The dilemma of digitalization versus energy consumption

“Our preliminary research at the Fraunhofer Institute underlined the fact that there’s little reliable data on the topic of digitalization and energy demand. As a result, we’ve launched an EU Horizon 2020 research project that will explore the impact of new trends on energy demand, including the topic of digitalization,” explains Heike, who is also a senior researcher and project manager at Fraunhofer ISI.

Energy efficiency versus energy demand

“The major risk in digitalization is that it will lead to more energy demand. While research has demonstrated that digitalization can have major benefits in terms of energy efficiency for both households and organizations, it doesn’t necessarily decrease energy demands,” explains Heike.

Streaming video services offer a simple example to understand the potential impact of digitalization on efficiency and demand. Downloading a video is much more energy efficient than manufacturing, selling and purchasing a DVD. However, the ease of use and access created by streaming services has led to a change in behavior. Whereas a household might have watched one DVD several times and only once a week, streaming services make it convenient to download and watch new content every evening. “The accessibility of digitalized services can definitely lead to an increase in use and therefore an increase in energy demand,” adds Heike.

Individual behavior versus regulation

For Heike, the challenge of digitalization and energy demand is two-fold. “We have to consider two major aspects of this issue. First, individual behavior will change as digitalization grows. This can have positive impacts (e.g., mobile apps to facilitate carpooling) or negative ones (e.g., an all digital car might drive itself, increasing the incentive for users to take their car instead of public transportation). The second challenge is regulation. A lot of work needs to be done in terms of policy-making in order to find the right balance between the benefits and disadvantages of increased digitalization.”

In addition, every player from individuals to companies have a variety of perspectives and incentives that govern their energy demands in terms of digitalization. Data centers for example have been a major point of discussion. “Companies have every incentive to build energy efficient data centers as energy demand is a huge cost. However, once a data center is up and running, companies have every incentive to push as much traffic through the data center, thus encouraging energy demand,” adds Heike. Similarly, we can consider how data is billed or taxed. A Netflix user who pays a flat rate has every incentive to stream as much content as possible. If users were to be billed per bit, or data centers taxed per bit, then their incentive to consume would radically change. “This is where regulation and policy-making can play a major role in mitigating the negative impact of digitalization,” concludes Heike.