The energy system is a complex global network responsible for supplying us with electricity for our buildings and fuel for our vehicles. It is undergoing extremely rapid change driven by a combination of new technology and policy commitments to decarbonisation.
So far, these changes have mostly impacted conventional electricity generators and parts of heavy industry.
However, the next phase of change will impact operations in the logistics sector along with the wider economy. Without action, operational flexibility could be reduced and costs increased.
Solutions to this challenge are available. Logistics operations generate more data than at any time in history. At the same time multiple energy technologies are emerging that can contribute to solutions if deployed properly. There is a window of opportunity to use logistics data with cutting-edge simulation techniques to find ways to find the most cost effective and profitable response to the energy transition.
FPS’ proprietary software tools help our customers to understand the impact of the energy transition on their business and formulate technology and operations responses.
Our latest blog post discusses changes in the energy system and how they may impact logistics operations as well as a route to identifying and testing solutions.
A Changing Energy System
Already, falling costs of solar and wind power generation technology have led to capacity increases that heavily disrupted the electricity industry in many countries. About a third of UK electricity today comes from renewables, the next phase of growth required to meet 80% carbon reduction or net zero policy targets is likely to have much wider impacts on energy prices as the costs of managing variation in renewables output rise.
Electric vehicle (EV) costs are decreasing in many segments driven by progress in battery technology and manufacturing. The business case for adoption is improving and demand is accelerating in both the commercial and passenger car markets. Local network impacts of EV deployment are already being felt and without action, regional electricity network congestion will increase substantially with rising EV uptake.
It will also be necessary to tackle decarbonisation of heat. Heat represents about 1/3 of energy use in the UK, this need is currently mostly met by natural gas and has a peak demand about 3x that of the electricity network. Meeting this demand through electrification even with efficient heat pump technology would represent a challenge for the wider national level electricity network.
These factors make mismatches in electricity supply and demand more likely at national and local levels. One of the most cost-effective ways of resolving this is to develop ways to decouple supply and demand for electricity like energy storage and demand side response (where electricity users vary their demand in response to electricity network conditions).
How Will Logistics be Impacted?
Changes to the energy system will impact logistics operations in several ways:
- Electricity will become more expensive – the costs of delivering electricity to users when they need it are likely to increase. The result of this will be more expensive electricity which will increase the importance of energy efficiency and onsite generation technologies.
- Reporting requirements will increase – these changes are driven by decarbonisation objectives, additionally end customers are becoming more concerned about sustainability in general. Both factors are likely to substantially increase energy and carbon tracking and reporting requirements.
- New vehicle technologies will be deployed – declining costs will lead to rapid growth in EV uptake in the commercial vehicle sector. EV’s have range and payload constraints, to maximise the benefit of EV investments, their usage needs to be planned differently to diesel vehicles. EVs also need to be charged which can very substantially increase site power requirements without management resulting in expensive connection upgrades running to hundreds of thousands of pounds.
- New energy technologies will be deployed – rising electricity prices and declining costs will open opportunities to benefit from technologies like energy storage. Getting maximum return from investments requires careful integration with site energy demands, operations and wider energy market conditions.
- Electricity availability may become constrained at certain times – it may be politically difficult to constrain when residential users charge their vehicles or heat their homes. As a result, industry would have to provide demand flexibility to keep the electricity network running. Providing this flexibility would mean that vehicle and warehouse scheduling will need to account for energy availability variations.
How can the sector respond?
An enormous range of vehicle, energy generation, storage and efficiency technologies are entering the market place. These technologies if deployed in the correct operating environment have the potential to radically reduce emissions from logistics operations. However, they are often less flexible than the fossil fuel based incumbents that they replace meaning their deployments need to be considered much more carefully to avoid wasted investment.
Part of the solution lies in the fact that logistics operations are generating unprecedented volumes of operational data. This data in combination with plummeting costs of processing power mean that logistics networks can be simulated more cheaply than ever before, provided data analysis is combined with the right technical and sector knowledge. This enables robust development and testing of operating strategies and technology choices in virtual worlds to uncover the best choices and wider best practice lessons.
Doing this is much cheaper than wasting investment funds by purchasing the wrong technologies or deploying them at ineffective locations.
By combining data analytics and scenario simulation with a deep understanding of logistics energy technologies and the wider energy system, FPS is helping its customers to respond to the energy transition in areas like EV deployment planning, future network design and load forecasting through this type of simulation and analysis.