Electricity 4.0: When electric meets digital

Last year was not short on evidence of why we urgently need to accelerate the transition to a new energy landscape. From extreme climate events to an unprecedented energy crisis and economic slowdown resulting from the war in Ukraine, it is clear we have reached a tipping point.

There is, however, light at the end of the tunnel. For Schneider Electric, achieving energy security and decarbonising our economy are two sides of the same coin and the answer lies in disrupting the way we manage energy, design buildings, optimise industries and electrify mobility.

Europe needs to act now so we can move to a new all-electric and all-digital world while securing our energy independence and meeting our climate targets.

The fastest route to achieving the energy transition at the magnitude and pace that is urgently needed is to embrace the wealth of opportunities brought by the convergence of electrification and digitisation at scale.

At Schneider Electric this is what we call Electricity 4.0: the next chapter in our energy revolution, and the fastest way to net zero by delivering clean and affordable energy for all. Electricity 4.0 means digitalising the energy ecosystem from end-to-end, making it greener, smarter and more efficient.

Over the last 250 years there have been four technology-driven revolutions impacting both industry and electricity and modernising our economy and society. From Alessandro Volta and Michael Faraday, the pioneers in the 1800s (Electricity 1.0), to mass electrification by the end of the 19th century (Electricity 2.0), supply ever increased to meet the insatiable demand. Then there was the development of the first practical solar cells in the 1950s (Electricity 3.0) and then we saw the rise of digitalisation and then mass digitalisation (Electricity 4.0).

And, why is this revolution happening now? For the first time, we can connect everything from plant to plug and use the data generated to optimise operations. The key ingredient of this transition is data and a successful transition will depend on the capacity to collate data at all stages to intelligently optimise.

To date, the EU’s response to the crisis focused largely on supply instead of demand. Concerted action at EU level led to an impressive reduction of Russian fossil fuel imports, with the share of Russian natural gas plummeting from 33 percent in October 2021 to 8 percent in October 2022-¹. EU countries have allocated more than €600 billion and counting in budgetary measures to shield households and businesses from rising energy prices–².

This money could be better invested! All we need is the political will to make it happen. The soaring costs of energy and the genuine risk of blackouts force us to implement an energy transformation.

This transformation will be built around energy efficiency and digitisation.

The technology exists today. We just need to deploy it.

By connecting everything that uses energy, from the lights in our office buildings, to the machines in our factories, to the air conditioners in our homes, we can measure when, where and how much energy is consumed.

Combining all this data, and layering it with software, artificial intelligence and analytics, we can control and adapt our usage for maximum efficiency, decreasing our energy demand by up to 30%.

At Schneider Electric we are convinced that combining electrification and digital innovation is the key to tackling Europe’s energy and climate crisis. The only short-term vaccine for this crisis is energy efficiency.

To accelerate Electricity 4.0 and create a new energy landscape which is reliable and resilient especially in the face of geopolitical and climatic threats, fast-tracking action in the following four areas will be essential:

• Energy efficiency and digitisation: Digitisation makes our energy use visible helping to eliminate waste. Connected devices, edge control and related software and services enable the monitoring, visualisation and management of energy production, distribution and consumption. Active energy efficiency technologies are available, relatively easy to install (no permitting required) and provide up to 30% energy savings with quick return on investment (approx. five years). Plus, they can be implemented in all sectors: residential and commercial buildings, industry and infrastructure. Mandating energy efficiency in buildings and industries can yield rapid results and with long lasting systemic value. The Fit for 55 package with the EPBD and the EED in particular will be paramount to make this happen by speeding up measures such as the deployment of building management systems (‘BACS’), the Minimum Energy Performance Standards (MEPS) especially for non-residential buildings, mandating new buildings to be net-zero instead of nearly-zero, enforcing energy audit obligations, just to mention some.

Digital technologies are a powerful driver for systemic energy optimisation across sectors and need to become the foundation of future energy policy.

• Electrification is undoubtedly the way forward for the decarbonisation of multiple sectors from transport (e-mobility), to heating (heat pumps) and cooling as well as industry (electrification of processes). When produced from renewables, it reduces carbon emissions drastically and when combined with digital innovations it is generated and distributed more efficiently and effectively. The action plan for the digitalisation of the energy sector together with the Fit for 55 package are fundamental pillars to match the climate neutrality ambition with the infrastructure needs on the ground; system efficiency and distributed clean energy generation being at the heart of the shift. It needs to encourage a faster deployment of proven and available technologies such as solar, wind, heat pumps, microgrids, electric vehicles and charging infrastructure, storage so we can accelerate the electrification of the energy system coupling it with the digitisation of the grid infrastructure to make it bidirectional, flexible and reliable. Schneider’s latest report concludes that by focusing on key sectors where electrification is both technologically feasible and attractive (buildings and road mobility), the share of electricity in the overall energy mix could jump from 20 percent to 50 percent, which would drive a reduction in emissions at end-use of around 1,300 MtCO2/y, as well as a drop in natural gas and oil supply of around 50 percent-3.
• Green energy: the global energy crisis accelerated the growth of renewables, but according to the IEA’s 2022 Renewables Report released in December⁴, Europe’s further capacity growth is being hampered by long permitting procedures, insufficient support schemes and slow network upgrades. Also here, the Fit for 55 package, will be a powerful agent for change with an ambitious EPBD and RED ramping up renewables in buildings, transport, heating and cooling as well as in industry and mandating green hydrogen in the hard-to-abate sectors like shipping and heavy industry. Reducing both our use and dependence on fossil fuels by accelerating the transition to renewable energy will be essential in tackling both the energy and climate crisis.

Flexibility A potential setback in the transition to a new energy landscape is how the distribution infrastructure will be able to cope with the considerable increases in electricity demand.

Beyond the necessary infrastructure upgrades, the rapid and parallel development of distributed generation (rooftop solar and backup battery systems) and digital solutions for efficiency and flexibility will be paramount to avoid grid issues. Demand-side is a critical tool to empower end-users to play an active part in securing and decarbonising the EU energy system. Demand-side optimisation and its dynamic management can reduce the burden on the electrical grid through digitisation. Despite this, fact is that the activation of consumers’ flexibility still faces regulatory barriers, notably due to the delayed implementation by member States of the Electricity Market Design. Recent research by smartEN shows that the full activation of flexibility in buildings, electric vehicles, and in industry could generate savings of 37.5 million tonnes (Mt) annually in GHG emissions⁵.

The combination of increased local power generation capabilities with new and smart digital solutions has the potential to improve the energy-wide system efficiency resulting in a smarter and increasingly resilient grid.

As the clock ticks over into 2023, it is imperative to speed up the implementation of structural solutions that will move Europe from an over-dependency on fossil fuels to a decentralised, digitalised, and decarbonised energy system. Electricity 4.0 is our best path to put this in motion. Europe can act now to turn the tide of the energy crisis.