Surging gas, coal, and oil prices are driving up inflation and putting the global economy under enormous strain. Electricity prices too are on an upward spiral because, in most markets, expensive and unreliable gas and coal supplies are the primary fuel for electricity generation. Global energy markets are in crisis.
What does this mean for the future? As the world ‘electrifies’ to combat climate change, are blackouts and energy poverty inevitable? How can clean energy from solar and wind fill the void when, obviously, these technologies rely on favorable weather?
Electricity network designs have evolved slowly over more than a century. In most places the markets that support them emerged more recently, but they typically have in common the idea that demand is ‘variable’ and supply is ‘dispatchable’. Put simply: electricity supplies are expected to vary according to demand, not the other way around.
This is changing. A reluctance to continue investing in new coal- and gas-fired generators (due to concerns about another global system in crisis – the climate) means baseload capacity is reducing and generation fleets are becoming less reliable in most countries where Buildings Alive operates. And on the other side of the equation, accelerating investment in cheap, abundant renewables like wind and solar means more generation capacity is coming online, but only when conditions are favorable. An extreme illustration of this variability is shown in the following plot for South Australia over the period 13-15 June.
South Australia’s electricity generation mix over recent days. Yellow is solar, green is wind, brown is gas (various), red is oil and blue is batteries. Source: https://opennem.org.au.
Enter buildings
Roughly 75 percent of all electricity generation is consumed in buildings (residential and non-residential) and yet, unlike generators, distributors, transmission system operators, metering providers and retailers, buildings are not considered part of the electricity ‘system’, let alone the electricity ‘market’. It is little wonder, therefore, that building operators don’t think much about when they use electricity or its implications.
This, of course, is unfortunate. Markets work best if they are two-sided, with producers and consumers interacting directly to determine price. Most building operators are insulated from price changes (in the immediate- to short-term) via fixed rate contracts and they don’t interact with producers ever. This means that when there is an abundance of electricity on the system, or a shortfall, the consumers are generally unaware and would not adjust their behavior even if they were aware because they have no incentive to. But as we have noted previously, buildings offer among the cleanest, cheapest and most powerful ‘batteries’ – the scale of their potential contribution to network stability and decarbonization from supporting renewables is enormous.
Never has it been more important for building owners and operators to accelerate their decarbonization plans, starting with the implementation of ambitious energy savings programs. Aside from cutting costs, it will ease demand on over-stretched networks and put downward pressure on prices. However, decarbonization calls for much more than just energy saving. For buildings it means becoming ‘grid-integrated’ and flexible, supporting clean energy generation by shifting load to enhance indoor environmental quality at times of the day when energy is at its cheapest and cleanest. Such buildings are what the IEA calls “Zero-carbon-ready”… and if we had enough of them right now, there’s little doubt the crisis would be averted, and the market would be able to take care of itself.