This post shows my response to one of the LBS Sloan MSc scholarship application essays that I completed. Plus some additional thoughts on the subject topic. The title of the essay given was:
Describe an innovative solution to a worldwide issue of your choice (Max 500 Words).
My response to this was:
A pressing issue facing the world today is; how does humankind supply power to its planet without making it uninhabitable? Solving this problem is gaining momentum, as demonstrated by the international collaboration that enabled the 2015 Paris Climate Agreement.
This is reducing the use of fossil-fuel generated power; thus supply of ‘traditional’ electricity sources is falling, while total electricity demand increases due to a reduction in transportation’s dependency on oil.
As a result, global solar energy supply is predicted to double every 18 months, while in the U.K (representative of the global average) wind power increased by 45% from 2016 to 2017.
Despite these changes, forecasts beyond 2030 show significant power supply deficits without the use of fossil fuels, and this is before considering that transportation embracing electrical propulsion could eventually double demand.
The erratic nature of renewable energy supply is an unquestionable problem. To mitigate supply shortfalls using only ‘clean’ sources would necessitate system capacities to be far in excess of demand. An alternative solution is to have traditional energy supplies used as back up, such as the U.K’s capacity market, but this is inefficient and contravenes climate change policy.
Research has shown that energy systems can be significantly optimised by both reducing supply fluctuations and introducing electricity storage into the distribution network.
To visualise how a system can be optimised, consider energy as inventory. Distribution systems such as those within the supermarket industry have managed to minimise inventory through intelligent location of intermediate storage facilities, together with increasing sources of supply.
Energy supply variations can be reduced by blending sources (solar and wind often have negative correlation) and by varying sources’ geographic locations. In addition, energy storage offers great potential. Storage technologies are in their infancy, as of June 2017 only 1% of U.K electricity demand was met by storage, but predictions estimate this may increase to 20% by 2022.
What is most urgently required now is a universal understanding of the most efficient energy supply system. Currently developments are often being progressed independently of one another, based on what individuals think will offer the industry the most benefit (and thus return on investment).
The World Energy Council predicts that energy system optimisation will enter mainstream thinking within five years. This approach is illogical; successful projects require completion of system design prior to implementation. Why would implementation of unprecedented energy system changes be any different?
This generates two difficult questions: What is the most efficient supply system? How can collaboration be co-ordinated to achieve this model? Difficult yes, but not impossible, and obtaining the answers could be key to turning a clean energy deficit into an exportable surplus.
An innovative way to develop answers could be through a high-profile competition similar to Google’s Lunar X prize. Google’s competition “sparked the conversation and changed expectations”, by encouraging exploration of the boundaries of knowledge, and sharing discoveries.
If incentives and prestige can help with cheaper space travel, couldn’t a similar approach work for energy system optimisation, and therefore climate change?
[Word count: 500]
Now first of all let me start by saying that I didn’t win an award for this particular essay submission, however it was the one essay that I found the most thought provoking and engaging.
My professional career to date has not given me any exposure to the energy industry, and thus quite a significant amount of research was needed. This in turn has resulted in this essay being quite an educational piece for me, and has got me to thinking about what the possible answers to the two ‘difficult questions’ could be.
The first question: What is the most efficient energy supply system?
Of course with limited technical knowledge it is not possible for me to answer this with great authority, but I can use what experience I have garnered from other industries to presuppose what might be effective.
I did briefly brush over this in my essay when referencing supermarkets distribution systems, which in turn are often used as a simplified analogy to describe a Kan Ban / Just In Time or Lean production system.
A supermarket maximises the quantity of products it is able to supply to its customers, while at the same time minimising the inventory of said products that it holds. It has a small amount of storage within each store, on the shelves. These shelves are replenished from stock that is held in larger quantities at the rear of the store, which are in turn replenished from a local distribution warehouse. Each one of these storage areas will be designed so that it can hold the minimum amount of buffer stock to ensure that there is a constant supply to meet consumer demand.
In addition, each supplier will likely also have a buffer stock quantity ‘on the shelf’ at either the production source or at a distribution centre, which will enable them to react to fluctuations in demand and supply supermarkets immediately as required. The supplier will produce to replenish this buffer stock, allowing a stable production output to meet peaks and troughs in demand.
This is a very simplified view, but also consider that a supermarket distribution system must supply thousands of varying products to thousands of customers with various consumer preferences. With an energy distribution system, every consumer has exactly the same requirements, albeit in different volumes. Surely optimising an energy distribution system must be easy compared to a supermarket equivalent? This leads onto difficult question number 2..
The second question: How can collaboration be co-ordinated to achieve this model?
A significant difference between a supermarket chain’s distribution system, and a national energy supply distribution system, is that the supermarket chain is likely to have one organisation leading and co-ordinating operations. Whereas an energy distribution system will consist of several large energy producers, separate organisations responsible for the energy distribution network, and often separate organisations responsible for supplying said energy to the end user. Each of these ‘players’ within the market will be competing against one another to get a larger foothold in the market. Thus collaboration and joint strategy will not be a natural step.
A similar example is the pharmaceutical industry, where traditionally firms have been very secretive of their development activities, which often means duplication of the same research, and thus inefficiencies across the sector as a whole. Squeezes on firms return on investment margins in recent years has resulted in them starting to collaborate on research activities and data. This is certainly an interesting prospect, and if successful could be emanated by many other industries, not least energy supply.
A more mature model that could perhaps be successful has been used for several decades within an industry that is very close to my heart; The Space Industry. Within this industry, most developed nations have a central body (US: NASA, Japan: JAXA, Europe: ESA) that analyses the most effective areas for investment, and develops a coordinated strategy for the whole industry based upon the results of this analysis. It then utilises third party organisations to supply much of the ingredients needed to implement this strategy – be it R&D into new materials and technologies, supply of spacecraft equipment, or bespoke software for specific applications.
This model is perhaps a happy compromise between an out-and-out capitalist model whereby market forces dictate development (meaning individual firms are primarily reactionary and fighting against one another), and a central government owned model which as history has shown, tends to restrict enterprise and dynamism. Reaching a happy balance between both models above is crucial to the success of a sector that relies upon several brilliant individual firms working together for the greater good of the wider industry. The space industry today is thriving and growing across the world perhaps at a faster rate than it ever has. Could the energy supply industry benefit from utilising a similar model? I certainly think so.