Writing off large scale utilities ‘an oversimplification’ – IEA chief

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The head of the International Energy Agency has told delegates at Europe’s largest power generation industry conference that writing off the future role of large utilities is a mistake.

Maria Van Der Hoeven, the IEA’s executive director, in a keynote speech at POWER-GEN Europe in Amsterdam said, “There are some who would say that large scale utilities do not have a future in a world with a higher level of renewables and distributed generation. This is an oversimplification made far too often.”

Van Der Hoeven mentioned the agency’s own scenarios, as well as the findings of the G7 Summit on energy this week which confirmed that, ‘utility scale power generation continues to be absolutely essential to fulfilling Europe’s energy demands and yet utilities will nevertheless have to evolve.’
Maria Van Der Hoeven
“Creating a low carbon energy system isn’t equal to the collapse of large scale utilities,” she added.

The IEA chief questioned whether the century old business model of electrical utilities selling kiolowatt hours to consumers makes sense in a future, which will likely feature larger amounts of distributed generation services such as solar photovoltaic panels on residential roofs and the growing influence of smart grid technology.

“In a future where IT helps to control household appliances and optimises the use of electricity in commercial and public buildings, including offices, supermarkets and hospitals, the kilowatt hour of electricity may not be the most valuable. Rather the company that will do well is one who will 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.”

However the dramatic change being witnessed in the power sector, Van Der Hoeven told the audience of power executives, that not everyone is ready to go off grid and even despite advances in decentralised technology very few will be able to disconnect entirely.

“And even if the cost of batteries falls as it looks likely to do, the majority of power generation will remain connected to the grid and the increasing use of renewables increases the need for network investment at least in the short term. Grids will be made to tie up all of these resources together and quite simply the grid is vital.”

She emphasised the essential role of policy makers in creating the right environment for investment, warning that despite carbon price there are cases where existing wholesale markets have been unable to attract investment for low carbon generation including renewables, new build and carbon capture and storage.

With half of Europe’s nuclear capacity set to be retired by 2040 as well as the ongoing regulatory drive to phase out of all coal-fired power plants, Van Der Hoeven pointed to the need for the EU to diversify gas supply.

“Yet”, she said, “Energy terminals sit idle in Spain as there is a lack of interconnection to take advantage of this capacity. There is a need for gas storage, something that central Europe has invested in and yet a lack of cross border market integration. And as our most recent medium gas market report has shown there is no scenario under which Europe can expect to reduce its dependency on Russian gas.”

“Policy makers should seize the chance to make meaningful changes to the way we produce, use and price energy and power in particular. Vision, leadership and decisive action based on the realities of the European energy system is what is needed to take advantage of this opportunity.

“Vision is laudable but action is what will make the difference.”



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