How Renewables Will Change Electricity Markets
* Article: How renewables will change electricity markets in the next five years. By Ruggero Schleicher-Tappeser. Energy Policy, June 2012.
URL = http://dx.doi.org/10.1016/j.enpol.2012.04.042,
Abstract
"Photovoltaic (PV) cells, onshore wind turbines, internet technologies, and storage technologies have the potential to fundamentally change electricity markets in the years ahead. Photovoltaic cells are the most disruptive energy technology as they allow consumers of all sizes to produce power by themselves—new actors in the power market can begin operating with a new bottom-up control logic. Unsubsidised PV markets may start to take off in 2013, fuelling substantial growth where PV power is getting cheaper than grid or diesel backup electricity for commercial consumers. Managing loads and achieving a good match between power consumption and weather-dependent power production will likely become a key issue. This consumption—production balance may trigger massive innovation and investment in energy management technologies involving different kinds of storage and controls. Increasing autonomy and flexibility of consumers challenges the top-down control logic of traditional power supply and pushes for a more decentralised and multi-layered system. How rapidly and smoothly this transformation occurs depends to a large extent on the adaptation speed of the regulatory framework and on the ability of market players to develop appropriate business models. The paper discusses conflicts of interest; hurdles and drivers; opportunities; and traps for this perspective."
Excerpt
Introduction
"Two recent developments have changed the context for energy policies: the drastic price reduction of photovoltaics and the Fukushima nuclear accident. Both developments are leading to shifts in public perception about traditional energy sources and differences in costs of production. Their combined impact is to accelerate a global transition to distributed power generation with renewable energies. The present article argues that a point of no return may have been reached: While for decades energy pioneers and dedicated political groups have promoted renewable energy technology in a small number of countries, today technological and industrial dynamics are driving the transformation, at least in the electricity sector. The article explains the reasons why change may occur much more rapidly than expected and why it will profoundly transform the logic of electricity systems and electricity markets—in essence, millions of consumers are starting to produce electricity for their own needs with the help of new kinds of smart consumer technologies.
The transition, however, will not be an easy one. A series of hurdles have yet to be overcome. How rapid and smooth the transformation will occur strongly depends on the evolution of regulatory frameworks. While strong business dynamics pushing for an accelerated transition to renewables is good news for climate policy, powerful incumbents in the power business fear they may lose influence. Their strategies to delay change or to push for centralised renewables may influence developments in single countries. Understanding the transition forward, however, is essential for all businesses and economies, as energy production and consumption patterns are conditioning the fabric of civilisations, economies and products. Adapting to inevitable changes in time may soon become essential for competitiveness in many industries.
In the last five years, two unprecedentedly rapid changes in perception have transformed the energy policy arena. In 2008/2009, renewable energies suddenly became a top issue of global economic and industry policy focus—President Obama was elected with renewable energy high on his agenda; economic recovery plans in many countries had an emphasis on renewable energy; the European Union decided on binding targets for renewable energy shares in 2020; the International Renewable Energy Agency (IRENA) was founded in record time; the International Energy Agency (IEA) boosted its activity on renewables; and China set off a wind energy boom. Shortly thereafter, in the run-up to the Copenhagen climate conference in December 2009, key stakeholders in Europe started to look seriously at the 2050 horizon and realized that nearly 100% renewable energy production is not only necessary for climate policy, but also technically and economically feasible, at least in the electricity sector. Most scenarios discussed today have been initiated in this phase.1 They mainly rely on wind energy and assume that strong political support will be needed for quite some time. The recent evidence of the potential of photovoltaics, and the experience of Fukushima have yet to be understood and integrated into scenarios and strategies which will further deepen and accelerate the paradigm change in energy policy."