The Electrification of Everything Goes Through the Grid
Even achieving our ambitious goals on the supply and demand sides would be for naught if the grid could not distribute the energy
Originally sent in Avila’s Newsletter on July 10, 2023
The energy transition away from fossil fuels towards clean energy sources is one of the most important challenges and defining economic trends of the coming decades.
The path to weaning ourselves from fossil fuels necessarily goes through electrification. In fact, final energy demand is projected to rise from 20% today to >50% by 20501 as we course-correct towards a net-zero economy. We need both the demand (from transportation, buildings, industry, etc.) to transition from oil, gas, and coal to electric, and the supply (i.e. the sources of energy to power the grid) to move away from fossil fuels (mainly coal and gas today) to green sources (solar, wind, geothermal, nuclear).
Investing on both ends for years, we realize that even achieving our ambitious goals on the supply and demand sides would be for naught if the grid could not distribute the energy. Imagine if we succeed beyond our wildest dreams producing cost-effective nuclear fusion, energy storage to handle solar and wind intermittency, hydrogen, and all our other ambitious projects and then couldn’t get them to their final destination? It would be devastating if demand transitions as quickly as we’d like towards electric vehicles, fermented and bio-fabricated foods, electric heating and manufacturing, and then we simply cannot deliver the electricity required. Experts estimate a staggering $35T2 investment required to meet our electricity needs, which includes a doubling or tripling of grid capacity while transitioning to a cleaner grid. This 2-3x range depends partially on how much we optimize the efficiency of the grid, the largest and most underutilized industrial asset in the world.
As you can see in the graph below, we need an entirely new conception of the grid as both the sources and uses of energy explode in quantity and type.
This conviction led to our investment in Plexigrid, a company building sophisticated algorithms and software tools to help utilities optimize their low-voltage3 asset utilization from an average of ~30% today to upwards of 60% by directing energy flows and enabling more effective demand management. Plexigrid’s proven ability to manage millions of nodes creates a meaningful moat.
We cannot miss the opportunity to congratulate Plexigrid on winning the 2023 EIT Digital Challenge, Europe’s largest deep tech competition! This while expanding into Finland, Ireland, and New Zealand; signing 7 new contracts; and partnering with established majors to submit bids on large-scale grid upgrade projects.
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Global Energy Transformation, A Roadmap to 2050 IRENA report
https://www.irena.org/News/pressreleases/2023/Mar/Investment-Needs-of-USD-35-trillion-by-2030-for-Successful-Energy-Transition
The low voltage distribution system is the part of the electrical power distribution network which carries electrical power from distribution transformer to energy meter of the consumer (also referred to as secondary or low-tension)