How Companies Can Reduce Carbon Emissions with a “Smarter” Energy Value Chain

There are several ways that companies can reduce their carbon emissions, with “smarter” energy solutions being a top candidate. The emerging trend of distributed renewable energy generation in enterprises is transforming the entire energy generation, distribution, and usage/consumption value chains with far-reaching consequences for an expanding energy ecosystem.

Market Overview

• To get a feel for the market potential for smart energy technologies for reducing carbon emissions in company operations, it’s important to first assess how much energy enterprises consume in Asia-Pacific, North America, and Europe.
  • Most of the growth is driven by Asia-Pacific (6,041.7 Terawatt Hours (TWh) in 2023 , which will surpass 50% of global consumption in 2023. By 2030, that percentage will increase to 57%.
  • Enterprises in North America and Europe will consume 1,982.14 TWh and 1,616.14 TWh of energy, respectively, in 2023. By 2030, energy usage in those regions will bump up to 2,125.14 TWh and 1,732.73 TWh.
• The sharp energy spending increase in 2022 was caused by huge increases in electricity prices in Europe of up to 100% and, to a lesser extent, the United States. Expectations are that prices will at least partially normalize in 2023 and beyond, after which a steady growth trajectory will be adopted until 2030 to reach a value of US$1.7 trillion worldwide.
• In 2030, enterprises in Asia-Pacific will invest US$844 billion in energy, followed by US$335.1 billion in North America, US$322.1 billion in Europe, and US$231.1 billion in the Rest of the World (RoW).
• Table 1 below lists yearly revenue for the major smart energy technology providers (see detailed profiles in the next section). Collectively, they grew their revenue by 11.5% and 7.5% in 2021 and 2022, respectively, despite adverse global economic conditions. Going forward, these players will grow their enterprise solutions revenue at a rate higher than their overall growth rates.

Table 1: Revenue of the Main Smart Energy Technology Providers

Technology Suppliers	Revenue	2020	2021	2022
Hitachi Energy	(US$ Billions)	3	8.2	10.8
Siemens Infrastructure (Energy + Buildings)	(US$ Billions)	15.7	16.4	19.0
Schneider Electric	(US$ Billions)	27.6	31.6	37.4
Honeywell (Building Technologies + Process Solutions)	US$ Billions	9.8	10.1	10.7
GE Vernova (Power + Renewable Energy)	US$ Billions)	33	33	29
ABB (Electrification)	US$ Billions	11.9	13.2	14.1

• When enterprises spend money on smart energy technologies to reduce carbon emissions, the most popular solutions are electrification, renewable energy/batteries, and digital management platforms. Growing at a Compound Annual Growth Rate (CAGR) of 12%, total revenue for smart energy technologies will increase from US$31.9 billion in 2023 to US$70.11 billion in 2030. The chart below provides the full forecast window.

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“The entire energy value chain—from the grid to the enterprise—needs to be sensorized, connected, and embedded/integrated in end-to-end management software systems with energy storage systems as a critical new asset. Finally, to fully achieve zero carbon energy systems, Artificial Intelligence (AI)-based automation will be critical due to the highly complex and fragmented nature of next-generation energy infrastructure.” – Dominique Bonte

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Key Decision Items

The following sections provide recommendations for smart energy technology vendors, enterprises/industry verticals, and energy utilities as companies aim to reduce carbon emissions.

Smart Energy Technology Vendors

Develop Integrated, End-to-End Smart Energy Solutions

To help reduce carbon emissions, technology companies in the smart energy market should integrate smart energy solutions into a wider digital technology portfolio to achieve better integration with the Internet of Things (IoT) platform, analytics, and software solutions. Energy should no longer be seen as a separate area, disconnected from the wider digital transformation revolution. To this extent, General Electric (GE) has aggregated all GE energy businesses under the Vernova banner, including Renewables, Power, Digital, and Energy Financial Services, offering an end-to-end smart energy perspective across all relevant GE business units: GE Digital, GE Energy Consulting, GE Energy Financial Services, GE Gas Power, GE Grid Solutions, GE Hitachi Nuclear Energy, GE Power Conversion, GE Renewable Energy, GE Steam Power, and LM Wind Power.

Moreover, Energybox offers a fully integrated end-to-end IoT solution consisting of sensors, controls, software, and AI to monitor, automate, and optimize multi-site facilities and equipment, and enable automated processes:

• Software: EnergyboxONE cloud-based IoT software platform (AWS CloudFront)
• Sensors: Temperature, door access, etc.; wireless 900 Megahertz (MHz) Dot sensor system, replaceable 5-year battery
• Gateways: Hubs, EnergyPro, Cisco edge compute device
• Controls: SiteController for dynamic scheduling (lighting, Heating, Ventilation, and Air Conditioning (HVAC))
• AI-Based Data Analytics: Real-time multi-site automation via edge-based processing and cloud algorithms via predictive AI
• EnergyTracker/Energy Monitoring & Benchmarking: Multi-site energy consumption monitoring for increased efficiency, downtime reduction, and equipment failure prevention

Adopt Energy-as-a-Service Business Models

Leverage IoT and cloud technology to implement flexible on-demand energy solution models to accelerate the digital transformation of energy infrastructure and operations, avoiding high upfront Capital Expenditure (CAPEX) costs. In an increasingly volatile and disrupted energy market, enterprises are increasingly expecting flexible, adaptable, and reduced risk energy purchase frameworks as they look to cut Greenhouse Gas (GHG) emissions.

Enterprises and Industry Verticals

Build a Strategy around Smart Energy Assets and Capabilities, in Particular On-Site Energy

For both grid operators and enterprises, storage has now become an integral part of their energy assets, taking on a critical role in the continuous management of energy networks as opposed to their former role of mere backup in case of occasional power interruptions. Arguably one of the cornerstones of reduced carbon emissions, the distributed nature of energy generation, mostly in the form of microgrids using solar or wind energy sources, is transforming the very nature of electricity energy grids in terms of a much more granular and decentralized topology. This is often referred to as Distributed Energy Resources (DERs), and they need to be integrated into the wider energy network environment in terms of ensuring overall demand-response management.

The dynamic and unpredictable nature of renewable energy sources, such as solar and wind, requires substantial energy storage capacity to buffer fluctuations in energy availability. Energy storage can take many forms with the Battery Energy Storage System (BESS) as the most common solution, replacing legacy diesel generators. Hydrogen and flywheels are sometimes also implemented as energy storage solutions.

Take Further Actions for Smart Energy Adoption

Other actions that enterprises and industry verticals should take to implement an optimal carbon reduction strategy include:

• Develop in-house smart energy expertise in order to become less dependent on consultants.
• Have the focus on smart energy reflected in the organization structure with C-level executives having end-to-end energy responsibility.
• Shift approaches from tactical responses to short-term energy market challenges to long-term structural enterprise energy strategies.

Energy Utilities

Leverage AI and Other Digital Transformation Technologies to Facilitate  Energy “Flexibility”

Large numbers of microgrids will significantly increase the overall complexity of energy systems and networks, requiring advanced forms of AI-based automation and management to maintain flexibility and resilience. On a more tactical level, energy system flexibility will allow optimizing energy usage of, for example, buildings to minimize costs according to the dynamics of fluctuating energy price levels in the form of real-time energy demand-supply balancing.

The complex nature and collective management of new energy increasingly require very advanced forms of digital control, management, reconfiguration, and maintenance. All components of next-generation energy networks need to be connected to enable grid-wide AI-based demand-response intelligence, ultimately leading to autonomous, self-healing energy systems that minimize carbon emissions. The digital transformation of the energy sector is not only a critical success factor, but an absolute necessity for building the smart energy networks of the future.

Smart metering and smart grid technology have seen limited adoption over the past decade by utilities, offering only incremental benefits in terms of energy savings and network management of centralized grids. In a world dominated by decentralized, distributed, and granular energy assets, they will become must haves.

Develop Integrated, End-to-End Smart Energy Solutions

Energy marketplaces, which have already been brought about by utilities like ENGIE, are a key piece to the carbon reduction puzzle. Power Purchase Agreements (PPAs) are becoming more common, especially for purchasing green energy, whereby electricity can be supplied either directly or virtually. PPAs are long-term bilateral agreements specifying the amount of electricity to be supplied, the negotiated price, a definition of risks, accounting rules, and possible penalties. With synthetic or virtual PPAs, the physical delivery of electricity is disassociated from financial transactions, enabling more contractual flexibility, involving spot market trading.

Aside from making energy marketplaces available as automated, AI-based energy management tools for enterprises and industries, utility providers should develop Building-to-Grid (B2G), Vehicle-to-Grid (V2G), and other intra-grid solutions. This will allow enterprises and industries to better participate in energy marketplaces as producers of electricity.

Key Market Players to Watch

• ABB Ltd
• Accenture Ltd
• American Electric Power
• AWS
• Deloitte
• Duke Energy Corporation
• E.ON
• EDF Energy
• EIS
• Enel X
• Energybox
• ENGIE
• Ericsson
• Exelon
• EY
• Fluence
• Fujitsu Limited
• Google
• Henkel Corp
• Hitachi Ltd
• Honeywell
• Iberdrola
• IBM Corp
• IEA
• Korea Electric Power Corporation
• KPMG
• LG
• MDPI
• Microsoft Corporation
• National Grid
• Next Kraftwerke
• NextEra Energy
• Nokia
• PECO Energy
• Pepco
• PwC
• RWE
• Schneider Electric
• Siemens
• Synergy
• Tokyo Electric Power Company
• UPS

Dig Deeper for the Full Picture

Discover the future of smart energy solutions for enterprises and industries with ABI Research's comprehensive market report. Uncover the latest trends, technologies, and opportunities that will drive reduced carbon emissions and sustainability in the energy sector, and stay ahead of the curve and make informed decisions with invaluable insights from this must-have resource.

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