How will energy look in 2035?

Arup recently unveiled a study that details what the landscape of the UK's energy systems will look like in 2035. In this article, Filippo Gaddo - head of energy economics - makes some predictions for the future.

How will energy look in 2035?

By 2035 we envisage a very different world. We can expect a much more diverse range of heating sources, with significantly lower emissions, and where all new vehicles are low carbon. The energy system of the future will be more decentralised, disaggregated and multi-vector, where for each of our needs there will not be just one solution, but many.


Creating a balanced energy system

In electricity, a number of renewable and low carbon technologies will emerge (nuclear, wind, solar, energy from waste, etc) with some gas for flexibility and peaking remaining. The transport sector will see all new vehicles being low carbon and electric vehicles will offer both a problem and a solution for the system. In heat, the dominance of natural gas will lessen, with some biogas and hydrogen emerging as solutions using a re-purposed network, alongside an increase in district heating and heat pumps.

No technology solutions will hold 80 per cent of the market, as natural gas does today. This will make flexibility (in system architecture, system operation and the regulatory framework) essential to achieving the UK government’s three objectives of decarbonisation, security and affordability. Achieving this vision will not be easy. The industry is clear that achieving the same success in heat and transport as power generation will require strong leadership from government, a stable policy framework and for system planners and regulators to take a whole systems approach.


Becoming our own energy producers

We will see a smart meter in every home and business in the next few years which will open up new opportunities to manage the energy system in a smarter, more efficient way – helping keep energy bills down. It will allow households and businesses to play a more active role in their energy management. Combined with half hourly settlement, distributed energy and the uptake of electric vehicles – this could revolutionise how energy is produced and used. Essentially the UK will become a nation of energy producers. A host of new technologies paired with the digital revolution will open up opportunities to deploy demand-side response tools and batteries in commercial and residential property – this will shift the load profile of demand and generation.


City wide infrastructure

Industrial parks, universities, airports and new towns will develop microgrids to manage their load on the distribution grid. However, this can only be achieved in today’s policy framework through the emergence of new mechanisms and innovation initiatives, such as special deregulated enterprise zones for large scale commercial trials and by a review of network charging as part of the RIIO2 price control period. The current work around SCR and Charging Future Forum as well as the Energy Revolution challenge as part of the Industrial Strategy are steps in the right direction. A clear vision from government is also required, including a possible revision of where decision-making powers around local energy solutions sit.


Funding the future

The National Infrastructure Commission estimates the energy sector will require more than £240 billion of investment by 2030 – or around £22bn per annum – over the next 10 years, which is more than the current rate of investment.

This is before we include investment in decarbonising heat and hydrogen. There’s also additional investment required for consumer focused energy efficiency measures and smart homes devices (including batteries and DSR) and investment in electric vehicle charging infrastructure, all of which will contribute to significant changes to the system. These could add another £2bn or more per annum over the period.

At the same time, some of these investments (particularly those in smart homes or energy efficiency) may also reduce the need for some of the more traditional capital investment beyond 2025. The question is then – do we need to re-think what we see and mean by ‘infrastructure’? Are demand side measures and ‘digital platforms’ to be considered infrastructure? Is the border between ‘capex’ and ‘opex’ becoming more fluid? The move towards using totex in regulation certainly points in that direction already.


A new wave of investors

These trends also suggest that very different players and type of investors are likely to be the household name in 10 or 15 years’ time. New commercial business models are already beginning to take shape, such as:

  • Community energy services
  • Virtual power plants
  • Peer to peer trading and blockchain-enabled trading platforms
  • Reliability services provider
  • Transport as a Service (TaaS).


The business models for gas operators will change significantly in the UK and continental Europe over the next 10 years. Utilities will have no option but to adapt and become ‘platforms’ or ‘integrators’ for a portfolio of different technologies and solutions. We will see the emergence of niche companies and business models tailored to specific regions and locations across or the UK as well as specific network and system services. Integrated utilities will bring together and link different sources of power and energy with multiple and diverse customers. Smart systems and data driven solutions will be the key to providing these links.

These changes can only happen though through a successful and transparent transition to a DSO model and potentially even a LSO (local system operator in microgrid and private networks) model.


Making the future reality

So what’s the main challenge? How to manage a system with hundreds of players. There will be hundreds of licencees, thousands of generating units, multiple platforms, multiple suppliers and contractual relationships. This is where the connection between the energy infrastructure and the digital infrastructure will be critical. Players in the future energy system will need to be agile and innovative but most importantly flexible and creative, that goes for policymakers as well. So now we know what to expect – how smooth will the journey be?


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