The Crucial Technological Paradigm for Climate Catastrophes
Millions of people have already witnessed firsthand the increasing intensity of extreme weather events such as heatwaves, wildfires, storms, and floods due to climate change. Climate change is believed to also drive geopolitical disruptions, wars, poverty, and diseases.
Traditional centralized energy systems are proving increasingly vulnerable to disruptions, as demonstrated by Winter Storm Uri in Texas, where over four million homes and businesses went dark and 246 people killed, or by the European gas crisis following the invasion of Ukraine which increased the wholesale prices for gas from 115% on February 2022 and July 31st of the same year by 237%. The same happened with electricity’s wholesale prices which went from 109% on February 2022 to 138% on September 27, 2022. To tackle these intensifying challenges and future-proof our systems, decentralization must emerge as a critical technological paradigm in the energy transition.
Decentralization refers to the shift from centralized production and decision-making to local, distributed systems, which reduces single points of failure and dependence on distant shipping. This approach enhances resilience by fostering greater flexibility, adaptability, and autonomy to mitigate the impact of disruptive events.
The decentralization paradigm allowed resilient technologies we all know, such as peer-to-peer networks, blockchain protocols, telecommunications, and of course the Internet itself. In his book “Power to the People”, Economist Editor Vijay Vaitheeswaran called twenty years ago for a decentralized paradigm shift of the energy system to take place, not only as a more social and democratic approach, but also as a favorable technological paradigm. What was a great idea two decades ago has become critical today.
The ongoing energy transition toward renewable sources like solar and wind power is driving the decentralization of power grids. These small-scale, distributed energy sources can be integrated into microgrids, empowering communities to generate, store, and manage their power supply. By increasing local control and reducing dependence on vulnerable centralized grids, we build resilience against extreme weather events and other disruptions.
Artificial intelligence (AI) and edge computing are among the technologies that can bolster decentralization efforts. AI optimises energy management, demand response, and predictive maintenance, while edge computing processes data closer to the source, enabling faster and more efficient decision-making right at the edge.
Some of Future Energy Ventures portfolio companies are already shaping a decentralized future. In fact, our two latest investments in 2023 are great examples: Sunvigo, based in Cologne, has introduced Solar-as-a-Service. Instead of purely selling PV systems to the customers, Sunvigo offers residential customers the simplest power agreement for solar PV, and they oversee everything else. In other words, they manage complexity embedded in installing solar PV, thus removing the friction for the customer, and allowing speedy adoption of decentralized energy production. In addition, it maximises the value of its distributed energy assets by integrating them in a virtual power plant that allows for the optimal marketing of excess solar power and maximising onsite solar power consumption.
Another example is Piclo, a flexibility marketplace. Founded in London in 2013, its founders created the company based on the realization that decentralizing the grid would require a different architecture paradigm. They saw that flexibility is fundamental to supply and demand management in the decentralized grid, and Piclo’s world class platform is an important building block of grid decentralization worldwide. Not only is the flexibility market predicted to reach $260 billion by 2050 – a 20 times increase from today’s size – but we calculated that up to 5GtCO2 of cumulative savings are possible by 2050: approximately 12.5% of today’s global annual greenhouse gas emissions.
At Future Energy Ventures, we strongly believe that embracing decentralization as a critical technological paradigm is essential for both climate mitigation and adaptation. By fostering local production, decision-making, and independence, we can build resilient systems capable of withstanding the growing challenges posed by extreme weather events and global disruptions. Investing in innovative technologies like AI, edge computing, and renewable energy sources will play a vital role in this transition, ensuring a sustainable and climate-resilient future. We believe that a decentralized energy system is not only one of the most compelling investment opportunities of our time, but one of the greatest chances we have to avert the worst ravages of catastrophic climate change.
 Vaitheeswaran, V V. (2003). Power to the People. Farrar, Straus and Giroux.