A report by consulting firm Capgemini has called for utilities to quickly adapt their business models and accelerate digital transformation efforts focused on productivity, agility and innovation, in order to grow profitable revenue streams.
The report pointed out that, during the past 12 months, the costs of renewable energy has continued to fall. Onshore wind costs are becoming competitive while offshore wind costs have fallen for the first time, reaching a lower threshold of €87/MWh. Additionally, a fall in the cost of photovoltaic solar installations is continuing, with a further drop of 20 per cent expected in the next three years.
The growth in renewables in a market experiencing overcapacity, combined with the low oil and gas prices, has resulted in a fall in electricity wholesale market prices, which reached a low point at the beginning of 2016 of €22/MWh compared with €40/MWh on average in 2015.
Capgemini global head of energy and utilities sector Perry Stoneman said: “The rhythm of development of renewable energy has long been dictated by regional objectives, rather than where the investment was most needed to service infrastructure and consumers.
“We now need to maximise advances in technology to establish competitive storage, using batteries, for example, that can optimise the use of energy that is being produced.
“It is essential that utilities adapt their business models to the fundamental changes in the markets, including decentralisation of production, an increase in renewables, new requests from consumers (in particular energy services), and the arrival of new players.
“They must simplify their organisation and accelerate digital transformation, which will enable them to make productivity gains, grow profitable revenue streams, and become more innovative and agile.”
The report also suggested that networks must invest in smart grids, and balance production, which has become more uncertain due to the growing proportion of renewables, with consumption, which is variable by nature.
One way of achieving supply-demand balance is to make consumption more flexible, with price signals reflecting the low production costs when renewables produce a large amount of electricity.
“Distribution network managers have an increasingly central role in market operations,” Stoneham said. “They face high activity with the connection of renewable plants, the deployment of smart meters, and the exploitation of the large volume of data coming from these meters.
“This data, which contains interesting information on consumer behaviours, could, under certain conditions, be made available to consumers themselves as well as industry players: distributors would then become data suppliers too.”