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Since our last new energy letter, the European Commission has published its long-awaited Renovation Wave Strategy, revealing of the extent of Europe’s decarbonisation ambitions in existing buildings – arguably the most challenging sector to decarbonise. The renovation wave strategy is making ripples, which could become a tidal wave of transformation for our existing building stock, with energy efficiency and the uptake of low carbon heating standing to make vast gains.
But this scale of change will only be unlocked if the market is swept along too – if member states follow through on the strategy recommendations, and if private investment is unlocked at the scale envisaged. So which parts of the renovation wave strategy give me something to be optimistic about?
Since our last new energy letter, the shift in focus has moved from the impact of the Covid-19 crisis, to how we recover – and how “green” this recovery is. I have growing confidence that the recovery will drive acceleration in some aspects of the energy transition. There will of course be major economic challenges ahead, and the energy sector is not immune to these - but the fundamental drivers of the energy transition remain unchanged. It is encouraging to see signs of a commitment to “building back better – and greener” from Brussels and in some European capitals. The decisions being made now will determine the speed and nature of the energy transition over the years and decades ahead – and as such, influence business models, strategies and opportunities for companies in new energy.
The most detailed glimpse so far of just what this recovery will look like, was revealed in the European Commission’s Recovery Plan to “repair and prepare for the next generation” – which sets aside €750bn for a Green Recovery (plus longer-term budget reinforcements). It clearly signals that this recovery should be clean, circular, competitive and climate neutral. So what does this mean for new energy? Five points catch my interest, which create fantastic opportunities for the energy industry, if it is ready to capture them.
Don’t get caught out by thinking this is something for the future. It’s happening now. Local optimisation of supply and demand is on the rise, and will accelerate. In this blog I set out the five reasons why.
If you agree with these, and you are in the active in the energy value chain, you need to take an active position on what this means for your business. There is a whole host of start-ups and companies from outside the traditional utility sector (as well as your traditional competitors) starting to target the opportunities arising from localisation of energy.
The hype surrounding blockchain in energy has undoubtedly dropped off since 2017, as the realities of moving towards commercialisation has proved far harder than many expected back then.
Most of blockchain’s potential applications to new energy, like virtual community energy trading, EV charging roaming and green energy verification, remain as small pilot projects. Whilst it does still generate interest when brought up at energy industry and tech conferences, those working with blockchain day-to-day are trying to shift the conversation away from the underlying technology and towards the solutions it provides. However, the current reality is that it is ‘permissioned’ blockchains that make most sense for energy applications, and there are two key challenges that we think may hold it back.
The energy system’s going to get much, much more localised. Maybe you don’t think that’s big news? With photovoltaics appearing on more and more rooftops, and storage in homes, isn’t this obvious? In my opinion what you see today is just the very tip of the iceberg.
In the past, economies of scale, dependence on bulk extraction of fossil fuel for generation, and inflexible demand dictated a paradigm of bigger is better, and optimisation of energy systems at the largest possible scale. The rationale for this paradigm no longer holds. Non-fossil fuel forms of generation and storage are deployable cost-effectively at small scale; demand is increasingly flexible; and data, software and analytics can be used for sophisticated optimisation of generation, network assets, storage and demand.
The European Home Energy Management (HEM) market has been quite slow to develop in the last decade, only reaching around 300k installations to date. But this is going to change.
By 2023, we expect the market to reach 2.3M units installed. While the overall HEM European market will grow, the highest potential for growth will continue to be in the Nordics in terms of relative penetration and Germany in terms of absolute numbers. France, the UK and Italy will remain behind even though we predict their HEM markets sizes will increase faster. With its high penetration of solar PV, one may have expected Belgium (and to a lesser extent the Netherlands) to be an interesting market, but its net metering system is clearly a barrier to HEM. Finally, Spain, and its interesting geography for sun power, could have been better placed, but there is a lack of incentives for customers to install and self-consume solar PV.
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