The world is undergoing a transformation in how it gets its power. In Germany, we have a word for it: Energiewende. It means energy turning point. (We use the same word Wende to describe the fall of the Berlin Wall and all the dramatic changes that came with it.)

In this transformation, we are witnessing the decarbonization of power consumption, thanks to the large-scale deployment of renewable energy sources such as wind and solar. Earlier this year, the European Union announced that its climate and renewable energy targets—a 20% cut in greenhouse gas emissions, 20% of EU energy from renewable sources, and a 20% improvement in energy efficiency—are actually on track to realization by the year 2020.

At the same time, we’re also seeing the decentralization of power production. For example, in Germany, more than 1.5 million households supply their own electricity, either for self-consumption or directly to the central grid. In 2015, around 40% of new PV installations were accompanied by a battery. In the nation’s rural areas, more than 180 bioenergy villages have taken responsibility for their own electricity generation. Similarly, in cities, energy and housing associations are installing PV panels on multi-unit buildings, and the German ministry of economics and energy estimates around 3.8 million apartments could be supplied with PV panels placed on their rooftops. Industry players have realized the marketing and cost-saving potential, too: automaker BMW powers the plant where it manufactures the i3 and i8 electric vehicles with a 10 MW wind park, and discount retailer Aldi Süd has installed photovoltaic panels on 1,000 supermarkets. In 2016,renewable, intermittent energy sources contributed more than 30% to gross electricity generation.

Besides the environmental benefits, there are huge implications for the manufacturing sector and for national competitiveness. Countries that manage to transition effectively to low-carbon generation technologies will be home to competitive energy solutions and manufacturing firms that are more resilient to energy shocks and weather disruptions.

That’s why so many countries are moving ahead with ambitious plans in this sector. In 2016, China installed 34 gigawatts (GW) of PV-panel-driven renewable power capacity. In January, the country’s energy agency announced that it will invest $361 billion to shift from smog-generating coal power to renewables. India plans to install 100 GW by 2022, up from 4.9 GW of new installations in 2016. The United Arab Emirates is investing $163 billion in renewable energy projects, with a target of meeting nearly half of its power needs with renewables by 2050. Morocco aims to do so by 2030. In two chief regions in Australia, rooftop PV penetration has already reached 30 percent. Around the world in 2015, additions of renewable power capacity outpaced other forms of electricity generation—coal, gas, oil, and nuclear—combined.

While regulatory policy, implementation, and rollout may differ from country to country, decentralization typically encompasses three phases. Each brings its own challenges.

Countries in the first phase, which we call “Energiewende 1.0,” focus on promoting renewable energies, such as solar, wind, biomass, or geothermal energy. Regulatory incentives include instruments like requiring utilities to source a small portion of their generation from renewable sources. Countries with a strong manufacturing base, such as China or Germany, may have a secondary objective: establishing a domestic manufacturing base for the respective renewable technology.

During this first phase of development, the total contribution of renewable power generation hovers below critical thresholds. The electricity infrastructure can cope with the additional, intermittent strain on the distribution network. Supply and demand remain largely unaffected.

Some countries such as Denmark and Germany have already entered the second phase, “Energiewende 2.0,” which is characterized by a large share of intermittent, weather-dependent power sources. In Germany, we have a word for the cloudiest days when the wind is not blowing very hard: Dunkelflaute. It means “dark doldrums.” Dealing with days like these — when both wind and solar power generation is very low – must be part of the equation as regulators and industry introduce more renewable power into a system originally designed for more flexible electric power generators such as gas-fired plants.

During this second phase, grid operators frequently have to intervene to keep the electricity grid in balance. For example, interventions in Germany’s largest transmission grid operated by private company TenneT increased from fewer than 10 interventions per year in 2003 to almost 1,400 interventions in 2015.

In the third phase, which is yet to come for any country, we predict that the electricity supply industry will be forced to leave its roots as a public infrastructure service and become truly private businesses, with customized solutions for each producer and consumer. This seems like the natural end-game for the broader decentralization patterns we’re observing. Thus markets entering “Energiewende 3.0” will have to answer two major questions. Who will bear the costs of expensive high-voltage transmission infrastructure if most supply is organized on a local or individual level? And how can governments steer the transition from a public to a private infrastructure, in particular the co-existence of both a central network and decentralized solutions?

Many governments still hesitate to foster the transition to decentralized power generation structures. It’s not easy, as the financial turmoil of major European power companies demonstrates. But electric utilities have been learning to adapt to these new realities of decentralized supply. They’re beginning to offer bundled services and package solutions instead of simply selling electrons by the kilowatt hour. We believe it is only a matter of time until flat rates for electricity become the standard.

Private-sector solutions are stepping up to meet market needs, too. So-called aggregators are now bundling the energy input of individual households to sell on wholesale markets. And demand-response providers identify companies that can temporarily switch off part of their electricity consumption—increasing the elasticity of demand to keep the grid balanced.

ReSTORE, the European market leader in demand response, has already attracted more than 125 large industrial and commercial consumers, including heavyweights such as petrochemical company Total, steel producer ArcelorMittal, and cement manufacturer Holcim. Compensation paid to these manufacturers can amount to more than 100,000 euros per year per megawatt of avoided energy consumption.

Countries in the developing world that have historically struggled to electrify their rural areas may be able to jump ahead to the third phase more quickly. In these markets, entrepreneurs recognize opportunities in the absence of public sector solutions. For example, Bangladeshi startup SOLshare establishes peer-to-peer microgrids that deliver solar power to households and businesses. That enables people to become solar entrepreneurs, because they can trade excess electricity for profit.

Whether via community initiative, entrepreneurial disruption, or traditional supplier adaptation, the global energy transformation is underway. Inevitably, it will affect national and industry competitiveness. Manufacturers and businesses have a large stake in managing this transition effectively, whether they’re driving the changes—or simply benefitting from the flexible, decentralized system.