Trends impacting the Energy Transition | Part 2 of 3

What are the trends that will impact the renewable energy sector?

This post explores three of nine trends identified by the Responsible Energy Initiative. Do bear in mind that these trends are not absolute predictions or forecasts; they are not linear in nature; and they are not exhaustive, as the future is dynamic and ever-evolving, not an extension of the past.

Check out last week’s post for an in-depth exploration of the first three trends and look out for the last three trends next week.

Trend 4 | New tech wave: Digitisation and automation could reshape business models and the workforce

As computational power, memory and battery technology progress, and human prowess at harnessing these technologies improves, more human activities are being carried out by machines. Artificial intelligence (AI) is designed for decisions and processes, robotics for completing physical tasks tirelessly and without error. Machine learning is a subset of AI that allows machines to learn from data and improve with experience. Together, and with more complex software driving them, these technologies are changing the global labour landscape and, indeed, our entire global economic system.

In the context of renewable energy, automation has provided competitive advantage. On the utilities side, the power of machine learning and artificial intelligence is enabling companies to better analyse their data with the objective of better forecasting, risk assessment, and grid integration.

Evidence of change

• First Solar, which automated its US manufacturing plant in 2017 and greatly increased its competitiveness against Chinese competitors, is set to invest in a solar manufacturing facility in Tamil Nadu in 2023.
• Multiple utilities in the US are using AI to reduce forest fires caused by power lines by analysing drone images for faulty equipment and risky vegetation.
• Tata Power has signed a three-year commercial agreement with BluWave-ai (the world’s first renewable energy AI company), which will allow real-time power scheduling automation and improve onboarding of renewable energy to the grid.

Possible implications for responsible energy

• An increase in automation in renewable energy manufacturing might increase competitiveness, but it could also limit the number of jobs that the renewable energy sector creates.
• Automation may also change the nature of jobs and skills required, affecting the talent pipeline and training required.
• Use of data in real time for monitoring and optimisation will likely increase.

Trend 5 | Shifting geopolitics: Changing dynamics between regions and countries will reshape supply chain

The increased globalisation of supply chains has led to heavy reliance on international sources of equipment, raw materials, and international trade routes. Shifts in geopolitical relations, including between US and China, and more locally between India and China, evidenced by new cooperation agreements and alliances, and manifesting in reshaped tariffs and incentives, are already changing the shape of trade flows.

The new drive for “self-reliance” in India seeks to promote local manufacture, which could drive different sourcing and business opportunities over the next few years if a supportive environment exists. Major skills shortages and complexity in business regulation has in the past hindered the success of the Make in India movement, but this may change. Even local supply chains will face increasing volatility, however, due to the physical and social impacts of climate change, as well as other shifts described in this document.

Evidence of change

• Following the India-China border clash in mid-2020, India’s Minister of Power announced plans to limit import of solar energy equipment from China in both the public and private sectors.
• Reliance Industries has announced plans to develop an integrated manufacturing facility that covers the entire value chain of solar panel production.
• India, USA, Japan and Australia Quad Alliance was established in 2007 but has recently seen reinvigorated energy due to the desires of the US to influence China’s impact in the Indo-Pacific.

Possible implications for responsible energy

• Localised supply chains can make it easier to achieve full transparency and accountability, though they can also be at risk of elite capture and local corruption and power dynamics.
• Volatility in relationships often manifests in volatility in trade barriers — financial and non-financial — changing prices suddenly and imposing changed requirements which may include environmental and social elements.
• Stronger relationships between countries can lead to easier and greater technology and knowledge transfer, and increased collaboration opportunities.

Trend 6 | Climate adaptation: Shifting weather patterns profoundly impact society and the economy

Climate change is reaching dangerous thresholds and is already beginning to affect every aspect of society and industry. Climate disruption is fundamentally changing the way businesses create value and manage risk.

Changing weather patterns are beginning to impact renewable energy generation. While scientists have discovered that shifting ocean circulation patterns may have triggered a rapid increase in wind speeds over the last 10 years, signals of weaker wind patterns in other regions could lead to stranded assets.

Climate change in India is predicted to increase migration and exacerbate inequality. Migrant workers are considered one of the most vulnerable social groups to climate change risks, specifically due to livelihood uncertainties.

Evidence of change

• The risk of damage to wind turbines from cyclones forced operators to shut down the turbines, which cut India’s electricity output in 2020, despite a longer windy season.
• South Asia’s Dalits, frequently concentrated in areas lacking access to water and sanitation, were confirmed as being disproportionately left vulnerable during monsoons, according to a Minority Rights Group report. These communities may also be excluded from emergency assistance due to discrimination.

Possible implications for responsible energy

• Without using reliable and robust forecasting and modelling, site selection decisions could lead to stranded assets.
• Given the amount of land required for utility scale RE, it is likely that sites will be asked to enable climate adaptation through restricting heat gain, providing flood protection, and other methods.
• As extreme weather events become more frequent, trade routes will be increasingly disrupted.
• As areas in which RE is being sited are forecast to face severe water insecurity and heatwaves, local labour will become increasingly difficult to find.

The Responsible Energy Initiative is looking to connect with others who are also exploring similar questions or working in a related area. Reach out to the programme manager, Saksham Nijhawan at s.nijhawan@forumforthefuture.org for more information.

These trends are written by Anna Biswas, Cynthia Morel, Sangam Paudel, and Saksham Nijhawan from Forum for the Future.