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The Rise of Local Energy Systems

local-energy-system

Energy is becoming more distributed and localised. We’re seeing the emergence of local energy communities, Microgrids and a whole plethora of potentially disruptive business models. To some this represents a challenge to their core business, to others it promises exciting new opportunities.

Today’s Distribution System Operators may fear the threat of grid defection. Even if there remain substantial income generating assets, these may become under-utilised and incrementally less profitable as new entrants cherry-pick the more profitable parts.

At the same time, energy suppliers are constantly facing competition from more agile or community owned start up suppliers and seeing their income eroded by regulatory interventions. Whatever the respective merits of these, many are looking at evolving their business models away from pure sales of commodity with ever-shrinking margins.

And then there are the emerging opportunities around localisation of energy, microgrids and communities – or at least that is what more and more people are looking at. In fact, the questions which keeps coming up when we talk to our clients about Local Energy Systems is “How can we make money out of them?”.

The real challenge here is not so much in identifying where the values lie, but in defining what we mean by “them”, that is Local Energy Systems. 

At one extreme there may be community owned renewable generation assets which do little more than exploit feed-in-tariffs or some other subsidy regime. In many instances, their only “local” attribute may be that they are owned by a local community group; there may be no attempt to align the generation to the needs of the local community. We see more opportunities to move towards value-driven models which capture more of the value chain and which can optimise the balance between local supply and demand.

At the other extreme are fully functional microgrids which not only seek to balance local renewable energy supply with the needs of the locality, but which can either operate completely independently of the grid or alternatively capture additional value from delivering services to the grid when required. In between these extremes are a whole range of schemes, trialling various degrees of system optimisation and different business and ownership models.

But which of these will be able to deliver real value to the participants and to the energy system at large? And which of them will later be seen as little more than over-hyped experiments?

Here at Delta-ee we continue to explore this area and are excited to be able to share some of our initial findings in our Local Energy Systems webinar, which will offer insights into the challenges facing energy suppliers, DSOs and others as well as describing the opportunities and how these are already being captured by innovative players in European markets.

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