THE ENERGY INDUSTRY TIMES - JULY 2017
Final Word 16
Dancing to a new tune
The European electricity sector
seems to be at a turning point.
Having had to deal with issues
such as low power prices, policy uncertainty,
the rise of renewables and
subsequent write-offs of generating
assets, to poor public image mainly
due to high levels of mistrust, Europe’s
utilities now seem ready to
embrace a new energy future.
As portfolios stabilise and severe
cost reduction measures take effect,
Europe’s energy companies finally see
the rapidly changing energy landscape
as more of an opportunity than a threat.
This was certainly the general sentiment
at Eurelectric’s Annual Convention
in Estoril, Portugal.
Speaking on the sidelines of the
conference, Serge Colle, Partner, EY,
said: “A lot of utilities now really have
embraced the energy revolution and
I’m starting to see that a lot of the
thinking as they strategize, is that they
are stretching their thinking beyond
today’s uncertainty. They are projecting
themselves in to a world where
there is no debate about whether there
will be more batteries or electric vehicles,
or whatever, but are proactively
sorting out what their purpose
will be in that space.”
Indeed the discussion around the
future role of utilities was a central
theme of the conference.
Over the last year or so there has been
a noticeable rise in the importance of
distribution companies (discos) with
regards to their role in an electricity
market that will be largely based on
renewables in a much more distributed
system where consumers are an
active part of the market.
With the network set to play a key
role in implementing the new energy
economy, there has been a lot of discussion
of what EY calls the “new
fields of play”. Paul Micaleff, Director,
Global Power & Utilities – Advisory
Service, EY, explained: “There are a
lot of conversations around things like
electric vehicle infrastructure and the
network as a platform and all of these
themes pose an interesting question:
who is best placed to engage the
consumer? Is it the network company,
the retailer or a combination of both?
And will we see a fight for survival
between them?”
While it could be argued that the
market is currently set up for retailers
to lead the debate and take the lion’s
share of the money to be made, the
possibilities for discos cannot be
under-played.
Discos own the networks and have
a key mandate to ensure network stability.
This, says Colle, gives them a
very strong argument. “It means they
can run applications for the sake of
network stability just as well as
someone else who thinks they can
make money on the same basis.”
There are undeniably significant
opportunities for discos in the new
energy world. Francesco Starace,
CEO of Enel and incoming President
of Eurelectric said: “Today the distribution
sector has the potential to become
an incredible, very hot area of
technology improvement in transformation
for the benefit of the whole
system. Distribution has always been
at the back of any energy debate in
the past. It’s time to put it at the front
because that’s where most of the action
will happen in the coming
years… so Eurelectric will try to put
a lot more attention to the DSO part
of the sector.”
Accenture launched a report at the
conference entitled ‘Power Play: New
Platform Models of Power Distribution
in the Future Energy system’. The
report is set against a background of
an increasingly distributed energy
system, where DSOs are seen as
“Distribution Platform Optimizers”
that perform distinct roles in new
ways.
Commenting on their role versus
that of the retailer, Sander van Ginkel,
Managing Director Accenture Strategy
Utilities said: “Everyone understands
what needs to be done but the
controversy is who does what? There
are three things the DSOs need to do
but in a different way. The first two are
asset management and active systems
management. The controversy surrounds
the third role – neutral market
facilitation.”
He explained that it is critical that
there are platforms to connect “devices”
such as solar, wind, storage,
electric vehicles and demand response
solutions, etc. These each have an IP
address so they can be seen and controlled
via the platform. The platforms
can also be used for carrying services,
e.g., an app for energy control in a
home, or charging EVs. Certainly, the
growth in value creation from platforms
as a result of increasing electrification
presents a real opportunity for
the discos.
“I think the DSO can play a good
role in these platforms because these
platforms need to be neutral,” said
van Ginkel. “It is better that the entity
that operates the platform is not
actively participating in the market
themselves. They are the referee but
not the player on the soccer field. So
we argue that the neutrality of the guy
that operates the platform and facilitates
the market is critically important.
He can do this by making sure
the platform is open to all service
providers. Naturally, there is controversy,
since the platform is an excellent
instrument to gain direct control
and get into a monopoly position.”
Knud Pedersen, VP Dong Energy,
echoed this thinking, saying that the
DSO “has a huge role” to play. “The
platform should be available to serve
and connect customers, which we
don’t even yet know about today. The
DSO thinking therefore has to be
developed in a way to create value for
all these needs… In my mind the
retailer is a customer of the DSO; so
we will have to provide them with the
right service so that they can deliver
a full package of services to their
customers.”
Acknowledging the changing times,
utilities are now putting the customer
at the heart of their new strategies. In
his opening keynote speech at the
conference António Mexia, outgoing
President of Eurelectric and CEO of
Energias de Portugal (EDP), listed
empowering customers as one of three
key things at the heart Eurelectric’s
focus.
“The customer, today, is at the centre
of the circle; and recognising this is
mandatory. Empowering customers
is not saying anything new but we need
to walk the talk and be consistent with
this new reality. We need to put the
customer at the centre of the debate;
customers want affordable, sustainable
and secure supply of electricity
as well as innovative services… They
want to become active actors in the
energy transition.”
While Starace noted the importance
of customers – whether they are individuals,
businesses or industrial entities
– he pointed out that energy
companies must carefully manage
their transformation.
He said the transition can be a cost
if not properly managed. “We can
continue to extract value from assets…
We should not just throw away
things because they belong to a certain
technology that we think is at the end.
It might be at the end but it could be
a longer end than you think.”
Giving examples, Starace said. “If
you look at the distribution grid, if we
fully digitise it we increase its value
by a big percentage. All of a sudden
your asset is worth more and easier to
run. In a power plant, you can install
and connect sensors at low cost to
improve how you run and maintain
the plant.”
It is a strategy that is rapidly gaining
momentum. Ganesh Bell, Chief Digital
Officer, Power Digital Solutions,
GE Power, said: “Over the last two
years, there has been an increased
awareness among our customers and
a belief that if you collect all the data
that’s available and aggregate it and
gain insights, you will find things that
will allow you to operate and maintain
differently, perform differently and
even compete differently. More than
50-plus customers have now started
on this journey.”
Energy companies are showing that
they are willing to embrace the use of
technologies such as digitalisation,
robotics and blockchain to help cut
costs and adapt to a new energy reality.
Now they have also accepted that
their role in the future could be very
different than it is today, and that the
transition should be viewed as an opportunity
instead of a threat.
Junior Isles
Cartoon: jemsoar.com