IEA chief defends role of large scale utilities

The Executive Director of the International Energy Agency yesterday defended the future role of large-scale utilities in Europe’s fast-changing energy sector.

Speaking at the Joint Opening Keynote Ceremony, Maria van der Hoeven said that the 21st century energy structure needed “new towers, cables and steel on the ground to prepare for smart market design”.

She said “this means a market that sets prices that accurately reflects the physical reality of the electricity system, both in terms of time – when and where the power is used – and in terms of space – where it is generated and used”.
Maria Van Der Hoeven  

Ms Van der Hoeven said that “there are some who would say that large scale utilities do not have a place in this future”.

But she warned that this was “an over-simplification that is made far too often. Equating a low carbon energy system with the collapse of large scale utilities is not the case at all.

“Utility scale power generation continues to be absolutely essential to fulfilling Europe’s energy demands”.

However she stressed that utilities had to evolve. She said in a future characterised by distributed generation and smart grids, “the kilowatt-hour of electricity may not be the most valuable product. Rather, the company that will do well is one that uses innovative ideas to bring together, power, technology, efficiency and other resources in a resilient and secure manner.

“It’s a company that will take advantage of a market that places value on flexibility.”

Ms Van der Hoeven conceded that proposed new power projects were facing a new breed of the syndrome known as NIMBY (not in my back yard). “We have the NUMBY – not under my backyard; the NOMBY – not over my back yard; and we also have the NOMH – not on my horizon. All are challenges.”

She said there was no-going back from the low carbon energy transition but stressed that “national capacity markets are not the right solution in terms of an integrated European energy system”.

She said “a holistic, all-encompassing approach is needed if we are going to tackle climate change”.

The pace of change of Europe’s power transition was also tackled by Ineke Dezentjé Hamming-Bluemink, President of FME, the Dutch Employers’ Association.

She said that a company “can no longer make a 10-year business plan – you must now review your strategy every month. It’s eat or be eaten.”

Stressing that “the most sustainable type of energy is the energy that you don’t use”, she said Dutch power firms had a key role to play in the electricity transition, but warned that the sector “must rise to the challenges”.

She urged companies to “leave your comfort zone and exploit new opportunities” and stated that those that survive would be “the ones that can best adapt”.

Marie Donnelly, Director, DG Energy, at the European Commission, told the audience that Europe was “extremely at risk and exposed” by its huge reliance on oil and gas imports.

Which she said made it all the more important for Europe to act in an integrated, collaborative way. “We can’t continue to operate with 28 separate boxes in the EU.”

She also stressed the rise in influence of the consumer: “Consumers are becoming aware. They want to know what they are spending now – they want real-time information. Consumers are being empowered from a thermostat on a radiator to decisions on demand response.”

Dr Wolfgang Konrad, chief executive of Siemens Distributed Generation, said one of today’s biggest challenges was the grid. “We need a grid to collect the energy from wind and solar power and then distribute it where it’s needed.”

He said that between 1990 and 2010,  the share of distributed generation was about a third of total demand. “What we are going to see in the next 20 years is this rising to well over 50 per cent – and that’s a trend that will not change.

“We need to understand how to better match demand with availability.”

“Fracking has acted like a valve and we have all seen a reduction in the oil and gas price. And as soon as the price goes back up again, it will open the valve again and more investments will be done and the price will come back down.”

Flexibility has a key role. There will not be just one answer, there will be many answers.

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