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Renewable energy, unsettled wholesale markets and decentralized production and consumption, pose challenges to Utilities
RENEWABLES CONTINUE TO GROW AND ITS PRICES ARE FALLING… BUT THERE IS STILL SOME WAY TO GO.
With a global focus on limiting greenhouse gas emissions, there has been a huge focus on investments in renewable energy. Its prices have continued to fall, but there is scope for more reduction.
COP21 in Paris highlighted the global focus on limiting the rise of our planet’s temperature to 2 degrees or less, by reducing greenhouse gas emissions. This has led to a large focus on renewable energy.
Europe has been at the forefront of the renewables boom, accounting for a quarter of the world’s total investment in it, despite having only 7% of the global population.
And during the past 12 months, the price of renewable energy has continued to fall, including both wind and solar. But subsidies have fuelled this fall in prices – and ultimately, the consumer ends up financing these subsidies.
- There has to be additional efforts in R&D and industrialization to ensure further fall in renewable prices.
- The current system of subsidies has to be reformed, especially for maturing forms of renewable energy. This will ensure more meaningful prices for Utilities.
INVESTMENT IN SMART GRIDS IS FAST BECOMING AN IMPERATIVE.
An increasing share of renewables in the grid, and electricity being generated closer to local demand, are driving modernization of grids.
The growing proportion of renewables in the network has meant electricity supply fluctuations. Utilities will need to look at battery storage technologies to mitigate this. Prices of lithium ion batteries have decreased in the recent past and will continue to do so in the near future.
Another way to balance the supply and demand is to look at Demand Response. By using customer information through deployment of smart meters and tools like time-of-use tariffs, demand can be regulated when supply is erratic. Smart meters contain rich information on consumer usage, which can then be used to encourage them to match demand to supply. The Distribution System Operators (DSOs) should take advantage of this and try to become full data service providers.
- Regulators should encourage more investments on distribution grids – including battery storage technologies, smart metering and optimal use of customer usage data.
- Evolve the DSO role to a data service provider one. This becomes critical for balancing the demand and supply sides
- Accelerate demand response mechanisms
WITH THE WHOLESALE MARKETS REMAINING UNSETTLED, UTILITIES NEED TO ACCELERATE THEIR TRANSFORMATION
The Utilities market is undergoing fundamental changes. To cope, players must take control of their own transformation.
The priority given to renewables on the electricity grid has resulted in closures of gas and coal plants, which operate mainly to meet peak demand and for too little time to be profitable. This threatens security of energy supply. UK’s Brexit also puts pressure on British security of supply, with investments being delayed.
Also, the growth in renewables combined with low oil and gas prices has meant a fall in wholesale electricity market prices. With Utilities players exposed to these low prices, their financial situation has deteriorated.
These fundamental changes in the market – including decentralization of production, an increase in renewables and the resulting wholesale price decreases, and even the entry of new players, has meant that Utilities need to adapt, and adapt fast.
- Accelerate their digital transformation journey leading to
- Improved operational processes and client relationships
- Significant cost reductions in the long run
- Becoming more innovative and agile