There can be little doubt that the UK energy market is undergoing considerable change, supporting and underpinning a transition to a lower-carbon economy. While it’s certainly true to say that, historically, our industry has often been perceived as part of the problem rather than part of the solution, it is equally true this situation is changing.
To drive positive change in our sector, I believe a number of new models need to be implemented, often requiring new partnerships to leverage the huge market opportunities ahead of us.
At varying speeds, we are seeing a move away from thermal assets to more flexible and renewable generation. For example, here in the UK, Engie closed its last coal powered plant in 2016 and has focused more on low-carbon, flexible assets such as renewables and our 2GW pumped storage station in North Wales.
Between now and 2050 our Group we will be switching our natural gas operations to biogas and renewable hydrogen. We are also developing hydrogen production units, converting electricity produced by renewable sources into gas to power fuel cell vehicles.
In parallel we are reducing demand by improving the efficiency of the assets we manage, alongside initiatives such as switching our own fleet, and those of our clients, to electric vehicles. Following the acquisition of EV Box we now manage over 40,000 vehicle charging stations across Western Europe.
Energy as a service
My second conviction is that we are at a point where nobody wants to buy energy by the kWh anymore. Instead, what they want to buy is an outcome like their home or office heated to a certain temperature. It is therefore “usage” that becomes more of a differentiator than volume. If this is the case, we need to align ourselves to our customers’ current and future needs. There is now more value in energy reduction than in supplying energy – we can unlock greater value for a customer by managing the whole process of operating built assets. We foresee that by 2020 close to 50 per cent of our UK revenues will come from business which combines energy and service elements together.
I’m pleased to say that many of our large B2B customers agree. A good example is our work with a major water company. Beyond supplying them with renewable energy, we also provide a range of energy services which will provide them with £3 million savings on energy efficiency over the contract duration.
Energy will be embedded in buildings and places
Rapid evolution of technology is presenting many opportunities for embedded energy. Buildings themselves will more commonly include solar photovoltaic (PV), energy consumption in buildings will be reduced due to energy efficiency standards as well as smart optimisation, and more energy will be produced locally and stored in batteries.
Energy will also become a strategic component in overall place-making and new green mobility solutions will require new energy infrastructure incorporated within the fabric of cities.
In the home, PV will help comply with building regulations, batteries will reduce grid connection costs in certain regions, and connected devices will become standard in the modern home. We are currently piloting several different household battery and smart control technologies, which enable excess solar energy to be stored and drawn down when needed.
It is this holistic approach that will allow us to provide a more integrated solution.
Driven by data
In homes there is a race to master the potential of connected devices and the internet of things (IoT). It started with smart meters and is now about who controls the box. Energy companies now find themselves competing with tech companies, but this is likely to be about more than just the technology. It is about forecasting energy usage and generating value, it is about peer to peer trading and software platforms such as blockchain.
As a Group we are investing 1.5 billion euros in digital technologies which will benefit our customers, as part of a three-year programme which began in 2016.
We are certainly experiencing exciting times. The revolution and re-definition of boundaries, as we move from being a supply-driven business to providing customer-driven solutions, will transform the world for the better. And, I hope, see energy companies once again as the solution and not just part of the problem.
Wilfrid Petrie will be speaking at Utility Week Congress, held on 9 and 10 October in Birmingham