of the categorical imperative for cities to take a leading role in climate change and climate adaptation programs.
Many cities already have plans to be carbon-neutral or zero-carbon cities by 2050 or earlier. The Global Covenant of Mayors for Climate and Energy estimates that, if fully implemented, commitments made by the 9,000-plus cities aligned to its goals would achieve annual reductions of 1.4 Gt CO2e in 2030 and 2.8 Gt CO2e in 2050.
Impressive as such commitments may be, making them a reality requires new approaches to urban infrastructure and services enabled by new energy systems, building technologies, and digital analytics. It also requires new platforms and tools that can support collaboration between city departments, businesses, and citizens in the transformation to a zero-carbon economy.
At the same time, cities will be shaped by the next wave of disruptive technologies, including the widespread use of AI and machine learning, the deployment of 5G networks, the growth in automated vehicles, and broader developments in robotics. The combination of ubiquitous communication, new energy solutions, innovations in transportation, and the digitization of almost all aspects of society will mark a massive change in urban economies and societies.
In 2020, we expect smart cities to lead the way not only on climate adaptation and mitigation but also as a test bed for the massive opportunities and challenges presented by the Fourth Industrial Revolution (4IR). This complex interplay between the move to zero-carbon cities and the emergence of the 4IR undoubtedly will make cities the focal point for energy and technology innovation in the 2020s.
Hydrogen Investment Bridges Cross-Sector Versatility (Adam Forni) Hydrogen is perhaps the most versatile option in the decarbonization toolbox. But although a clean hydrogen economy was first envisioned nearly 50 years ago, cost barriers and lack of infrastructure have held back robust growth to date. In the decade ahead, expect green hydrogen infrastructure to establish a more significant foothold, with technology innovation a key driver across the entire value chain.
Hydrogen’s appeal as an energy carrier lies in its sector-crossing versatility, and policymakers are taking note. As they further explore options for decarbonizing electricity, more focus is paid to sectors where emissions are more difficult to cut. Electricity and heat alongside transportation and industry account for a combined 60% of global GHG emissions; both sectors offer ample opportunities for integrating green hydrogen as both an energy carrier and industrial feedstock.
In 2020, investment in hydrogen production as a link between renewable electricity and other sectors will gain traction. Although today’s processes are mostly based on fossil fuels, increased integration of electrolyzer technologies, carbon capture options, and other emerging production will widen hydrogen’s appeal. Stakeholders will build on lessons learned at the first 400 global fueling stations (with thousands more to come this decade) for new materials for storage tanks and pipelines; hydrogen compression, storage, and transportation will also see step change improvements.
Early markets for green hydrogen will attract greater investment in 2020. These include displacing fossil-based hydrogen in industrial applications as well as various transportation applications from forklifts, buses, and passenger vehicles. Historically high costs are coming down, but perhaps more importantly, the urgency is rising on employing this linchpin solution to combat climate change.
Connectivity in the Grid Becomes Pervasive — But 5G Is (at least) Five Years Out for Utilities (Richelle Elberg) Digital technologies are evolving rapidly, and solutions leveraging AI and machine learning, grid-edge computing, and cloud-based solutions all hold significant promise to help industries accelerate their transition to Industry 4.0. Power and utilities, in particular, will be more focused in 2020 on leveraging these innovations to evolve business models, become more competitive and customer-friendly, and safely integrate burgeoning DER installations while making the grid more resilient. Without ubiquitous connectivity, none of these goals are even possible.
Navigant Research believes two important emerging trends will change the way the power and utility industry use connectivity and networking to achieve visibility and control throughout the grid as well as behind the meter. First, utilities will seek access to the dedicated spectrum, with which they will build private 4G LTE wireless networks. 4G technology—the same technology that powers our smartphones today — is more than adequate to serve most utility applications. Due to its widespread global use, formerly high equipment costs for 4G technology now enjoy attractive economies of scale. More importantly, there are new spectrum options becoming available to utilities that did not exist just a few years ago.
Second, utility networking practices will use emergent low power wide area (LPWA) technologies. These are low cost, long battery life solutions that will make widespread sensor deployments affordable, providing critical data for asset monitoring and predictive maintenance applications. LPWA technologies have the potential to radically lower utilities’ cost of ongoing capital investment and maintenance, as well as positively affect grid resilience by preventing equipment failures.
The intense hype around 5G wireless networks is everywhere, but the truth is that electric utilities are likely to embrace a more evolutionary path to their communications. This path leaves behind numerous ad hoc, application-specific networks, and consolidates them into a smaller number of higher functionality networks.
What we will not see anytime soon is utilities using (public or private) 5G wireless for their current grid needs. Note, however, that longer-term, 5G promises to enable truly revolutionary changes across emerging Energy Cloud platforms such as Smart Cities, Internet of Energy, and Transportation-to-Grid.