This time last year we talked about the energy industry being on the cusp of change.
Our general feeling was that the tipping point for new energy had come – and we think events in 2019, such as the rise of climate change protests (for example, Extinction Rebellion) and increasing adoption of Net Zero targets, have shown this to be true.
So, if the pace of change is continuing to accelerate, what stands out for us in 2019?
EV everywhere continues
The moment EVs move from niche market to mass market is rapidly approaching. Many Auto OEMs are introducing new EV models, and prices are dropping as supply chains scale up. But prior to this mass market adoption, in 2019 we have seen fleets become a particularly active part of the market. They can play a leading role in market development and how chargepoint infrastructure developers or operators can generate revenue in the near term, especially in the public domain where the economic attractiveness of investing in EV recharging infrastructure remains challenging without public subsidy.
Value streams for flexibility
2019 has seen the energy storage market continue its rapid ascent, although it’s also been a year of waiting for regulation and policy to give certainty to value streams around flexibility. Incentives have tailed off globally, grid payments, e.g. from ancillary services, are uncertain or not yet in place, and V2G and local distribution service payments are just emerging commercially.
The industry needs stable structures and rules to be in place to enable battery, renewables, and the plethora of demand side response assets, to stack into an investable business case. We've also seen merchant revenue, from wholesale markets, start to become less of an ugly term and begin to attract more interest.
Decarbonisation of heat
Tackling the decarbonisation of heat finally came to the fore in 2019. As a core research area of Delta-EE's, right from 2004, we are hugely excited about this – it’s been the elephant in the room.
The popularity of our European Heat Summit in September spoke volumes about the stronger industry focus on this topic, both from incumbents and new entrants. Several developments stand out for us:
- Gas and oil boiler bans are starting to become reality in the new build sector – even in countries such as Netherlands, the cradle of the European gas industry. This is further opening up the market for heat pumps.
- Hydrogen has gone from being a pipedream to the preferred option for keeping gas as a vector in the energy system. There is huge vested interest in the gas industry to make hydrogen a viable option and we have seen these stakeholders really mobilising in 2019.
- Heat as a Service and other new business models are starting to be offered into the market by a growing number of companies. These service-based approaches may have a critical role to play in achieving a full decarbonisation of heat over coming years.
- Public adoption of Net Zero targets by some companies demonstrates a much higher level of ambition to decarbonise both their own operations as well as their customers’ lives. There are challenges to achieve these targets, but it signals serious intent.
On to our predictions for 2020…
In our Talking New Energy podcast, Jon Slowe often brings out his crystal ball for speakers to predict the future! Here’s our own view on 2020:
There’s a lot of ESG/CSR money from corporates looking for investment opportunities – it’s one of the drivers for the current boom in renewable corporate PPAs. At the same time, we see a lot of investors, some of which rode the wave of subsidy-supported PV and wind wave over the last decade or so, looking for new assets classes to invest in. There are a growing number of ‘energy transition investment funds’ being raised – and we think these will start to become visible in 2020 as CleanTech 2.0.
VW’s Elii initiative will launch in 2020, bringing a leading Auto OEM into the utility space for the first time. Will other Auto OEMs follow VW’s lead? The oil majors such as Shell, BP and Total will also be actively developing their eMobility strategies, bringing them into the utility space.
At the same time, we expect to see some utilities trying to go the other way – for example by trying to be the provider of transport solutions to their customers (including vehicles and their fuel supply both in the home and out of home). The winners won’t emerge in 2020 but the clash of giants will become prominent.
- CEP starts shaping the market
While the EU’s Green Deal package will no doubt garner many headlines, it’s unlikely to start having much impact in 2020 – unlike the Clean Energy Package (CEP), approved by the EU in late 2018 and which will have rolled through into Member States’ national legislation. It promises to be a significant driver of market evolution – shaping areas such as energy efficiency, energy storage, community energy, EV charging infrastructure and demand side flexibility.
We expect to see accelerating adoption of demand side flexibility by DSOs across Europe, and dynamic Time of Use tariffs to become more common across Europe. Moreover, as the early adopters of PV in Germany start to drop out of the FIT scheme after 20 years, this will trigger growth in the number of customers focusing on maximising self-consumption. Delta-EE is expecting over 300k homes in Europe to buy a Home Energy Management (HEM) system in 2020.
We’ll be closely evaluating each of the above trends in our Research Services, alongside the many other developments taking us well beyond the tipping point for new energy, and which will shape the energy transition. Please register with us to receive periodic updates on our work or contact me if there’s any topics you will be interested to discuss.