Executive Summary New technologies inspire hope of a more efficient, resilient and flexible energy system, able to cope with intermittent generation, distributed energy resources, growing demand and electrification of transport and heat. Bloomberg New Energy Finance convened the Energy Smart Technologies Leadership Forum in Amsterdam in November 2012 to develop insights into some of the challenges associated with bringing change to the energy sector through smart grid, distributed energy, demand response, energy efficiency, energy storage and electric vehicles from the perspective of the cities.
New technologies inspire hope of a more efficient, resilient and flexible energy system, able to cope with intermittent generation, distributed energy resources, growing demand and electrification of transport and heat. Bloomberg New Energy Finance convened the Energy Smart Technologies Leadership Forum in Amsterdam in November 2012 to develop insights into some of the challenges associated with bringing change to the energy sector through smart grid, distributed energy, demand response, energy efficiency, energy storage and electric vehicles from the perspective of the cities.
As many of the benefits and challenges associated with the above technologies are felt at a local level, we sought to examine the role that local actors – from individuals, building owners and communities to businesses, utilities and policy-makers – would have to play in defining the transformation of the energy sector.
The major findings from two intense days of discussions and working exercises were:
● Distributed energy resources, such as rooftop photovoltaics, battery storage and demand response will become ubiquitous over the course of the next ten years. However the impact that this will have on the energy sector is uncertain – it is not yet clear if the deployment of local technologies will precipitate a shift towards a more localised industry structure or not. A key factor is whether utilities in a centralised market framework can be sufficiently flexible at a local level to ensure reliability as distributed energy resources are added to the grid and, equally, whether local utilities in a decentralised industry will have the scale to ensure reliability as distributed energy resources are added to the grid.
● Whilst some technologies have yet to reach maturity, the factors that need most urgent resolution are non-technical. This applies across the energy system, including: broadening the definition of consumer benefit, as applied by regulators, beyond considerations of just price and reliability; developing consistent legal frameworks across jurisdictions to support energy efficiency-based business models for building retrofits; adopting a holistic policy approach for integrating intermittent renewable generation into the grid; and creating markets that support the development of demand-side energy resources.
● There is a variety of ways that city governments can exert their influence on energy: through direct ownership of utility companies; creation of their own climate or efficiency goals; and through policies relating to areas that are more traditionally within their domain. This is particularly the case for the electrification of transport. Whilst there is an expectation that the city’s role within energy may grow, the nature of its involvement is still unclear. Furthermore the importance of the city within energy will not surpass that of national governments, which will determine the degree of influence that cities may exert. Currently there is impetus at the level of the European Union to encourage a higher level of influence of cities on energy but this will require buy-in from both member state governments and cities themselves if it is to succeed.
● Although there is currently uncertainty over the future structure of the energy system, particularly in relation to the degree of decentralisation, the scenario planning exercise highlighted several strategies that large utilities can employ irrespective of the way that the industry develops. Utilities can prepare for all outcomes by expanding their offerings to include services outside of energy. Many European energy companies have already taken early steps in this direction. Energy companies of all types should also be seeking to develop and maintain strong relationships with local governments since these could hold an increased level of influence in a more decentralised energy system. Where change driven by technology is certain but the resulting industry structure is uncertain, it is policy-makers – national and local – that will make the decisions that are most critical to the energy sector.
● The pace of progress towards a smarter energy system varies considerably between countries, but in most cases the rate of progress is in line with a given country’s needs. Over the next few years China and Japan are expected to become increasingly prominent, in the case of the former because of the firm political commitment to a smarter grid, in the case of the latter due to the immediate need for smarter infrastructure driven by the nuclear shutdown. Europe is currently seen as a leader within smart energy, despite uneven progress within the EU. Whilst the Netherlands and the UK are both moving quickly France and Germany have not made as much progress. In the case of France there is no pressing need for smart infrastructure but Germany will need to move quickly to avoid the negative consequences of a high penetration of distributed generation combined with the nuclear phase-out.
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