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Decentralizing Electricity

The Coming Energy Revolution

By Stefan Schultz

Electric cars, intelligent washing machines, mini power plants in your basement: Germany is on the verge of an energy revolution. SPIEGEL ONLINE looks at the latest developments in the smart grid and how it will change the relationship between consumers and energy suppliers.

The power grid of the future is one of humanity's boldest visions. Gigantic wind farms in the sea and enormous solar fields in the desert are to generate the bulk of our power in the years to come. But consumers and companies are also producing energy with mini-power plants in their own basements and solar panels on the roof. And intelligent appliances are saving energy in our homes: washers, dryers and refrigerators that communicate with each other wash, dry or cool when electricity is cheapest. The information age is arriving at a new level: It's becoming the electricity age.

The electricity age is imminent in six German regions: The technology of the future for smart energy management is going to be developed and tested, under the label E-Energy, in several cities. A number of projects will kick into high gear this month. Tens of thousands of homes and hundreds of companies are expected to participate in the field tests. Research will be conducted into the possibility, for example, of homes that can largely produce all the electricity required by a household, as well as energy exchanges that enable consumers to sell any excess, self-produced and environmentally friendly electricity at a profit back to the energy grid.

Together with firms like Siemens, SAP, IBM and energy giants like EnBW, RWE and Vattenfall, Germany's economics and environment ministries have already mobilized €140 million for the development of the associated technologies and the tests. The government has provided €60 million and the industrial partners are raising the rest together with public utilities and smaller, innovative technology partners. According to Ludwig Karg, one of the researchers working together with scientists and communication experts in the model regions, E-Energy is intended to jump-start a greater energy revolution in Germany. "We are providing German companies with future access to markets worth billions," he said.

Companies Create New Super Sector

The project actually does have the potential to speed things up. It could help to explain the new technologies to consumers. Indeed, a number of recent developments suggest the energy revolution is already taking shape. In recent months, numerous spectacular future-oriented projects have been launched:

• In mid-September, the German federal government agreed to the massive expansion of power generation through large offshore windparks.

• Companies like Munich Re, Siemens, Deutsche Bank, E.on and RWE, working together under the name Desertec, want to build giant solar power plants in Africa's Sahara desert to feed the European power grid.

• Carmaker Volkswagen, together with ecologically friendly energy utility Lichtblick, wants to install 100,000 mini power plants directly in consumers' homes. Demand for the system has been strong from day one.

• Car parts maker Bosch acquired solar cell manufacturer Ersol in 2008 and, rumors suggest, is currently working to design a solar-powered car.

• IT giant Cisco is working together with one large European electricity grid provider to create a smart power grid of the future. By mid-2010, the company wants to equip power lines, substations and transformers with information technology.

• Search engine giant Google is also trying to get in on the smart grid action. The US company is developing software to allow consumers to track their electricity usage in real-time over the Internet.

The upheaval these projects have the potential to cause is enormous: Energy and IT markets are drawing closer together and the automobile industry will likely follow soon. A new super sector could change the competitive landscape and create new opportunities for partnerships. It will open up new business opportunities for the beleaguered automobile sector, power and IT companies as well as innovative start-ups, providing vast growth opportunities.

'The Greatest Infrastructure Project of the Decade'

Consumers could also stand to benefit from the transformation of the energy market. The German government estimates that more efficient power supply management could save 10 terawatt-hours (i.e. a billion kWh) of energy a year, which corresponds to the annual consumption of 2.5 million households. Márta Nagy-Rotherngass, head of the European Commission's Information and Communication Technologies for Sustainable Growth unit, says the modernization of the energy grid is a "win win situation" for everyone.

Industry experts are urging Germany to spearhead this future market and to try to create an export success story with the technologies that are being tested. E-Energy expert Karg, who introduced the project late last month at a conference in Washington, said the Americans were keen to work together intensively with German companies on the modernization of the power grid.

But there is plenty of competition: The International Energy Agency expects to see investments of several billion dollars worldwide by 2030 in projects to generate electricity, manage consumption and modernize power grids. "The change in energy will be the greatest infrastructure project of the next decade," said Christian Feisst, head of business development at Cisco's SmartGrid subsidiary.

In China there is a huge need for a smart electricity grid and the government is working hard to lay the technological foundations for it. The Americans are also investing heavily in future-oriented projects. Of the $39 billion that President Barack Obama has made available in his economic stimulus package for the promotion of green energies, more than $4 billion is expected to flow into the energy market. Dozens of US startups are producing hardware and software to enable consumers to monitor energy usage in real time, or to automatically regulate it.