The European power system is set to change radically in the future owing to the drive to reduce carbon emissions. At the same time electrification of transportation and heating sector will create a perennial demand on the grid infrastructure.
MarketsandMarkets™ View Point:
Rajiv Roychaudhuri - Associate Director : Energy and Power, at MarketsandMarkets™, shares his Point of View as mentioned below:
Utility Asset Management Market — Uptick in T&D Investment and better availability of grid, to integrate renewables demand:
Considering that the Utility Asset Management market stands at USD 2.75 Billion and expected to grow by 8.25% and touch USD 4.09 Billion in the year 2022, there is strong likelihood of a significant investment in the T&D sector, being the basic hardware infrastructure. Increasing demand for power, aging infrastructure, increased distributed energy resources, and requirement for efficient and reliable power are the factors driving the utility asset management market. Most of the investments for T&D upgradation are taking place in order to achieve energy efficiency and reduce T&D losses. Rising electrification to support renewables & electric vehicles as a clean mode of transportation, is also being witnessed in enormous proportions in countries within Europe. Most of the corporates emerged as the driving force behind Europe’s 2018 renewable electricity demand. This was primarily on the back of initiatives including WeMeanBusiness and RE100, as more corporations saw sustainability as necessary for competitiveness.
Some of the leading players in the utility asset management market include Siemens AG (Germany), ABB, Ltd. (Switzerland), General Electric Company (US), and Emerson Electric (US).
The utility asset management ecosystem comprises smart grid solution companies, such as, Lindsey Manufacturing Co. (US), Siemens AG (Germany), NetControl OY (Finland), and CNIguard (UK).
It also comprises energy software companies, such as, S&C Electric (US), ABB, Ltd. (Switzerland), Sentient Energy, Inc (US), Emerson Electric Co. (US), and Enetics Inc. (US).
Impact of electrification and renewables driven by prudent regulatory measures:
The demand for green electricity in Europe increased 8% in 2018. Although this was not as phenomenal as the rise seen a year earlier, demand continued to grow, pushing the price of electricity identified as generated from renewables under the EU’s Guarantee of Origin (GO) scheme to new highs. On the EU level, a new Renewable Energy Directive (REDII) has also been recently approved with a view to strengthening the guarantee of origin system by further embedding it in the European legislation. Such proactive measures will go a long way in making green schemes perpetual and self-sustainable.
The reported volume of demand for certified green electricity was 499 TWh, but that number is expected to rise an additional 10 TWh when German fourth-quarter figures are included, according to Norwegian renewable energy consultancy ECOHZ. This invariably would mark a significant rise from 2017’s 470 TWh across EU member states.
“For the first time, renewable energy demand in Europe surpasses 500 TWh – or half a billion Guarantees of Origin,” said Tom Lindberg, managing director of ECOHZ, commenting on the 2018 statistics issued by the Association of Issuing Bodies. “If the growth trend from the last five years continues, the GO-market will soon surpass €1 billion, customers are willing to pay a premium on certain origins of energy.”
Alongside the growth in renewables supply, there is also a likelihood of a significant increase in power demand due to the electrification and digitalisation within the EU region. Electric cars are rapidly entering the mainstream, with more than 25 per cent of new cars launched in Europe in the current fiscal being either hybrids or battery electric vehicles. With complete electrification of personal and light commercial transportation expected to be achieved by 2050, will again result in increasing power demand across Europe by approximately 20-25 per cent, from the present levels.
Electrifying heating is also anticipated to see significant growth, but there is a caveat that this would place even more significant strain on the power system, both in terms of the amount of electricity required, and due to the fact that heating demand is concentrated on colder days during the winter months, which puts the grid in a difficult situation due to load variabilities.
Major corporate energy users will play a pivotal role to alleviate some of the market risks with a proviso for long term power purchase agreements (PPAs). In Germany alone it is estimated that PPAs with major industrial power users would bring forward 12 GWs of new renewable capacity. For utility companies and renewables developers, understanding industry off-takers and building products and relationships customized for their needs will continue to be a key competitive advantage in the next few years.
The combined activity of the electrification of heating and transport could jointly result in as much as an 85 per cent increase in power demand across Europe.
Renewables will provide over 60 per cent of Europe’s total power supply by 2040, representing a 400 GW, €400bn investment opportunity into clean and green energy capacities. It is propounded that by 2050, total European power demand could rise by as much as 85 per cent, mainly due to the electrification of heating and transportation. This will be significantly aided by better delivery mechanisms, private sector participation or a combinatorial approach of public private partnerships and not through government subsidies. At the same time, the falling cost of renewables will bring them to grid parity and hence, there is an imminent changeover and a skew on renewables demand in Europe, creating demand & investment cylces for all associated stakeholders & equipment and service providers in the coming decade.