Disrupting energy and production – How

Becoming more energy and raw material efficient is the only way to manage increasing demand within limited resources. That’s no surprise. Challenges arise not only from the physical limitation of resources, but also from our inefficient and wasteful use. That is particularly relevant for manufacturing, as we largely depend upon non-renewable sources of raw material. For energy, technologies to harness renewable sources have become mainstream business in recent years. Hence renewable sources and their efficient use are the two avenues to rethink our energy and material flows. And that is where novel technologies in energy, production, and transportation present opportunities for change.

Pushed by the dilemma of increasing demand and limited supplies, and pulled by emerging technology options, I see strong incentives for us to move towards the decentralisation of energy and material flows. Or rather, the re-localisation of how we produce and consume, to generate and provide what is needed, when it’s needed, where it’s needed. Here are three signals pointing in that direction: one is economic, the second addresses production, the third blends energy and transportation.

Let’s start with the circular economy.

While the idea of recycling resources has been part of the public debate since the advent of the green movement in the 1970s, the concept of the circular economy has received far less attention than it deserves. The basic idea is as simple as this: our traditional thinking about resources is linear – dig it out, transform it, transport it, use it, discard it. Implicitly, that assumes an infinite supply of resources as input, and it accepts an ever-growing output of waste. Even without accounting for the energy cost of transformation and transportation, it is self-evident that this concept is unsustainable.

Hence we must break the linear mould and turn it into a cyclical approach to using resources. That requires a fresh look at the waste we currently discard, to make it the beginning of a new cycle (rather than filling up the landfills). In this view waste becomes a resource; today’s waste becomes the main input for tomorrow’s production. And yes, that approach necessitates a fundamentally different way of designing (and manufacturing) products: design for re-use, for recycling, for disassembling.

To achieve the long-term objective of minimising the use of non-renewable resources, we need to invest in research and develop new technologies, and that won’t happen over night. But a recent McKinsey report summarises a couple of promising examples for moving from theory to practice. At a more fundamental level, the Ellen MacArthur Foundation is chartered to promote the transition towards a circular economy by funding research projects and developing educational programmes. Hence I am optimistic that the circular economy is gradually getting traction.

Second is the much-hyped 3D printing.

The advent of this technology has captivated the imagination of hobbyists and entrepreneurs, as it holds tremendous promise for manufacturing goods locally. And despite some unrealistic expectations, 3D printing has entered mainstream business. Ernest & Young recently published an overview across industries offering a good reality check for how far the technology already evolved, especially in industrial manufacturing.

A little outside that mainstream, the global logistics company DHL published their trend report on 3D Printing and the Future of Supply Chains. DHL review their established business models in the light of novel technologies (including 3D printing and others like robotics, Internet of ThingsUnmanned Aerial Vehicles). Looking for services they could offer to their consumers in the future based on these emerging technologies, DHL do nothing less than rethink the division between production and transportation. Which types of products could be manufactured locally? How would that affect the demand for conventional logistics? Which services could become obsolete? And which new services could become technologically feasible and economically viable? The answers to these kinds of questions are bound to reshape the logistics landscape, potentially uprooting global supply chains as we currently know them.

Third, e-mobility.

And again, DHL sprang a surprise. Operating one of the largest fleets of delivery vans (those boxes-on-wheels that deliver our mail-order purchases, and clog our roads and sidewalks), they looked for emission-free alternatives to the standard vans available on the market. After many of the conventional car manufacturers told them that there’s no market for an electric delivery van, DHL decided to develop that vehicle on their own. Well, they cooperated with a start-up (that ultimately became their subsidiary) to develop StreetScooter, the electric delivery van that meets DHL’s needs in terms of range, endurance, payload, and cost. And in contrast to the predictions of the car manufacturers, the demand for StreetScooter is far bigger than DHL’s own need. Craftsmen and municipalities were amongst the first customers, and the company just announced plans to double its production.

And of course we need to talk about Tesla. Models S, X, and 3 get a lot of attention, not the least for the pressure they put on the established automotive industry by demonstrating that e-mobility is feasible and (reasonably) affordable. Even more interesting is the evolution of Tesla’s mission statement , which now fully embraces the “transition to sustainable energy”, a really far-reaching claim for a motor company. I’d argue that the vehicle is only the most visible piece of a larger puzzle. With PowerWall, Tesla already offer a stationary energy storage that can act as a local energy buffer. And with SolarRoof, they promote private local generation of electricity as well. Taken together, wall, roof, and car deliver a self-sustained energy solution for private households, driving personal mobility and powering home consumption.

The core of this solution is not the automobile; the core is the battery, the energy storage. Tesla’s Gigafactory is a forward-leaning strategy to make batteries more affordable through economies of scale. And Tesla’s confidence in battery technology is outstanding. Only a month ago, they announced to build the world’s biggest battery storage system in South Australia (paired with a wind farm, to boost availability and reliability of green electricity). What is more, they committed to get this system to work within 100 days, or it’s delivered for free. That’s not just a marketing stunt: it’s a very public demonstration of the maturity of battery technology. The strategy is clear: pushing the boundaries of technology, making the technology more affordable, increasing customer confidence. And with this strategy, Tesla is true to its mission, a global pace-maker of the transition to sustainable energy.

For the future

The circular economy, 3D printing, and e-mobility are only three out of many more examples. But they create an impression of the considerable impact individual concepts and ideas, when bundled with a set of emerging technologies, could develop: giving us new ways to manage our energy supply, and to manufacture, deliver and consume goods and products.

One plausible trajectory could be the increase in local manufacturing. Coupled with the growth in renewal energy supply, mainly through local use of wind turbines and solar cells, such re-localisation would transform our current distribution networks. The power grid would only be one out of several backup options, and trucks and freight trains would distribute mainly raw materials, as the transportation of manufactured goods would be increasingly obsolete.

Of course concrete solutions will be tailored to specific circumstances. Not every house hold or village is located in the type of weather conditions that favour electricity generation from wind or sun. And not every product lends itself to local manufacturing. For the foreseeable future, in a case-by-case approach, I’d expect that we’ll use a mix of solutions: local where local is possible, centralised where necessary. Over time, as technologies mature further, we could thus arrive at a re-localisation of energy supply and manufacturing. For our energy supply, the trend toward local supply is already evident. The dynamics for local manufacturing are less obvious, but gaining momentum.

I cannot say when the majority of the population will have migrated to localised production patterns. But I can tell you the indicator that I’ll be looking for: the demise of the 20 ft container. Back in the late 1950s and early 1960s, this standard steel box revolutionised global transport and enabled the global supply chains we know today. Cutting transport time and cost, this simple box embodies the shift from distributing raw material and bulk commodities, to transporting semi-products and manufactured goods.

Today, global container shipping is the battle ground for fierce competition, hence it might seem counterintuitive to think about a possible end of this specific mode of transportation. Still, I believe that when that event occurs, it will signal the advent of another era of production and transportation: when manufacturing is once again near the consumer, and transportation is focused on raw material.


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