European electricity association Eurelectric is working at the heart of the power distribution system transformation on key issues such as decarbonisation, decentralised generation and digitalisation.
Engerati speaks with the association’s policy director Marion Labatut about the opportunities for further renewables growth resulting from the commercialisation of storage, the latest EU policy updates affecting that sector and an artificial intelligence platform that will be launched later this year.
E: Where are the greatest opportunities for growth in the solar industry in Europe over the next 3-5 years?
ML: First of all we can really witness a growth, in 2018 another 8GW of solar was installed, which is 36% more than in 2017. It’s definitely growing, Germany in particular is really on the rise at 45GW, and according to recent market studies it could increase to 70GW by 2023. There are also national climate plans being submitted by countries which show big ambitions, Italy will probably add another 10GW to reach 30GW by 2023, and there is very good progress in Spain and the Netherlands.
E: How is storage changing the feasibility and cost-effectiveness of solar?
ML: Storage brings different opportunities. The issue is that the pattern of solar production doesn’t necessarily match the needs of households or commercial customers, and it’s not dispatchable. So if you combine it with batteries it becomes more valuable for prosumers, who can use more of the energy they produce, and solar plus storage can be used in conjunction with smart energy management programmes, to charge electric vehicles, etc. There is large potential for solar to give more value to prosumers. On the market one can imagine large solar fields paired with large batteries that would make it more dispatchable and increase the flexibility revenues.
E: What regulatory barriers are there to further development of solar + storage?
ML: The Clean Energy Package (CEP) removed many of the barriers, for example self-generation and self-consumption is now a right that needs to be implemented at the national level. There is now a framework for Citizens Energy Communities and renewable energy communities, which gives people the right to invest collectively in renewables. We set out some recommendations in a position paper in May recognising the potential of these communities to promote demand-side flexibility and storage in times of abundant renewable generation through the development of renewable self-generators, electric vehicles and stationary batteries. There are some good case studies in the paper from Spain, Italy, Belgium, Germany and Greece.
Power purchase agreements (PPA) are developing, there has been a lot of collective work on standardisation of contracts and to make buyers and sellers meet, for example at the RE-Source Platform which Eurelectric supports. We see the progressive development of online platforms which should help smaller players to access the marketplace and make aggregation possible.
For storage, double grid fees, when you have to pay both for taking power from the grid and for releasing it again, have been an obstacle to investment. This is being removed, for example in Finland it was removed recently for large batteries. In the UK they just announced higher VAT for solar battery packs starting in October, which is not a positive development.
E: What are the next policy developments to watch for, particularly in relation to storage?
ML: The new European Parliament is coming in and the new Commission president Ursula von der Leyen has pledged more ambitious targets for 2050 in a European Green Deal to be announced in the first 100 days, so that should come pretty soon. It will probably have a carbon neutrality by 2050 target at its core, and that will shake the debate. Digital is going to be at the core of legislation, and the first angle for us will be on cyber security. The Clean Energy Package mandates to develop a network code, and we at Eurelectric will take part in the drafting of that with our DSO members.
She announced a Digital Services Act to complete the digital single market, which will be an initiative around platforms, digitalisation and data privacy.
Further, we are working with our members to launch an AI and digital platform before the end of the year and the idea is to gather utilities, start-ups, industry representatives and manufacturers to drive the future of AI and data to produce new energy services. We will take stock of recent developments through regular check-ins and run roundtables on how to create value out of this.
E: Can you tell us any recent case studies of a successful policy framework, versus one that is holding back growth?
ML: Well as mentioned you have the double charging problem and additional taxes or VAT on specific products. Of course you should encourage innovation, let the market work, make sure that flexibility is valued and have a level playing field. But the core of the issue, for storage as well as for other capital intensive assets, is long term investment signals, which today are not really provided by the short term electricity market. Corporate PPAs are expected to play an important role but will not be sufficient to deliver on all the investments needed. Besides, adequate visibility of long-term revenues can reduce the cost of capital significantly.
E: How are incumbent energy suppliers responding to the influx of new start-ups and the increase in digitalisation?
ML: It’s not necessarily about opposition. We see a lot of competition and that leads to innovation. Incumbents are starting to develop new products using data such as smart home products in cooperation with start-ups. For example Enel has just bought aggregation services and is integrating new competencies within the company and teaming up with start-ups, which is very positive. It’s not about start-ups fighting with utilities but rather, new partnerships. Spirits are up. We had a very positive Power Summit in May with CEOs of utilities who are developing innovative services and innovation hubs. Utilities are handling tons of data just to play in the electricity markets and it’s now about leveraging these competencies to go into the downstream and deliver what customers want. I think we’ve passed the negative period and now we are in the new electricity market where people are seeing new opportunities. The combination of electrification and digitalisation is going to be key, and smart electrification is the way forward.
E: How do the different EU member states deal with storage – are DSOs and TSOs allowed to own storage assets?
ML: The Clean Energy Package solves a lot of our problems. We now have a process in place. In principle DSOs and TSOs are not allowed to own storage. Firstly the CEP defines storage in a clear way. It does say network operators cannot own storage, but that they can have a market test and if it fails the regulator can give the right to own storage for some time, and then the market can be retested again. Operators need to get approval for specific circumstances. It’s definitely not a green light, but really a market approach that now needs to be taken to the national level so that detailed procedures and processes can be developed.
We’re going to see many discussions on storage when the gas and decarbonisation package is revealed. There will be guidance on power-to-gas, hydrogen, electrolyzers... there is a big discussion on ownership and some TSOs are very keen to invest, but other market players are also keen. This will be one of the big discussions. We support that it should be a market activity, but it is not at a commercial stage yet. There should be R&D consortia with TSOs in there, but it should be released to the market as it becomes more mature. There is an amazing amount of opportunities in the area of sector coupling, it is only the beginning.