Is electricity the oil of the future?

"There are many examples of Power-to-X in action that provide opportunities for utilities"

The rush toward energy production methods that don’t rely on fossil fuels – namely solar, wind, hydro, geothermal and nuclear – has seen electricity becoming king. Last year, 26 per cent of the British electricity generated was from wind and solar technologies, a new record for the UK.

While this is good news for carbon emissions, one of the key challenges for countries transitioning to renewable energy, is matching the supply with demand. Storage capacity has not yet caught up with the expansion of renewable power production to facilitate supply moderation to the grid. For instance, in Germany, electricity prices have dipped below zero many times when supply has outstripped demand.

“Power-to-X” is a combination of methods and technologies that enable the storage of energy and subsequent utilisation of it, for other industries. One such technology allows for the conversion of surplus wind and solar electricity into heat or other fuels. By reducing energy system inefficiencies, storing energy and redeploying it when needed, Power-to-X minimises the waste of surplus power and balances out energy system loads. It also provides new revenue opportunities for utility companies, energy retailers and the manufacturing sector through cross-sector collaboration as seen most widely in the electric car industry.

Power-to-X: a growing trend

Global trends within the renewable energy space continue to be positive for the growing importance and expansion of Power-to-X. This trend has been driven by falling costs and the growing dependence on renewable energy, alongside aggressive decarbonisation targets and the phasing out of fossil fuels in many countries (for example coal in France by 2023).

There are many examples of Power-to-X in action that provide opportunities for utilities. Take electric vehicles or ‘Power-to-mobility’. The number of electric vehicles worldwide, according to IEA, will reach between 40 and 70 million by 2025. The vehicle charging infrastructure presents a strong growth opportunity for utilities as the infrastructure will boost sales of electric vehicles leading to increased demand for power. Further, batteries don’t just store surplus electricity, they can also feed it back to the grid when required.

A further example of Power-to-X is ‘Power-to-heat’. More than half of the global energy consumption is made up by heat, the majority of which is sourced via fossil fuels and delivered through gas. Heat pumps for domestic heating can replace inefficient fossil fuel fired boilers reducing emissions and cost. On an industrial scale converting surplus renewable energy to heat can boost the flexibility of thermal plants and industrial processes, enabling waste heat recovery and increasing energy efficiency in industrial processes and buildings.

Another way of storing electricity is by converting energy to fuels and chemicals, also known as ‘Power-to-fuel’. For example, the ‘Power-to-Hydrogen’ concept uses electrolysis to split water into hydrogen and oxygen. The hydrogen can be used for various purposes, for example transport and advanced hydrogen combustion applications.  Secondly, when combined with carbon captured from power plants, hydrogen can also be used to create synthetic fuels in the form of methanol and derivatives or synthetic natural gas (SNG). Hydrogen can be used as a mix with fossil fuels or as a substitute in internal combustion engines, thus connecting the power sector with the transport sector. Burning synthetic fuel releases CO2 into the air, however as the CO2 is recaptured, the process is a closed loop and additional emissions from fossil fuel imports are avoided. CO2-derived methanol, as a transport fuel, can achieve a carbon reduction of more than 50 percent compared to gasoline. It also produces less particulates and no sulphur, reducing air pollution locally. Thirdly, in gas fired power stations, large-scale gas turbines fuelled by a hydrogen mix has been shown to reduce carbon emissions by 10 percent compared to natural-gas-fired power generation.

There are several new opportunities that electrification brings across many different sectors. Power-to-X plays an important role in helping to manage supply and demand of electricity. The good news is that many of the technologies involved are nearly, or already, developed. As the cost of renewable energy falls and the pressures to decarbonise rise, their viability will only increase.

However, for utility companies to harness the potential of Power-to-X, there will need to be new levels of cooperation across sectors. They are already working with electric vehicle and renewable energy providers but to take it further, they will need to create partnerships with chemical and manufacturing firms too. More broadly, regulators also need to understand the role that electrification and the wider use of electricity plays in the fight against climate change. Utility companies can play a part in educating them. Reasonable framework conditions such as green certificates, green premiums and legislation are required to support Power-to-X.

All of this will take time, but an efficient, smart, secure and flexible grid will benefit both consumers and utilities alike. Electricity could certainly be the new oil, but utility companies need to evolve and collaborate to reap the benefits.