Session III - The energy world of tomorrow: smart, innovative and competitive

Keynote Speech

In his inaugural speech as incoming EURELECTRIC President, António Mexia, CEO of EDP, outlined five strategic priority topics that will underpin his two-year Presidency: electrification, market design, decarbonisation, retail and DSOs. He paid tribute to outgoing President Johannes Teyssen, CEO of E.ON SE, for his leadership and guidance over the past years and for having created transversal teams at EURELECTRIC that brought a “systemic sector view on important topics such as capacity markets or downstream activities”. He vowed to build upon this “outstanding work” alongside Vice Presidents Jean-Bernard Lévy and Alistair Phillips-Davies, “two distinguished leaders in our industry”, coupled with the “invaluable experience of Secretary General Hans ten Berge and his staff at EURELECTRIC”.

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Session III Panel Debates

The session was structured in three separate panels and co-chaired and moderated by Wytse Kaastra, Utilities Managing Director at Accenture and Hans ten Berge, Secretary General of EURELECTRIC. The panels focused on the energy world of tomorrow and the impact on different elements of the value chain. How closely will wholesale markets and new customer solutions be linked? What will be the future roles of DSOs and TSOs? How will trends in distributed generation and storage impact on solutions for the future?

Wholesale Markets and New Customer Solutions: Working together or going Separate ways?

Oliver Stahl, Managing Director Europe at EnerNOC, focused on the increasing participation of demand in electricity markets. “Demand response has always been there but now we are doing it differently”, he said. He drew a parallel with other sectors that are also under transformation due to the rise of peer-to-peer business (e.g. the transport sector seeing the development of Uber) and pointed to a massive trend consisting in consumers increasingly willing to become self-sufficient in their energy use. Given all these changes, he took the view that aggregators are key in providing flexibility, especially for households who generally find it difficult to participate directly in the markets.

Juan Jose Alba Rios, Vice President Regulatory Affairs at Endesa, said that recent developments in how supply and demand participate in markets are a result of policy and regulation, not competition. Talking about decentralised generation, he thought that the pure economic case is not favourable yet, adding, as an example, that “people do not generally want to grow their own food or create their own clothes – why should it be fundamentally different when it comes to energy production?” He concluded by saying that retail markets are overregulated and we should move away from this.

Jan Panek, Head of Retail Markets at the European Commission’s DG Energy, said that regulation and policymakers are there to facilitate the proper functioning of markets. In this respect, he expressed his disbelief that the full automisation of the energy system will ever occur. He then insisted on the importance of flexibility, considering that the sector today is “not only about electrons but also other elements like flexibility” - and the demand side can provide such flexibility.

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Grid Responses to Distributed Energy: What role for DSOs? What role for TSOs?

More and more generation will move to local grids, leading to an increasing role for DSOs, stated Peder Andreasen, Member of the Board of ENTSO-E, in his opening statements. He argued in favour of much more cooperation between TSOs and DSOs to ensure system planning, operation, market services and data exchange, and insisted that “both DSOs and TSOs will now need to have access to much more developed markets (e.g. for flexibility)”.

The model of DSOs as active system operators and market facilitators seems to be the most suitable in the view of Marguerite Sayers, Managing Director of ESB networks. She emphasised the importance of cooperation between TSOs and DSOs and the fact that “customers are no longer predictable in terms of behaviour”, saying that a lot of people are incentivised to go off-grid but that this is creating an extra cost for those who stay on it. She stressed that shifting to more capacity-based charges would allow for a fairer allocation of costs between customers.

Alberto Pototschnig, Director of ACER, considered that data should be put in the public domain. “Not using the data as a competitive advantage is key. We need to have the data held by a neutral party”, he said. He also expressed a strong concern about mixing natural monopoly tasks with competitive activities: “DSOs should not be a referee and one of the players at the same time”, he stressed. He also underlined that there is still a lot to be done on the retail side, e.g. on switching.

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New Trends in Distributed Generation and Storage: Is Self-Generation a Solution for the Future?

Antonio Coutinho, Member of the Management Board at EDP Commercial, kicked off the debate by highlighting that “customers have never had as much choice as today”, owing to the deployment of empowering technology and new business models. He then stressed that industry executives see a combination of automisation and centralisation as the most likely scenario going forward. To make the change smoothly and fairly, he stressed that “Governments need to remove regulated tariffs as these are one of the biggest elephants in the retail room”. Mr Coutinho then pleaded for cutting red-tape and over-regulation in the emerging downstream market and concluded with the following “simple” statement, “Being simple is a value in itself – let competition deliver that simplicity.”

Oliver Schäfer, President of EPIA (European Photovoltaic Industry Association), surprised the audience by saying that he does not necessarily hope for a scenario in which the utility industry disappears to make room for a fully decentralised energy world. He emphasised the increased predictability of photovoltaic generation, which nevertheless still requires system optimisation – an area in which “utilities have a clear edge”, he noted. He concluded by stating that the photovoltaic industry is looking forward to healthy competition with utilities and that he also sees the broader solar industry (including manufacturers of inverters, for example) as an enabler of new business models to be taken up in partnerships, not competition, with power utilities.

Giulio Volpi, Policy Officer at the European Commission’s DG Energy, started his intervention by saying that “the emerging distributed generation model creates a number of opportunities - as well as challenges - that European utilities need to understand and effectively address in their business strategies”. Mr Volpi then explained that the European Commission is positive about the evolution of national renewable energy support schemes into a direction promoting increased cost-effectiveness and market integration. “Through well designed self-consumption systems, prosumers generate their own electricity while delivering a service to the system and keeping their investment viable.” The combination of distributed generation with energy storage and demand response can provide a new lifeline to utilities, he added. “The onus is on you, the industry, to deliver the kind of systems optimisation that we need,” he said.

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2015 Industry Award

Next Kraftwerke GmbH was named winner of the 2015 EURELECTRIC Industry Award for its far-sighted and innovative initiatives to help further integrate renewable energy sources into the market and use the flexibility potential offered by producers and consumers alike to create “new” balancing market opportunities for both. Accepting the award, Lisann Krautzberger, CEO of Next Kraftwerke’s Austrian subsidiary, thanked EURELECTRIC President Antonio Mexia for having selected Next Kraftwerke for this prestigious prize. She underlined that the “consumer powered energy transition” conference theme was very much at the heart of Next Kraftwerke’s business philosophy and pointed to the crucial role that customers and business can play in redressing the flexibility challenges posed by the growing influx of renewables and distributed energy resources into the grid.

Next Kraftwerke was founded in 2009. It is the operator of the largest virtual power plant (VPP) in Europe and a certified power trader on the EPEX energy exchange’s spot market. Headquartered in Cologne, Germany, Next Kraftwerke is also expanding into other European countries.

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2015 Student Award

For the sixth year running, EURELECTRIC organised a Student Award as an integral part of its conference programme. This year's winner was Killian McKenna, PhD candidate at University College of Dublin, for the best essay entry on the topic “Dinosaurs of the Past or Innovators of the Future? Designing digital strategies to engage domestic customers”. Mr McKenna described electrification as “one of the greatest achievements of the 20th century”. He identified the energy transition as a fundamental challenge to be tackled by both utilities and energy consumers. To make the energy transition a success, “we need a digital infrastructure to enable the data transfer, monitoring, control and interaction between the myriad of different technologies that will make up the future sustainable energy system”, Mr. McKenna said.

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Session IV - Powering Europe ahead

Keynote Speech

Pat O’Doherty, CEO of ESB, presented the work carried out by EURELECTRIC under his leadership as Issue Manager ‘Downstream Market Design’. “Electricity has underpinned the well-being of our societies and economies for decades, and the utility industry wants to keep its role as engine for growth and prosperity in the future,” he stressed in his opening remarks. He went on to ‘dissect’ the macro-trends across policy, technology and evolving customer needs which are influencing the electricity business, and described the steps that are being taken to find the most appropriate answers. Several challenges remain, he said, such as “finding ways to de-confuse customers by simplifying complexity of energy markets for them”, or “making the energy transition work to the benefit of all consumers instead of only the few ones who can afford to invest in new technologies and services.” To this end, Mr O’Doherty outlined a market framework which makes the provision of new, innovative services simpler, cheaper and fairer. “The framework builds, on the one hand, on Active System Management and on the other, it hinges upon fierce competition among competitive actors - established and new - who compete for customer relationships on a level-playing field.”

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Session IV Panel Debate

Moderating the final panel, Monika Hoegen, journalist, questioned her panellists on the main challenges, obstacles, risks as well as opportunities in the future “customer-centric” world.

Wolfgang Anzengruber, CEO of Verbund, underlined the profound shift that energy utilities are going through. Moving away from simple commodity provision, utilities must become service providers, supporting self-generation and providing information to the consumer. This, as such, is a deep cultural change for established companies. In terms of regulatory environment in the EU, he regretted the existence of too many subsidies, the over-regulation of the sector and the non-achievement of the EU energy market objective, in spite of policy targets and self-imposed deadlines in Brussels.

Magnus Hall, President and CEO of Vattenfall, said that his company has never been a dinosaur, being on the contrary generally at the forefront of development. 90% of generation in Sweden is equally split between nuclear and hydro, with the remainder being mostly made up of other RES. Outside Sweden, Vattenfall is much more fossil-based but the process of decarbonisation is now clearly under way, even if it might have important societal impacts. As for the objective of the internal electricity market, Mr Hall said that it would be reached gradually, without any ‘big bang’ or specific target year, underlining that it is indeed a long process.

Dalius Misiunas, Chairman of the Board and CEO of Lietuvos Energija, depicted a different reality for the Baltic region, which is still heavily dependent on Russian energy imports due to a lack of interconnection to the EU via Poland and Sweden. In order to develop the necessary interconnections and have an effective regulation of networks at EU level, Mr Misiunas saw the necessity of developing a common EU approach - and maybe even a single regulator to replace the current ACER, which at the moment is just an EU agency with no real powers.

For Walter Boltz, Executive Director at E-Control, noted that there are several different types of customers – and those that are interested in taking an active part in the market are a minority. He concurred with EURELECTRIC’s downstream report in saying that the customers going off-grid will be subsidised by those who cannot afford to do it, thus creating a customer divide. In terms of distribution tariffs, Mr Boltz thought that the divide could be corrected by the de-taxing of network users and the introduction of a more sensible structure for network charges, not only volumetric but also based on installed capacity (kW instead of just kWh).

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Closing Session

Keynote Speech

Peter Altmaier, German Federal Minister for Special Affairs & Chief of the Chancellery, underlined the importance of the energy issue for the German government and the effort put into driving an effective energy transition which, he insisted, “can only be a success if it can be implemented as a business case”. A key move in this respect is the integration of renewable into the market to control costs and prices. Minister Altmaier stressed the intention of the German government to develop a policy which leaves room for manoeuvre for conventional generation in co-existence with increasing renewable penetration. The Minister challenged the power sector to adapt and create new value: “the energy transition is the most demanding and most exciting project in Europe and electricity will be ever more important, pluralistic and volatile in the 50 years to come. This offers opportunities for the industry to find solutions and business cases”, he said.

Concluding Remarks

Closing the conference, EURELECTRIC President Antonio Mexia re-iterated the 5 key actions that will form the basis of his Presidency priorities. He compared the power sector to a car, which must replace its wheels while moving: “If we want to succeed in this undertaking, our industry must be in the driving seat, not locked in the trunk”, he said. In this respect, he called for a joint effort from EURELECTRIC members to ensure stronger engagement with external stakeholders and politicians, insisting on the need to stand “united as a sector” in order to continue to create value for our customers in a world where “electricity is key both to people and companies”.