Powering industry 4.0

Industry 4.0 has become the buzzword of late. Interestingly, however, it was way back in 2011 that the German federal government announced ‘Industrie 4.0’ as one of the key initiatives under its High-Tech Strategy 2020. In chronological terms, the first industrial revolution took place in late 18th century with the advent of steam engines. Then, in late 19th century, it was time for the second industrial revolution with the introduction of assembly lines and mass-production techniques. The third industrial revolution pertains to introduction of electronics and ICT in manufacturing in the 1970s. Industry 4.0 alludes to the fourth industrial revolution based on cyber-physical systems, Internet of Things, machine-to-machine communication, big data & analytics, augmented reality, block-chain, and smart manufacturing. It promises, as per certain sources, to increase productivity by 50% with 50% reduction in the resources required. Industry 4.0 is said to be a fundamental shift from ‘centralised’ to ‘decentralised’ manufacturing, focussing on highly specialised—and at times, ‘on-demand’ customisation—and low-volume production involving rapid prototyping. And just like the previous three industrial revolutions, this too would have close linkages with energy.

As per the International Energy Agency, the industrial sector accounted for 42% of the world electricity consumption in 2015. Considering that enhanced efficiencies are the cornerstone of Industry 4.0, there would be renewed emphasis on moving towards higher levels of energy efficiency in industrial processes as well. This, and far greater reliance on digitalisation, is likely to have bearing on long-term energy demand projections that presently do consider higher efficiency levels, albeit in a more conventional industrial scenario.

Smaller, decentralised manufacturing facilities—as opposed to the present-day necessity of having large and centralised ones to achieve economies of scale—will have implications on the quanta of energy consumed as also on the way it is consumed. And this is where the distributed and decentralised characteristics of renewable energy could be utilised most optimally. Smart factories may very well start coming up in hitherto under-developed places, energised by renewables-based micro-grids. Moreover, the resultant digital technologies could also enable seamless integration of vast amount of variable renewable energy in to grids. Likewise, block-chain may very well alter the way transactions and trading of energy takes place securely. Advanced ICT tools could make energy optimisation possible by converging energy demand and market prices in real time, at both, macro and micro levels. The building blocks of both, Industry 4.0 and energy transition, are mutually complementary. Both rely on innovative technological choices, decentralised approach, as well as disruptive business models. And from the developing countries’ perspective, both give opportunities for transformative progression, obviating the need for investing in assets that get obsolete fast.

This also means a paradigm shift in policy formulation and the way businesses are conducted today, in terms of approach as well as speed of implementation. While the businesses cannot afford to stick to conventional thought processes, regulatory regimes too would need to take cognizance of fast-changing ground realities and not only adapt to them in time but help those new-age businesses grow. e-Commerce and ride-hailing services like Uber are prime examples of inability of archaic regulations in dealing equitably with technology-driven business models. Indeed, adaptation at every level would be the key as depending upon consumers’ requirements; industry may remain in a state of perpetual flux. That implies that energy services too will have to be flexible and nimble. The self-generation of clean energy would be a natural fit in these conditions.

To really draw full benefits from such developments, it is imperative to create a nurturing environment that provides freedom to experiment, to innovate technologically and commercially. Regulatory oversight in such a scenario needs to be more of a guiding framework balancing out different interests. A holistic and advance strategic planning would be the key impetus for both, Industry 4.0 and energy transition.