Contributed by Lau Skovgaard, Director of Renewables, Cognite
The energy transition is well underway. Today, we have more renewable energy generation than ever before and investment in this generation is expected to make up more than 70% of all investment dollars for 2021, far surpassing all other supply types.
All this investment is paramount, not only because we need it for clean electricity to power our houses and offices, but also because electricity will eventually power most of our economy, whether that is for our electric vehicles or indirectly via hydrogen for our factories and planes.
Renewables are now fully cost-competitive with fossil fuels and with oil again climbing above $100 a barrel the balance is shifted even more towards renewable energy with the added benefit of providing the energy majors with plenty of capital to finance their new renewable businesses.
The problem remains though that with increased penetration of renewables generation comes increased complexity. We have yet to find the solutions necessary to handle the volatility renewables bring to the grid.
Wildfires echo across the country and violent hurricanes and winter storms are increasingly posing a threat, especially to the most vulnerable people in our communities. At the same time, we are facing unprecedented increases in energy prices that are wreaking havoc on inflation, hurting individuals on a household level, and ultimately damaging the American economy.
It’s my belief that we do not live in a world in which we fail to solve climate change. But we need to be smart about how we invest in renewables, so that the energy transition happens in a cost-efficient and effective way.
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Beyond building, embrace digitalization
Putting up steel towers, designing blades, and producing solar panels is key to the energy transition, but we have (thankfully!) come to a point where the big innovation gains in this kind of foundational work are starting to flatten out.
In addition to better battery storage technologies, which are a priority area of focus, there is another crucial piece to completing this global, renewables puzzle – something that is only now starting to get the attention it deserves: data.
Data is the only way to ensure that the existing capacity we have – and what we will build over the coming years – is used to the fullest. By leveraging advanced data analytics, we can increase efficiency by making all the components of this new, volatile, and decentral energy system play together.
As companies are increasingly exposed to merchant risk, the ability to generate superior returns in the wholesale market will rely on an advanced data foundation that takes out the guesswork of trying to balance multiple generation sources and storage forecast.
Instead, new advanced capabilities in power trading can be enabled by embracing physics-based modeling that takes into account novel data sources, including real-time weather data and operational data (e.g. scheduled maintenance events).
Being able to explain these models will also be of great importance. Instead of a black box approach as some companies are currently being forced to adopt. I am a firm believer that players participating in the market should be able to understand the recommendations being generated in order to improve them over time.
There are also incredible gains from using digital twins to increase the lifetime of assets by conducting predictive maintenance and optimizing the maintenance of turbines, doing it smarter and when electricity prices are lowest.
A 3D digital twin powered by AI and seamless collaboration enables visual and true remote operations, which can lead to savings of 20-30% in operations. A considerable part of these savings come from travel cost reduction, which also increases safety as it lowers the need to inspect faults in person.
A digital twin should really be thought of as a visual tool to help locate, navigate, and understand data needed for seamless collaboration and optimization. The key areas of improvement are streamlined asset integrity activities and decision support, the ability to track performance KPIs and trends over time, remote data capture, and collaboration in
real-time between field workers and operational centers.
And this is just the beginning. As data becomes ubiquitous, easily accessible, and useful, people working at the new renewable energy majors will be able to craft innovative use cases that drive real business value ultimately bringing renewables further down the cost curve.
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Foreign companies are quickly seizing the huge market opportunity for renewables in the U.S., but the domestic players have unique competitive advantages that can be leveraged to secure their fair share of the market.
The U.S.’s advanced competencies in software development, data analytics, and artificial intelligence, for example, put it in a unique position to create the next wave of innovation in the renewables space.
Innovation in renewable energy will be fundamentally different from the VC-fueled teenage start-ups out of Silicon Valley. Innovating in the energy space requires large companies working with innovative partners to iterate on potential solutions in an open ecosystem approach.
These large companies will also be the ultimate beneficiaries of this innovation, not only because they will benefit from the newly developed solutions but also because it will supercharge the demand for even more renewable energy.
Examples are already starting to emerge; Aker Horizon is experiencing upfront how new digital solutions help them achieve lower levelized cost of electricity – key to ultimately helping them win bids against their competitors.
The U.S. is standing at a pivotal moment in time, it has all the necessary ingredients to dominate the cleantech industry (especially at home) and bring itself to the forefront of solving the problems of the 21st century. But the inconvenient truth is that the acceleration toward a clean energy future needs to happen sooner rather than before it’s too late.
About the author
Lau Skovgaard is a Harvard MBA with a decade of experience in the renewable energy industry, spanning business development, private equity, and M&A. As the Director of Renewables at Cognite, Skovgaard focuses on digital transformation and Artificial Intelligence deployment for U.S energy companies. Prior to joining Cognite, Skovgaard worked in corporate development for Ørsted, the Danish leader in offshore wind, focused on smart grids, energy storage, and biogas.