Customers and companies are looking for more cost-effective ways to ramp up renewable electricity generation from wind, solar and hydropower, deploy electric vehicles, charging stations, electrify buildings, and reduce methane from natural gas—a transformation that comes with significant benefits to global energy and the global economy.
Still, with these benefits in mind Dr. Joe Nyangon, a global energy economist and expert on clean energy technology, warns that if the transition to these new energy resources is not handled properly, power systems and costs could be adversely affected, putting the world’s energy landscape in a worse place than it is now.
Handling these transitions properly is crucial, not just for the safety of our climate, but for the well-being of economies across the globe.
Regulators and utility companies concur that this energy transition needs to be managed pragmatically and purposefully so as not to perpetuate the techno-institutional complex of carbon lock-in and path dependency.
Dr. Nyangon has dealt with solving these kinds of energy problems throughout his career spanning over 15 years.
The current trends and developments in the energy business are placing tremendous pressure on utilities triggering changes in electricity production, transmission, and consumption.
Among the two biggest influencers on modern power systems are democratized choice and decentralized renewable energy generation.
Democratized choice refers to the energy resources and structures that allow customers to take key actions such as peak shaving, flexible loading, and installation of grid automation and intelligence solutions.
Decentralized renewable energy generation refers to energy sources that can be produced closer to the site of consumption, such as solar panels.
Growth in renewable electricity generation has been motivated by customers’ preference for distributed energy as a means to reduce costs and take more control over their power supplies.
With both of these factors in mind, states continue to promote 100% renewable electricity generation through ever-higher renewable portfolio standards in order to realize a clean energy economy.
Dr. Nyangon warns that if these cleanest, low-cost energy sources are introduced too quickly in large quantities without building a modern electric grid to replace the old and outdated distribution and transmission systems, solar and wind power could adversely affect power systems due to fluctuations from changes in weather conditions, creating a unique challenge known as the ‘duck curve’.
The ‘duck curve’ refers to the idea that today’s power systems cannot fully utilize the power and benefits of solar energy.
Failure to use this kind of energy properly could lead to outages and higher costs for energy providers, possibly leading to increased payments for customers, putting a greater strain on the economy as a whole.
The cost of any kind of power interruption to customers is staggering, not just to utilities but to consumers and even the local economy in terms of lost revenue during forced blackouts.
Navigating these kinds of potential changes to the energy industry is extremely important to the future of those systems and how much companies and consumers will pay for them.
“Our ability to electrify transportation, buildings and heavy industrial processes is the defining challenge in tackling the climate crisis,” Dr. Nyangon says.
“Mitigating climate and energy transition risks requires improvement in operations and strategies for de-risking energy investments. This entails long-term climate-risk hedging and transition risk mitigation strategies to tackle the stranded electricity assets challenge.”
Recognizing that energy sector transition- and climate-related asset stranding risks are still evolving, Dr. Nyangon is leading an effort at SAS to develop new models and tools for assessing and pricing risks and opportunities.
This entails configuring climate-risk hedging and transition risk mitigation strategies to ensure utility assets are resilient to these risks.
Utilities must smoothly transition towards minimal carbon impact business practices and operations, in order for modern energy systems to be most cost-effective.
These transitions will likely include implementing alternative utility regulation and pioneering grid modernization models.
Dr. Nyangon believes the most promising solutions that exist today will blend renewable energy and natural gas resources (as a bridge fuel to a low-carbon future) to incentivize DER (distributed energy resources) development and help deliver competitive ROI (return on investment) for customers.
As a powerful confluence of architectural, technological, and socio-economic forces transform the U.S. electricity market, similar changes are being seen in global energy.
These changes can be extremely cost-effective measures for consumers, companies, and countries, but only if they are implemented with care. Failure to do so could result in greater challenges to infrastructures and economies than we have now, setting back the future of global energy for years to come.
Dr. Nyangon cites educator Peter Drucker’s advice of “the best way to predict the future is to create it” as a personal motivator and that certainly applies to his own work. Helping clients make the smooth transition to minimal carbon impacts business practices and operations, improving businesses today and setting up a better energy industry for the future.