The rapid advancement of technology is driving a significant increase in electricity demand while also fostering innovations in renewable energy supply. As renewable power becomes more affordable and reliable, the electrification of industrial processes is gaining traction. This shift emphasizes the importance of energy security as economies aim to reduce reliance on fossil fuels.
Renewable electric power costs have been declining sharply for over a decade, promising cheaper electricity in the future. Innovations in storage and electrification are creating opportunities to utilize this abundant power effectively. Electric vehicles and artificial intelligence are notable technologies with increasing electricity demands. Basic industries such as cement, chemicals, and steel also stand to benefit from cheaper electric power by reducing input and processing costs.
"The ongoing steep decline in the costs of renewable electric power, now in its second decade, promises more abundant, cheaper supplies of electricity in the years to come," states an industry expert.
The International Energy Agency (IEA) reports that installed renewable power generation capacity reached 666 gigawatts (GW) in 2024, marking a 30 percent increase from 2023. The agency projects global renewable energy capacity could expand 2.7 times by 2030.
"This remarkable growth is being driven not only by cost advantages but also by the world’s ever-growing appetite for electricity," notes an IEA spokesperson.
Data centers are contributing significantly to rising electricity demand. In the U.S., data center expansion is expected to account for over one-third of new electricity demand between 2022 and 2026. These facilities consume substantial amounts of energy, especially when deploying AI models.
"In the U.S., more than one-third of new electricity demand between 2022 and 2026 is expected to come from data center expansion," according to IEA estimates.
While some companies revert to fossil fuels due to weakened federal climate goals, many remain committed to renewables due to their low costs amid rising energy demands. Some firms are exploring nuclear power as a reliable long-term energy source.
"At first glance, nuclear appears well suited to the needs of data centers as it provides highly reliable, clean energy 24 hours a day," says an industry analyst.
Small Modular Reactors (SMRs) are emerging as a potential solution for building new nuclear plants efficiently. Microsoft anticipates needing five times more electricity by 2030 compared to projections made in 2020 and has signed deals with Brookfield Renewable Partners and Constellation Energy for solar, wind, and nuclear power sources.
Storage advancements have been crucial in addressing the variability of wind and solar power. Grid-scale batteries have become essential components for storing intermittent renewable energy production. Sodium-ion batteries show promise due to their abundance and lower flammability compared to lithium-ion batteries.
"The IEA has identified grid-scale storage as the fastest-growing energy technology," according to an IEA report.
Electrification of basic industries has become feasible through recent innovations that allow electrical furnaces to produce high temperatures required for industrial processes like cement production.
"In his book Zero-Carbon Industry, Jeffrey Rissman explains that electrification of industrial processes should be viewed in terms of cost-effective replacement," highlights a review on industrial electrification trends.
New technologies such as heat pumps and thermal batteries offer solutions for industries requiring varying levels of heat intensity. Companies like BASF, SABIC, Linde, Rio Tinto, BHP, Holcim, SSAB, and Tata Steel are working towards electrifying industrial processes or adopting green alternatives like hydrogen direct reduction or electric arc furnaces.
"Even if these new technologies prove scalable...electrifying industry will take time," cautions an industry expert about transitioning existing processes toward electrification while considering associated risks and opportunities for investors interested in emerging markets or established themes focused on optimizing consumption efficiency amidst changing market dynamics globally today!