Europe’s electricity markets and therefore the associated business models are largely focused on the way to integrate the pliability services provided by renewable and distributed generation and energy storage assets (Distributed Energy Resources (DERs)). From the liberalized competitive forward, day ahead and intraday markets, to the regulated balancing and congestion markets, all are changing shape supported the influx of DERs and therefore the rise of flexibility markets of the normal participants are feeling the impact, the Transmission Service Operators (TSOs), the Distribution Service Operators, the Utilities and Independent Power Producers (IPPs). The changes also are encouraging new market participants, from aggregators to the developers of latest local exchanges and lots of more.
Energy must be met by renewable energy by 2020. With 17.5 percent 1 of the EU final energy utilization met through renewable energy in 2017, the EU is getting close. Subsidies, however contentious, were the catalyst that enabled renewable energy to scale in terms of installed capacity – scale was the primary great challenge for renewable. Subsidies fuelled the technological development of renewable energy generation resources. This delivered reductions within the cost of energy production, thus driving scale as wind and solar photovoltaic (PV) approached and, in some cases, reach, grid parity. Individual wind turbines have grown to possess 10x capacities over the last 20 years. The typical price for rooftop solar installations in Germany has reduced from just over €4000/kWp in 2008 to only over €1000/kWp in 2018.
Today, the subsidies, related to the deployment of a replacement generation are diminishing – the intervention worked. There are many ongoing technical and price reduction challenges related to renewable energy and therefore the associated intermittency. Optimizing the yield from generation assets and enhancements in energy storage solutions are priorities. There’s however a far greater, systemic and continent-wide challenge for European Renewable Energy – the reinvention of the Electricity System and associated markets.
The European electricity system has been emerging over the last 20 years from an integrated large thermal unit and nuclear-based model to a highly assigned and splintered renewable generation model. Nuclear and thermal units remain operational. However the expansion and replacement have largely been renewable – wind or solar PV. This alteration, including new demand like the electrification of transportation and industry, has fundamental implications for electricity markets, business, and operating models.
If subsidies were key to putting together the size of renewable energy in Europe, information exchange would be key to the technical and commercial success of future markets and business models, given the huge increase within the number and range of DERs. For Energy CIOs across Europe with interest in renewable energy, there'll be an ongoing demand to optimize the performance and reliability of the renewable assets. However, the evolving nature of the electricity markets presents significant opportunities and risks. The rewards for those agile enough to master information exchange and exploit these market changes might be substantial—perhaps through the establishment of the latest digital businesses. The impact of risks related to process failures and data problems in far more information intense electricity system is amplified.