SESSION III: ENHANCING THE VALUE OF THE INTELLIGENT GRID
Accenture-EURELECTRIC video on electricity grids
Markus MERKEL, Senior Advisor to the EWE Board of Management, focused his presentation on the “DSO toolbox.” “To ensure the smart transition, we need to enhance the DSO toolbox,” he said. He considered that “an upgrade of distribution grids would be needed if they were to integrate 100% renewables.” This objective can be reached, he said, giving the example of Germany, where close to 100% (94% renewables are today connected to the distribution grid). Mr Merkel concluded by highlighting a number of grid projects that are being developed in Germany in the areas of flexibility, mini-grids and renewables’ integration.
Andy BURGESS, Ofgem, presented the regulators’ perspective on how to incentivise innovation for DSOs and the entire energy system. “Innovation is not just about technology but also about finding new ways of doing things, bringing benefits to consumers and users,” he stressed. For example, “in the area of smart grids, TSOs and DSOs need to cooperate and exchange information regarding the challenges they face, including improved coordinated planning,” he said.
SESSION III: Panel Debate
Session III moderator, Pat O’DOHERTY, CEO of ESB, kicked off the panel discussions by saying that in the new digital power system DSOs face a number of important challenges, storage – ownership and operation - among some of the most controversial. He also touched upon issues of data privacy and living “off-grid” as a real possibility.
Joao TORRES, CEO of EDP Distribuicao and Chairman of EDSO for Smart Grids, elaborated on the issue of ownership for storage. “We need to speak up much more on this as it seems that the ideas in the sector are not yet clear,” he said. “The ownership of storage by DSOs is important for security of supply as well as the stability of the grids.” Mr Torres also mentioned the good work currently underway in the TSO-DSO platform on data management exchange and concluded by saying that he does not believe in smart grids without the help of smart meters.
Laurence CARPANINI, Director Smarter Energy Solutions at EU IBM Corporation, said that new markets participants need to be encouraged to use storage assets. On the issue of data privacy, he said: “It is important to look at customers’ needs. It would, for example, appear that some customers are not too concerned by data privacy. We should thus make our customers become more aware about this important issue,” he said. He concluded by saying that in his view smart meters are not particularly necessary for smart grids, even though DSO representatives disagree.
Gerard REID, Founder and Managing Partner of Alexa Capital, said that for him there are four important “S” in the sector: solar, storage, semiconductor and sulphur. “Electric vehicles are coming our way much quicker than we think and their storage capacity is going to impact business models,” he said. “These business models will be different in every country depending on their design.” Mr Reid stressed that other industries engaged with storage will advocate having a suitable regulatory framework in place to allow for the transport of electricity.
Sean O’DRISCOLL, President of Glen Dimplex, said that living off-grid may be a real possibility in the near future. “The recent entrance of digital players will set up new scenarios for companies to provide electricity to DSO consumers,” he said. “There are many sectors where one can look in the future – currently 40% of primary energy in Europe is used in buildings, and there is much scope for integration of thermal storage in buildings and district heating, for instance .” He explained that demand side management services, frequency response services and price arbitrage are services which should be provided in the future. He concluded by saying that the energy business needs a coordinated all-encompassing system approach that includes TSOs, DSOs, retailers and generators as part of the whole solution. DSOs should facilitate a market where the system should be accessible in real time as this would help with the rapidly increasing storage and with the smartness of grids.
Ari KOPONEN, CEO of Caruna Oy and Vice Chair of EURELECTRIC’s DSO Committee, said that stakeholders in the electricity system should not confront each other but rather work to enhance cooperation between the old and new players. “Traditional players need to bear in mind that the business is to serve the customers,” he said. “They should look for more proactive ways on how to add value for our customers.” DSOs plan investment for many years ahead - the technology installed today may not be very smart in 40 years, but the backbone of the system will still be there. He said that the pricing of DSO grids should therefore go towards more flat tariffs, especially in areas where there are no congestion problems. “Future DSOs will provide reliable connection for the energy system for considerable amount of citizens as well as enable new kinds of services,” he said.
Jorge GONZALEZ, Managing Director at Ormazabal, said that owning smart meters, as is the case in some countries, is very helpful for DSOs. Although smart meters are not a must, they can be used in a positive way. He also noted how much the sector has changed: “Two years ago, at the 2014 Annual Convention of London, we did not mention anything about the new retailers which had emerged in the last year (Airbnb, Uber, etc.),” he said. “It seems that we are talking one way but are acting in another.”
Industry and Innovation Award
The 2016 EURELECTRIC Industry and Innovation Award went to Eologix , a start-up company that has developed an innovative sensor for icing detection on the surface of wind turbine rotor blades. Accepting the Award, Dr. Thomas Schlegl, Managing Director of Eologix said: “It is a great honour for me to accept this award. The EURELECTRIC conference today addresses innovative technologies and solutions and I am proud to share with you an innovative product design that allows for retrofitting existing wind turbines.”
Founded in Graz, Austria in 2014, Eologix supplies flexible, adhesive sensors for monitoring surface conditions of wind turbines' rotor blades. Through precise measurement, downtime can be significantly reduced, up to € 20 000 per year saved, and facility wear avoided. Between 70 000 and 100 000 wind turbines worldwide are affected by icy conditions and are thus potential Eologix customers.
EURELECTRIC requested participating students to develop a video, infographic or animation dedicated to the topic of digitalisation. This year’s Student Award went to Mindaugas Cesnavicius, student at the Kaunas University of Technology (Lithuania) for the best video creation on the topic of digitisation. He thanked the audience for selecting his video, stating that for him, the opportunity for any student to address delegates at a high level conference, such as the EURELECTRIC Conference, was in itself a huge success.
EURELECTRIC Student Award winner's video
SESSION IV: SMARTER POWER MARKETS IN THE DIGITAL AGE
Accenture-EURELECTRIC video on electricity markets
Hando SUTTER, CEO of Eesti Energia, presented the key achievements of the Estonian power market focusing on digitisation and the ongoing rollout of smart meters. “By end 2016, all Estonian consumers will have hourly data about their energy consumption,” he highlighted. Among others, he mentioned the opportunities of smart metering for a more efficient use of distribution networks and for active customer involvement. The collected data allows energy retailers to propose more sophisticated and individualised services enabling customers to manage their consumption more efficiently. He stressed that “as long as the consumer agrees, this data should be available to anyone willing to provide such innovative offers.”
Fereidoon P. SIOSHANSI, President of Menlo Energy Economics, used interesting figures from the US electricity market to discuss how the development of embedded and decentralised generation, as well as storage and energy management and control, is a game changer for power markets. Indeed, “while electricity demand declined in the last five years in the US, net metering grew 500% per annum in average between 2011 and 2015.” This “prosumage” pushes businesses to rethink their strategies and develop new products and services, he noted. Among others, he mentioned the development of solar leasing and peer-to-peer trading as interesting business strategies appearing in the US. He highlighted the need to tackle the issue of free-riding on the distribution network.
SESSION IV: Panel Debate
Session IV moderator, Juan José ALBA RIOS, Chair of EURELECTRIC Markets Committee and Vice-President, Regulatory Affairs Endesa, focused the panel discussions on European power markets in the digital age: Will digitisation allow for different ways of arranging current trading? Will wholesale trading be replaced with peer-to-peer transactions? How active will small customers be? What about aggregators and the role of suppliers? More importantly, will the wholesale price continue to be a meaningful economic signal for dispatching or for investments in a renewables-focused world?
Helen STEINIGER, dealing with Communications & Research at Next Kraftwerke, explained that her company – winner of the 2015 EURELECTRIC Industry Award and operator of the biggest virtual power plant in Europe - is using the flexibility potential offered by producers and consumers alike to create “new” balancing market opportunities for both. She also highlighted the need to “increase incentives to switch to smart grids as well as the need for wholesale prices to adequately reflect scarcity situations on the grid”.
Ireneusz ŁAZOR, Member of the Europex Board and President of the Management Board of TGE, highlighted that wholesale market trading and current power exchanges platforms will remain necessary in the future. However, with the development of embedded and decentralised generation, he recognised that “local power exchanges will most probably develop in regions with a high share of embedded generation to enable peer-to-peer trading between prosumers.”
CEO DEBATE: GOVERNANCE AND POLITICS, OUT OF SYNC WITH A FAST CHANGING WORLD
Moderating the final panel debate, Alistair PHILLIPS-DAVIES, Vice-President of EURELECTRIC and CEO of SSE, questioned participants on how a European governance framework can be developed despite the existence of different national systems and ambitions. He raised questions about the massive disruptions in the utility business and their potential impact on the sector, and about how regulation could underpin these evolutions rather than hamper them. Where must the political focus be channelled as a first priority - and, given the rapid pace of technological and market developments, are governments out of sync with this fast changing world?
Dalius MISIUNAS, CEO of Lietuvos Energija and President of NLEA, underlined that there are still individual interests despite the objective of developing a common EU market. “In the Baltic region, we have developed a common energy market which is successful, but we still have different positions on interconnections, ETS or trading rules with third parties,” he said. Mr. Misiunas highlighted that for a well-functioning single market, what is needed is infrastructure, market platforms and common rules. On this last point, he added “we are lagging behind with individual approaches on capacity mechanisms or renewables support schemes. If we do not surpass these obstacles and move on, it will be difficult to talk about a common market ever.” On the sector’s evolution, he stressed that companies need flexibility to interact with customers. Less regulation is needed to be more flexible and to develop disruptive technological innovations.
Pavel CYRANI, Member of the Board and Chief Strategy Officer, CEZ a.s., expressed the view that “the European Commission makes many detailed proposals that subsequently result in the proliferation of different national measures.” He mentioned that the EU might also be putting too much focus on the wrong targets: energy efficiency, renewables, efficiency in buildings or smart metering, which result in local fragmentation and impair the functioning of the EU market. In this respect, a strong EU ETS is a precondition to unite Europe as it an EU-wide, technology-neutral tool. Strengthening the EU ETS is therefore needed to avoid having more and more national measures that do not lead to the reduction of CO2 emissions. Moreover, Mr. Cyrani thought “important to use the revenues from auctioning for investments in the sector rather than for financing public policies.”
Johannes MAYER, Head of Regulation E-Control, noted that “the first energy package was general, the second was precise and the third was more detailed, but even so, there is still a need to integrate the EU Member States further.” The role of DSOs and TSOs will be important to facilitate new services. He went on to say that “the challenges lying ahead are discussed from a wrong angle as we are looking too much at system stability or data management while there is a real potential to harmonise transactions across borders and market participants should be allowed to move more freely and provide services across borders.”
Stephen WOODHOUSE, Director of Pöyry Management Consulting, noted that the major issue for the electricity sector is not technology or cost. The real issue is overregulation, which prevents change from happening. “Some utilities have already embraced the future and are much more than simple asset owners, who think of customers as a source of income,” he said. Customers, in the new business model, must be on board at all times. He went on to say that “the absolute value of energy does not matter as much because in relative terms energy is cheap. What really matters is having higher energy prices than your competitors.” With a binding climate change agreement, the global commitment could mean that there would be no regional emission trading markets driving energy prices higher in certain regions, which would increase investors’ certainty, he concluded.
In his closing remarks, António MEXIA, President of EURELECTRIC and CEO of EDP, pointed to how the power sector has evolved in the past years. It is today much more open to debate and controversy than ever before. “The frontier between the power sector and other sectors is blurred and this is excellent news as we can learn from each other,” he said.
He underlined that the role of DSOs is fundamental for the decentralised future. Concerning market design, although it was initially mostly a wholesale issue, it now also concerns retail. The economics of the system, as well as the relations with customers have fundamentally changed. He reiterated that the market must be respected and that too much standardisation, such as standardisation of bills, is dangerous. He added that the utility sector was the biggest loser after the financial crisis and it is crucial not to create a new environment which will trigger stranded costs and assets again. “The speed of change is extremely fast, and innovation and technology will always surprise us, he said. Spread the word that we are in the middle of a revolution, and that we need to be revolutionary,” he concluded.