Climate change and meeting the rising demand for energy 

Why energy solutions are increasingly distributed rather than centralized.

Climate change and unprecedented population growth are presenting challenges, but they are also driving innovation – above all, in the area of electrical energy. Siemens’ Smart Infrastructure business is addressing these megatrends and providing solutions that create environments that care. One key component: distributed energy solutions (DES) that make it possible to decentralize energy systems.


By Cedrik Neike, CEO of Siemens Smart Infrastructure


The Industrial Revolution, which is now already entering its fourth stage, continues to progress swiftly around the globe. Its technological innovations have transformed society and massively reduced poverty while substantially increasing life expectancy. Nevertheless, it is becoming increasingly clear that the fossil fuels on which these rapid advances have been dependent until now are precipitating potentially disastrous climate change. Burning these energy sources produces greenhouse gases, including carbon dioxide and methane, which contribute to endemic global warming. From 1970 to the present day, global CO2 emissions have more than doubled – from 15.9 gigatons to 36.2 gigatons per year in 2017.

Achieving the required growth despite climate constraints

Now, at the gateway to the Fourth Industrial Revolution – which is driving the digital transformation of our society and economy – climate change and decarbonization have become the key constraints on our activities. At the same time, the world’s population is growing, which leads to a global need for continuous economic growth. By 2050, earth will be home to nearly 10 billion people, seventy percent of whom are likely to be living in cities. Although our resources are dwindling, all these people will need a clean, hospitable environment to live in. Meeting these challenges will require efficient means of transportation for people as well as a reliable supply of water. But most of all, it will require a way to supply the lifeblood of the 21st century: electricity. 

But what does all this mean in concrete terms? What challenges will we see in the future? And who is responsible for meeting them? 

Convergence of sectors is bringing new ways to meet challenges 

When the Industrial Revolution started, the generation of electricity was very decentralized. Then power generation changed, and there was a stage of big, centralized power supply. Today, we’re going back to the roots. But this time, our methods will be sustainable. With a holistic approach: building owners, energy producers and distributors are now facing challenges of greater complexity – but also outstanding opportunities. Especially when we consider that buildings, including the related systems, account for roughly 40% of the energy consumed worldwide.

Today, we’re going back to the roots. But this time, our methods will be sustainable.

Siemens’ Smart Infrastructure business has picked up on these trends and will offer solutions for meeting these important demands by intelligently linking the energy system with building solutions to create environments that care. Combining these sectors will establish an ecosystem of smart infrastructure for grids, buildings, and industries – an ecosystem that will intuitively respond to people’s current needs while protecting the planet for future generations.

The increasingly complex energy system is enabling and fostering multiple new roles and business models

These ecosystems – or environments – are increasingly using decarbonized and decentralized energy. For example, the role of buildings in the energy market is gaining importance: today, many new buildings are already generating their own energy – with a growing percentage of renewable power. However, new solutions are needed to meet the rising demand for electrical energy, which is expected to more than double over the next 10 years. 

At the same time, we’ll need to compensate for fluctuations in the availability of renewable energy sources. In power generation, meeting these demands could involve on-site storage and sector coupling – for instance, for establishing connections between buildings and the charging stations that are needed for electric vehicles

New solutions are needed to meet the rising demand for electrical energy, which is expected to more than double over the next 10 years.

In the future, buildings and infrastructures must be able to manage their energy consumption intelligently by combining decentralized power generation with storage of surplus electricity –  and with capabilities for accurately forecasting both energy demand and the mix of resources required to meet it. Such measures will optimize demand while reducing costs and boosting availability. In addition, in order to ensure smart management of not only the buildings themselves but also the grid that supplies them, it will be necessary to maintain a continuous exchange of information across all components involved. 

One key component driving convergence: distributed energy solutions (DES)  

The possibilities for connecting the energy-generation ecosystem with the energy-consumption ecosystem are more than numerous. They range from intelligent control of the grid and the locally installed system to smart storage solutions, and from building automation and control systems to switches, valves and sensors. To explain what the convergence of energy supply systems with buildings and industries will look like, I’d like to concentrate on one vital element that is driving this new ecosystem of smart infrastructure: distributed energy solutions

The rise of DESs is leading to a more heterogeneous and dynamic energy supply with multiple players and multi-layered flows of energy, information, and money – operated autonomously and/or in islanded mode, but also connected to a larger grid. 

Experts foresee high growth rates for the technologies associated with DESs. For example, the compound annual growth rate for the energy storage market is expected to exceed 10% between now and 2024. Electric vehicle infrastructure is expected to expand by over 30%, and it is considered likely that distributed energy solutions in general will grow by about 10%.

What concrete benefits can distributed energy solutions offer? 
  • Boosting resilience: Opportunities for city and municipality authorities – but also districts and campuses, like universities, hospitals, and industries – to design their own local energy supply systems. These systems may work in conjunction with the overall grid, but they can also be configured to be completely self-sufficient.
  • Integrating renewable energies: Renewables are often distributed (with the exception of hydropower, which is closely related to geography, as well as large off-/onshore wind parks and utility-scale photovoltaic parks), and distributed energy solutions help integrate them into the overall grid. This change is growing in relevance as buildings cease being mere “consumers” of energy and become “prosumers” that can generate electricity themselves – and turn into intelligent storage systems that can add flexibility to the overall grid. In addition, building operators could sell any electricity surpluses to the energy market or offer their capacities to the energy flexibility market. 
  • Applying the co-generation principle efficiently: For example, by using heat from nearby production operations to heat or cool buildings or even ice stadiums.
  • Saving energy during transmission: Shortening transmission routes or even avoiding them completely can achieve significant savings.
  • Raising dependability: Increased reliability of the local power supply, which also helps stabilize the distribution and transmission systems.
  • Strengthening communities: Fostering value creation at the local level.

To summarize: local, decentralized, and controllable power generation and storage solutions can be designed to provide end users with local resilience or even full independence from the grid – often combined with outstanding economic advantages. The benefits apply to grid operators as well; such a local solution can manage demand to reduce peak loads when infrastructure is nearing its capacity limits. And this approach makes it possible to sell excess capacity on the market. 

Many of these benefits are certainly not yet reality on a large scale today. But the figures available from DES projects that have already been realized speak for themselves: an independent study on this topic shows that – compared to “business as usual” – DES operators are seeing operational cost reductions ranging between 8% and 28%, combined with a return on investment (ROI) of three to seven years. CO2 emissions are being reduced at a similar scale. 

We believe that taking advantage of these new possibilities and benefits will enable us to help create environments that are guided by intelligent capabilities to secure three main advantages: sustainability, a secure and reliable supply of energy, and economic benefits.

Environments that offer intelligence for greater sustainability

Ideally, supplying energy on a distributed basis makes a decisive contribution toward protecting the environment and our planet’s climate by consuming power where it is generated and thus avoiding transmission and distribution losses. In addition, using renewable sources of energy can significantly reduce emissions and preserve natural resources. 

Distributed energy solutions play a key role here because they have been specially designed to generate, store and distribute green energy. Making good use of these advantages is vital – particularly against the backdrop of the current debate about stopping climate change. 

Today, technologies like waste-heat recovery, forecasting algorithms and measures for achieving better allocation of available energy can already deliver significant resource savings. These tangible benefits can be reaped now.

Until recently, the Galápagos Islands were – despite their status as a UNESCO World Heritage Site – using a diesel-based power supply to operate hotels, restaurants, and the homes of their 2,500 permanent residents. There were undeniable risks associated with shipping the old power plant’s diesel fuel from the mainland, which is 1,000 kilometers away. In recent years, two big fuel loads were spilled during transport by ship. These accidents damaged the Islands’ coastline and threatened its fragile ecosystem.

The new solution engineered for the Isabela Island Hybrid Power Plant exploits a variety of energy resources to create a system that can meet the local power demands. It generates a power output of 1.2 MW and comprises 3,024 solar panels, five generators and 84 battery modules, which are all controlled by a smart hybrid control solution. The solution involves:

  • A 952 kWp photovoltaic system for collecting sunlight and converting it to electrical power.
  • Five 325 kW reciprocating-engine generator sets designed to operate on Jatropha oil (a biofuel based on vegetable oil) to meet generation requirements when sunlight is unavailable (due to nightfall or cloud cover, for instance).
  • A 660 kW / 333 kWh storage system for enabling smooth transitions back and forth between biofuel-based and solar generation. Storing electricity is an important prerequisite for ensuring grid stability.
  • The smart hybrid control solution, which is the plant’s command and control system. It provides automation, optimization and visualization of the generation process, interconnections between systems, and remote access.

The results achieved on the Galápagos Islands speak for themselves:

  • 28 tons of diesel saved monthly
  • 24/7 availability (99% uptime)
  • 85 tons of CO2 emissions saved monthly

Environments that offer intelligence for securing the supply of energy

Virtually all industries – and critical infrastructures in particular – depend heavily on a reliable supply of energy. Local energy solutions help improve system reliability and boost the availability, quality, and resilience of the electrical power supply. These benefits enable businesses to safeguard their processes and prepare for future requirements while ensuring scalability.

One great example of using a regional, fully renewable energy supply system to secure the supply of electric power would be the “Path of WUNsiedel,” an energy project being implemented by a town in Bavaria, Germany. The goal is to turn the supply area of Wunsiedel’s publicly owned local utility into a fully flexible system based entirely on renewable energy sources by 2030. 

Above all, the Wunsiedel project demonstrates the possibilities for putting sector coupling to good use. Sector coupling involves system integration and networking of different DES elements. System operators, for example, can make ideal use of the potential of renewable energies by hosting the infrastructure needed for temporary storage of wind and solar power. These advantages can be achieved by using digital connectivity to link energy systems and consumers together.

The result is an extremely reliable and economical energy supply system that not only supports and relieves the upstream grid but also sells the generated surplus on the energy market (feed-in). The long-term goal is to create an independent supply area that relies entirely on renewable energies. 

What technology supports Wunsiedel?

  • Photovoltaic installations with a capacity of more than 10 MW
  • Wind turbines with a capacity exceeding 10 MW
  • An 8.4 MW / 10 MWh electrical storage system for ensuring grid stability (currently in the commissioning phase)
  • Provision of power and heat through satellite power plants based on locally produced wood pellets
  • A smart home storage solution as an offering for consumers that enables private households to store the solar energy that they have produced – and use it at night, for example, if needed

What results have been achieved so far?

  • Combination of different sources of renewable energy, generation assets, and power consumers linked by digital connectivity – which is vital for providing a reliable and sustainable supply of energy
  • In 2017, green energy consumption in Wunsiedel exceeded grid consumption for the first time
  • Feed-in of an overall electricity surplus into the upstream grid in 2018 – with an average total surplus of about 15 GWh generated over the year
  • Savings of 144,000 tons of CO2 between 2011 and 2018 compared to conventional energy generation

Looking ahead: power-to-gas or power-to-liquid will allow another evolutionary step. Generating “green” gas from renewable energy sources can enable long-term energy storage in order to secure the supply of power for transportation, industries and grid services.

In addition, buildings with integrated storage will increasingly supply load-balancing capabilities for the local network. Electric heat accumulators in residential spaces, for example, can be used to shift loads. In a first project in Wunsiedel, a couple of 6 kW accumulators are connected to a control center that can manage the individual electrical heat accumulators and use them to provide scalable storage of electrical energy. For instance, 100 of these 6 kW systems could, in the future, provide a total of up to 600 kW of storage that could be used to support and balance a municipal utility network. 


Learn more

Environments that offer intelligence for economic benefits

Optimizing energy costs is increasingly important for improving competitiveness. There are several ways to achieve this goal. For one thing, optimizing the energy mix can help lower the cost of purchasing electricity. In addition, reducing overall energy consumption and boosting energy efficiency provides two other effective ways to cut costs. Finally, establishing a local energy solution makes it possible to reduce grid fees and create additional revenue by selling surplus energy to the energy market.

Sello, in the Finnish city of Espoo’s Leppävaara district, is one of Scandinavia’s largest shopping malls. Covering an area of 102,000 m2, there are 170 shops as well as a concert hall, a hotel and a library. Thanks to its location near Helsinki, more than 24 million people visit the center every year.

In 2010, Sello became the first shopping center in Europe to become LEED-EB Gold certified. In 2015, it also became the first shopping center to achieve LEED-EB Platinum certification. To secure ongoing LEED certification, the shopping center required modernization and efficiency improvements. These updates were also critical for retaining shop tenants, who expect fair and consistent leases and low operating costs. And it was equally important from a marketing perspective: air quality is key for the overall quality of the shopping environment because visitors want to feel comfortable.

The solution: smart use of digitalization. The key to turning Sello’s building data into opportunities was a comprehensively planned analytics approach, including space and equipment-level trending analyses and a customized set of parameters for equipment performance and environmental conditions. 

Thanks to these insights, optimized air flow rates in restaurants and repair and maintenance of heating, ventilation and air conditioning (HVAC) installations led to immediate savings in energy costs while improving air quality and comfort for visitors. In addition, automated evaluations of weather forecasts are used to preheat entrances and improve visitor safety during the winter when there’s ice and snow. 

The results speak for themselves. Turnkey smart building management solutions and a nine-year lifecycle service contract led to significant cost reductions. Total yearly benefits amount to about €650,000, including cashflow from the energy market, savings through energy-efficiency measures and a reduction of maintenance costs.

In addition, Sello was able to reduce its maintenance-backlog investments by €650,000, produces 470 MWh of energy per year locally, and cut its annual carbon emissions by 281 tkg/CO2.

The technology used at a glance:

  • 1,500 energy and HVAC data points for analytics (with 12,000 data points in total)
  • Solar panels generating 750 kWp
  • 1.68 MW of battery storage
  • 1 MW flexible load in existing technology
  • Electric systems for demand response and microgrid functions
  • LED lighting system with a digital addressable lighting interface (DALI)
  • Upgrade of the automation system, and
  • 12 electric vehicle charging stations in operation

And the project goes on. Since autumn 2018, a virtual power plant implemented at the shopping center has made it possible to actively participate in the energy market by being flexible in the building’s consumption in accordance with market needs. This is done by connecting the shopping center building to the overall grid to form a virtual power plant and by turning the center into a kind of “reserve power plant.”

The heart of the virtual power plant is a software platform, operated by Siemens, that intelligently balances electrical loads from buildings that have been connected within a microgrid, incorporating renewable energy and energy storage. With the help of this platform, Sello’s microgrid combines energy efficiency, storage optimization of peak loads, and its own electricity production. This solution is pioneering a model for distributed energy systems to benefit utilities, business and society. 


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Distributed energy solutions – a sustainable answer to today’s challenges

Let’s be clear: On the road to the future of energy is inextricably linked to the topics of decarbonization, decentralization and digitalization. The goal is to generate, supply and use energy intelligently and sustainably. This requires integrative thinking and an eye for the big picture – which encompasses everything from intelligent energy concepts to sector coupling and from electric vehicle infrastructure to the integration of renewable energies into the power grid. 

There are already technological solutions available for driving progress today. In a first step they don’t require new laws, new regulations or new technological developments to enhance their impact. Cities, companies, and citizens can all play an active role in climate protection today – and create “environments that care.” 


Author: Cedrik Neike, Member of the Managing Board of Siemens AG and CEO of Siemens Smart Infrastructure

Picture credits: Siemens AG

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