The world faces an urgent challenge: to balance the interconnected needs of ensuring energy security of supply, achieving environmental sustainability and providing energy equity (energy that is affordable and accessible to all). Known as the ‘energy trilemma’, this challenge impacts all of us and increasingly shapes the strategies of governments, policymakers and business leaders. All three elements of the trilemma are made more difficult by the ongoing backdrop of geopolitical uncertainty and trade tensions. So how can businesses navigate these, sometimes conflicting, objectives?
Connected thinking
Crucially, the energy trilemma will not be resolved by tackling the three elements in isolation from each other. A cleaner, fairer, safer energy future relies on addressing all three elements of the trilemma at once because they are deeply interconnected and any imbalance can lead to significant risks: energy shortages, price volatility, increased carbon emissions, social inequality, and geopolitical instability. This is a complex balancing act – one that is felt deeply by companies in Europe’s industrial sector, many of which are intensive consumers of energy.
Progress therefore requires not just long-term energy technologies, such as Carbon Capture and Storage (CCS) and hydrogen, but also commercially viable solutions that are ready-to-go. The good news is there are various options already available, especially for businesses able to take a sophisticated portfolio approach, which leverages multiple energy solutions at the same time.
Renewable power in focus
Core to this portfolio approach, are renewable technologies, such as solar and wind, which can help to decarbonise power supply. Corporate Power Purchase Agreements (CPPAs) offer a useful way for businesses to secure long-term access to renewable energy and support their decarbonisation goals. These act as a long-term contract (usually between five and 15 years) between a renewable generator and a customer. During that time, the power purchaser buys energy at a pre-negotiated price, reducing their exposure to market volatility.
In addition, CPPAs include renewable energy certificates to certify the origin of their renewable energy and report reduced carbon emissions.
For some businesses, there is the option to generate their own renewable power on-site. By producing electricity directly at their own facilities, typically through solar PV systems, battery energy storage and microgrid integration, industrial businesses in Europe can optimise their consumption to help reduce costs, build resilience and mitigate exposure to grid disruptions.
Flexible solutions for success
The possibilities do not end there. Flexible energy solutions such as Battery Energy Storage Systems (BESS) can help businesses better manage exposure and extract more value from intermittent renewable power generation, especially those with long-term solar CPPAs. By charging up when energy prices are low and then selling power when they are high, businesses can also hedge against market fluctuations and better balance energy demand with real-time supply.
Similarly, virtual power plants (VPPs) and small generation aggregation (SGA) are effective tools for further optimising and managing renewable portfolios. VPPs are designed to aggregate multiple smaller, distributed energy resources to function collectively as a single, large power plant. This allows them to offer the same services as traditional power plants – including grid support, trading in energy markets and increased integration of renewables – but without the need to invest in a single large operating facility.
The vital role of gas
The future energy mix is not all about renewable power. By having a partner capable of taking a more holistic view of the solutions available, industrial businesses can begin turning their diverse energy needs into a strategic opportunity.
This diversity includes natural gas and Liquefied Natural Gas (LNG), which industry leaders such as Shell believe will play a foundational role in the energy transition, displacing coal and supporting the deployment of renewables. Natural gas currently meets a quarter of the world’s power needs and plays an important role in reducing carbon emissions from coal and other oil-based fuels. Biomethane, which is made from organic waste like food scraps, manure and agricultural residues, can be used in the same way. With the same infrastructure as natural gas, it can save up to 202 per cent of Greenhouse Gas (GHG) emissions compared to EU fossil fuels.
The trading opportunity
As energy markets become more complex and dynamic, European industrial businesses can explore ways to take a more strategic view of their energy portfolio. Through the strategic buying and selling of energy through their provider – including environmental products and renewable electricity and certificates – businesses can secure supply, manage exposure to energy market volatility and optimise their energy portfolios by looking at them as a collective asset as opposed to a set of individual energy solutions.
Being able to trade across multiple markets and energy types 24 hours a day also diversifies the range of sources and regions customers are able to access, reducing dependency on specific locations and suppliers. This helps directly address energy security while mitigating localised disruption.
Beyond today
As we have seen, there are many elements to consider in managing exposure to the core challenges of the energy trilemma – and many potential solutions too. No single government, business or individual can solve these challenges alone. Nor, for that matter, can they control the ongoing complexity and uncertainty surrounding today’s global energy markets.
However, what business leaders can do is choose how they respond. For the European industrial sector, this means taking steps now to diversify their energy supply, drawing on a combination of renewables, traditional fuels, battery storage and trading solutions to boost resilience, increase security and broaden access to cleaner energy. Above all, it means finding a partner with the size, access and expertise to help them unlock those solutions at scale.