Solar farm

A New Space Race

Part 3: Earth Space

A New Earth Space Race

The impact of physical and digital space on the planet as a whole, including a revolution in energy systems that will create a sustainable legacy for future generations.

Imagine you had the power to determine the future performance of your organization’s infrastructure assets across four key priorities:

 

A. Significantly improved cost efficiency

B. Improved resilience to physical and digital threats

C. Significantly lower environmental impact

D. Reliable energy supply

 

But your choices are not going to be easy – you will need to compromise some to elevate others. For each of these priorities you must select only one of the following outcomes, and each can only be used once:

 

1. Guaranteed today

2. No short-term progress, but guaranteed in exactly three years

3. A 50:50 chance of success/failure every year

4. No progress for five years

 

Take a moment to decide what you would do, how you would match priorities with outcomes. Which priority would you like to be ‘guaranteed today’? Which would you leave to chance? Where would you be willing to delay progress?

Kid on a kickboard between smart buildings

What is the New Space Race?

This thought leadership study reveals how infrastructure stakeholders view the immediate and longer-term future of our built environment and energy systems. Discover fresh perspectives on how our infrastructure will be reshaped by the global pandemic, a new era of digitalization and the urgent need to decarbonize.

Leaders prioritize the environment

We put this scenario to our survey respondents and recorded their decisions. While, in reality, organizations are not faced with such exclusive, absolute options, responses to this dilemma can help us understand where the trade-offs are likely to be made in real, more nuanced, decisions over infrastructure strategy.

 

The standout finding from this scenario is the extent to which respondents prioritized significantly lowering their environmental impact. It was the most popular pairing with “guaranteed today” and the least commonly combined with "no progress for five years".

 

Cast your mind back just two or three years and it is hard to imagine that environmental impact would have been prioritized in this way, ahead of business fundamentals like costs, resilience, and reliable energy supply.

Shifting to low carbon infrastructure

“The energy transition is upon us. It has already started, and the trajectory is irreversible,” says Michael Webber, Josey Centennial Professor in Energy Resources, Mechanical Engineering at The University of Texas at Austin and former chief science and technology officer at ENGIE, a multinational energy company. Webber believes many governments and companies have now updated their legacy ideas about energy. While a few still cling to old ideas, “most have realized that the world of energy is already moving,” he says.

Environmental impact was prioritized ahead of business fundamentals like costs, resilience, and reliable energy supply. 

A similar shift is evident in other infrastructure domains. “We have seen a sea change around environmental issues in the last couple of years,” says Jeremy Kelly, Research Director at JLL, a global real estate services firm, “it was happening before COVID, but I believe the pandemic has brought the fragility of our society and environment to the forefront. There is a recognition that climate risk is financial risk. And so we have seen a sharp increase in demand for guidance on how clients navigate their decarbonization journey and deal with climate change.”

 

Climate risk has indeed become a financial risk, and also a risk to resilience (due to increased extreme weather and rising sea levels) and potentially reliable energy supply (as the world accelerates into a more distributed, complex energy system). This broader appreciation of environmental impact helps to explain why many respondents have put it ahead of other priorities.

 

The public sector has a special concern around resilience, particularly in regions that already have their share of extreme weather. “Governments are responding to climate change risk, and city resilience has become an automatic consideration,” says Steven Velegrinis, Head of Masterplanning at AECOM, a multinational engineering firm. “There was a time where everyone thought it was someone else's problem, but now people accept the reality, and are trying to mitigate the impacts.”

There is a recognition that climate risk is financial risk.
Jeremy Kelly, Research Director at JLL

Velegrinis is based in Dubai, where leaders are concerned that 50°C days could quite soon become 60°C days, creating unlivable regions. There are bigger threats too: “If the long-term sea level rises occur, as per some of the IPCC forecasts, Dubai could lose two thirds of the city, without even considering the impact of storm surges,” he says. 

The target revolution

Over the past five years there has been an exponential rise in the number of organizations setting low-carbon or net-zero targets (see Fig. 3.1). There is also a lot of optimism around achieving these goals, with most of our survey respondents expecting their organization to be carbon neutral by 2030 (see Fig. 3.2).

Fig 3.1

The exponential growth of low-carbon or net zero targets

Only 15% of respondents had targets in place before 2015.
Fig 3.2

The rapid shift to net zero

Two thirds (66%) of respondents said their organization would be a net zero contributor to global carbon emissions in (or before) the year 2025.

The challenge will be turning this optimism into reality. “Whilst it's great to have a target, I think there is a bit of a gap at this stage, between the ambition and a clear strategy that gets you there,” says Wayne Butcher, director at Grant Thornton, a global tax, accounting, and consultancy business. “It is only recently that organizations have started to fill in the details, and there is a need to really focus on the smaller steps now, to work out all the technical specifics and determine how operational models will work in a net-zero framework.”

 

Energy produces three quarters of global greenhouse gas emissions, making clean energy the biggest priority of all in the fight against climate change.  While there has been rapid progress in wind and solar, the energy transition has only just begun and needs multiple sources, technologies, and methods – with different mixes tailored to different regions and applications. 

Energy storage is a key priority

Take energy storage for example. Most energy industry respondents (82%) believe energy storage systems for homes and businesses will be a critical part of the energy transition. Plus, the same respondents rated “energy storage systems to reduce wasted energy and improve resilience” as the highest priority among a set of potential strategy recommendations for cities.

 

Like the diverse range of energy generation technologies, there are a growing number of storage methods that will support the energy transition, including batteries, supercapacitors, pumped hydro, fly wheels, hydrogen electrolysis, and many thermal solutions, from hot rocks to chilled water.

 

 

Most energy industry respondents (82%) believe energy storage systems for homes and businesses will be a critical part of the energy transition.

“Storage helps energy companies to use their capital and assets more efficiently,” says Webber, “For example, underutilization is a fundamental problem for the power sector. In the United States we have about $5 trillion worth of power plants that we use 45% of the time. Energy storage could reduce the need for some of these plants, while the remaining ones could work at closer to 80% utilization.”

Integration challenges

Solar and wind energy present challenges for energy companies too, most notably in matching supply and demand. If conditions are not suitable (e.g. at night, or when the air is still) then power generation may not meet demand. However, when demand is low, but it is sunny or windy, too much power may be generated. In these cases, the energy is often “curtailed” (effectively wasted) to avoid damage to the grid.

 

Energy respondents see the latter scenario (managing and storing surplus power) as a much bigger challenge than the former (a lack of output at certain times). This is certainly the case in Germany, where wind farms in the North generate large amounts of excess power, but this cannot be directed to the power-hungry South because the transmission network is not strong enough.

Fig 3.3

More renewables ahead of greater efficiency

In this narrow choice, energy respondents favor investment in renewable energy generation. This reflects the vast scale of the energy transition, not a lack of focus on demand-side management, which is near-universally deemed important by the same respondents.

Energy respondents see the latter scenario (managing and storing surplus power) as a much bigger challenge than the former (a lack of output at certain times). This is certainly the case in Germany, where wind farms in the North generate large amounts of excess power, but this cannot be directed to the power-hungry South because the transmission network is not strong enough.

 

“In the North of Germany, renewables generate five or six times more than local load,” says Xiaohu Tao, Vice President, Business Innovation and Digital, in Energy Networks at E.ON. “Connecting renewables to the grid is not a new challenge for us at lower voltage, but the high voltage connections needed to integrate those wind farms is much more challenging.”

 

A key reason for this is that there is public opposition to construction of the new transmission lines that would be required to link the regions. The planning process takes many years, in some cases more than 10 years, and so Tao expects more political support will be needed. “To really accelerate network expansion, planning and approval processes must be consistently digitized, nature conservation requirements standardized, and sufficient manpower and technical resources made available for the approval authorities,” he says.

 

Today, when power can’t be used locally, or sold to neighboring countries, it gets curtailed. This is not just a waste of clean energy; it comes with a significant financial sting. “Compensation is paid to the renewable energy companies that have to curtail power, and this is currently close to one billion Euro each year in Germany alone – it is an absolute waste that many are trying to change,” says Tao.

Consumption without benefit

Smart grids, smart meters and other digital enablers will help us manage the complexity of clean energy supply, including the integration of distributed, multi-modal power generators and storage systems.

 

But much can also be done at the point of consumption. Demand-side management will be another critical piece of the energy transition puzzle. So much energy is wasted out of negligence. Insulation is lacking, devices are left on, blinds are not pulled, machines are not updated – there are countless examples of energy that gets consumed without benefiting anyone.

Smart grids, smart meters and other digital enablers will help us manage the complexity of clean energy supply.

Several principles can be used to help us get smarter about energy demand, including conservation, efficiency, penalties, incentives, scheduling and optimization. Digital systems deploying artificial intelligence, fuzzy logic, and various computational models are increasingly helpful as organizations aim to implement models built on these principles. They can make the quick decisions – based on huge sets of data – that are required to drive many demand-side management techniques.  

Fig 3.4

Surplus power more challenging than erratic output

When renewables generate surplus power there are three options: use it, store it, or waste it. Many wind and solar installations are forced to waste potential green energy because of a lack of suitable transmission networks or storage options.

The gigantic scale of the energy transition

Research in the US concluded that demand-side strategies could help to avoid about one fifth of annual electricity use in 2030. It may seem surprising, in light of this, that in a binary choice, three times as many energy respondents said the supply of renewable energy needs greater investment than energy efficiency and demand side management.

 

But this finding does not mean that efficiency measures are not important. Away from that binary choice, an overwhelming majority of all respondents (81%) believe much more attention and investment should be given to improvements to energy efficiency and demand side management. The lop-sided result of that binary question reflects something else: an appreciation of the enormous scale of the energy decarbonization challenge.

81% believe much more attention and investment should be given to improvements to energy efficiency and demand side management. 

Renewable sources are expected to reach 30% of total world electricity generation in 2021. This represents major progress – faster than many had expected – but electricity itself still only accounts for about 20% of total energy consumption. The balance of electricity generation – and the balance of total energy consumption – is dominated by oil, coal and natural gas.

Fueling the future

Many believe that the biggest challenge we all face in the race against climate change is in those areas that are hardest to electrify. “The vexing problem for the world isn't efficiency, or smart grids, or electrification – those areas are the easy part,” says Webber, “the hard part is how to decarbonize fuels, how to develop viable green gasses that work at scale and within viable business models.” Many of the world’s most energy-intensive processes, in heavy industry and heavy transport, do not yet have viable electrical alternatives to combusting fuels. 

 

This is perhaps why “hydrogen infrastructure rollout” was the second highest strategic priority for cities among energy respondents. Green hydrogen (i.e. hydrogen made from the electrolysis of water using renewable energy) could be the green gas of the future. 

The vexing problem for the world isn't efficiency, or smart grids, or electrification – those areas are the easy part.
Michael Webber, Josey Centennial Professor in Energy Resources, Mechanical Engineering at The University of Texas

However, green hydrogen is currently too expensive for most large-scale applications, and a functioning green hydrogen economy will require a vast expansion of renewable energy capacity and supporting infrastructure. It will take an estimated US$70 billion to develop a competitive hydrogen economy by 2030. Despite this, most in our survey are optimistic about the gas, with three quarters (74%) saying that hydrogen will be a crucial component of the energy transition.

 

Hydrogen is also compelling because it can be used for energy storage, turning what would have been curtailed renewable energy into a transportable green energy commodity. It is no surprise then that five German states in the country’s north have kicked-off a joint plan to transform the region into Europe’s leading area for hydrogen production.

Fig 3.5

Energy storage and hydrogen: crucial parts of the energy transition

Hydrogen is expensive, somewhat difficult to distribute, and is often an inefficient energy carrier compared to electricity. However, it is compelling as it has the potential to solve two major energy transition challenges: decarbonizing fuels and storing renewable energy.

The hard carbon problem

The decarbonization of fuels is related to another big challenge of the new earth space race. Infrastructure leaders can decarbonize the energy used to operate buildings and other assets, but there is a deeper challenge to solve: “There is a lot of embodied carbon in the basic bones of a building, the structure, including the concrete and steel of the frame and foundations,” says Ewan Jones, partner at Grimshaw, a global architecture practice. “There is now a bigger focus on this, measuring and reducing the embodied carbon, and not just emissions from operations.” 

 

This is related to the fuels problem because manufacturing, processing and transporting things like steel and cement, are exactly the kind of hard-to-electrify applications that are difficult to decarbonize. In our survey, respondents rated new materials and substances as the innovation or technology they expected to have the second biggest impact in the next five years (after only AI-driven prediction and automation). This could be part of the solution to reducing embedded carbon in new buildings.

There is a lot of embodied carbon in the basic bones of a building, the structure, including the concrete and steel of the frame and foundations.
Ewan Jones, partner at Grimshaw

Cross-laminated timber (CLT) is one example. Some believe CLT has great potential as a more sustainable building material than steel and concrete.  Research indicates that if made from sustainable forestry sources, CLT stores enough carbon within it to offset the emissions released from its production, making it a net negative carbon emitter

 

Embodied carbon is also a factor in decisions about whether existing buildings are refitted and reused, as opposed to being demolished and rebuilt. Retrofitting saves much of the carbon that would be needed for new construction, while often also improving operational efficiency and environmental performance.

 

“It is estimated that 40% of all emissions are from real estate, and about one quarter of that is in the form of embedded carbon, used in the materials and construction process,” says Kelly, “recognition of the retrofitting challenge will force greater collaboration.” As Kelly points out, however, the challenge is that retrofitting is not easy, “and the construction industry, in general, has not yet solved the puzzle of how to effectively retrofit aging stock,” he says.

Carbon cooperation

Decarbonization will rely on a great deal of combined effort on the part of all infrastructure and energy stakeholders. This is accepted by the vast majority in our survey, with over eight-in-ten (82%) saying increased cooperation and coordination between diverse stakeholders is crucial to reducing CO2 emissions from energy and infrastructure.

 

“Net zero will not happen if we do not cooperate together,” says Tao, “These are joint issues that impact everyone. Energy stakeholders should be innovating, sharing ideas and working together, because it is the most challenging and important issue for us all.”

 

Part of this will rely on strong leadership and support from the most powerful players because regions and organizations are of course at different stages on the journey to dealing with climate change, building resilience and decarbonizing their assets and operations. 

82% say increased cooperation and coordination between diverse stakeholders is crucial to reducing CO2 emissions from energy and infrastructure.

“Some of our clients are major corporations and institutional investors who have strong commitments to green standards, in terms of their buildings, operations, and supply chains,” says Kelly. “But there is a very long tail of businesses that are pretty early on in their decarbonization journey. They often have some level of commitment, but often lack the resources or know-how to implement a strategy.” 

 

Greater cooperation can play a role in making decarbonization both a universal imperative and a practical reality.

 

The urgent transformation of infrastructure across our three dimensions – the physical, digital and earth spaces - is a race with the urgency of a sprint, but the duration of a marathon. 

Infrastructure transformation: a race with the urgency of a sprint, but the duration of a marathon…

Infrastructure stakeholders need to make difficult trade-offs along the road, much like in the dilemma at the start of this chapter. Of all the priorities that need to be weighed, decarbonization is increasingly the one with the biggest influence on the scales. It will be among the most powerful drivers of change in physical spaces, while the maturation of digital space will be a primary enabler of change in the earth space.

 

This is just one of many ways in which the three space races are one, with aspects of physical, digital and earth spaces acting simultaneously as both drivers and enablers of change. This is the nature of the new space race – a race of unified human, digital and environmental priorities, and a race we must all strive to win together.

We would like to extend a special thank you to the diverse set of industry leaders and experts who shared their ideas and insights with us as part of this study.

This thought leadership study is based on a survey, in-depth interviews and desk research. It is not an academic or scientific research paper. Our goal is not to provide any final answers, but rather to start conversations, stimulate thought, and encourage infrastructure stakeholders to reflect on what today’s megatrends mean for the future of our energy system and built environment.

 

The survey included 501 respondents from 10 countries. The countries involved include those large-scale and/or highly advanced infrastructure assets and ambitions. It was fielded in June and July 2021.

Country                                                                                       
 

USA

20%

UK

16%

China

12%

France

12%

India

10%

Germany

8%

UAE

8%

Singapore

6%

Austria

4%

Sweden

4%

Primary role

 

Leadership, management, strategy

24%

Operations and maintenance

15%

Architecture and design

12%

Information technology, cybersecurity, software development

12%

Engineering or construction specialist

10%

Financial management or investment professional

5%

Sales, marketing, PR

5%

Data science, analytics, AI

4%

Consultant (e.g. management, sustainability, technology)

4%

Risk management, legal or regulatory compliance

3%

Property development

3%

Sustainability and/or efficiency specialist

2%

Industry

 

Architects, developers, construction, engineering

18%

Heavy industry and manufacturing

14%

Retail, hospitality, corporate, residential

12%

Public sector and education

12%

Energy (generation, transmission, distribution)

11%

Light industry (Food/beverage, data centers, transport)

10%

Healthcare and pharma

8%

Property/facility management

8%

Investors (trusts, funds, etc)

6%

Organization size                                                                  

 

50 - 249 employees

20%

250 - 499 employees

20%

500 - 999 employees

25%

1000 - 4999 employees

20%

5000+ employees

15%

Seniority

 

C-suite executive (or equivalent)

32%

I report directly to a C-suite executive

38%

My boss / manager reports directly to a C-suite executive

30%