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6th European Energy Forum
Conseil Français de l’Énergie | 2017
WHAT BUSINESS MODEL FOR
ENERGY IN EUROPE?
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
2
Administrateurs du
Conseil Français de l'Énergie
(au 1er janvier 2017)
Bruno Léchevin
ADEME
Daniel Verwaerde
CEA
Patrice Geoffron
CGEMP
Jean-Bernard Lévy
EDF
Isabelle Kocher
ENGIE
Didier Houssin
IFP Energies nouvelles
Patrick Pouyanné
Total
Francis Duseux
UFIP
Olivier Appert, Président
François Ailleret
Jean-Marie Dauger
Pierre Gadonneix
Jacques Maire
Bruno Weymuller
6th European Energy Forum What business model for energy in Europe?
Paris, 22-23 May 2017
Copyright © 2017 Conseil Français de l'Énergie
Tous droits réservés. Tout ou partie de cette publication
peut être utilisée ou reproduite à condition que la mention
suivante soit intégrée dans chaque copie ou diffusion :
« Avec l'autorisation du Conseil Français de l'Énergie,
www.wec-france.org »
Directeur de la publication :
Jean Eudes Moncomble, Secrétaire général
Crédit photos © Conseil Français de l’Énergie
Publié en 2017 par :
Conseil Français de l'Énergie
12 rue de Saint-Quentin
75010 Paris - France
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
3
SOMMAIRE
OPENING SPEECH 7
SESSION 1 - TECHNOLOGIES: WHAT’S NEW? 9
HOW DECENTRALISED TECHNOLOGIES HAVE CHANGED BUSINESS MODELS IN EUROPE
AND THE WORLD 10
1. New business models and a new competitive landscape 10
2. Industrial self-supply 11
ACCENTURE TECHNOLOGY VISION: FIVE TRENDS DRIVEN BY DIGITAL DISRUPTION 12
1. AI is the new UI 12
2. Ecosystem power plays 12
3. Workforce-marketplace 12
4. Design for humans 13
5. The unchartered 13
THE ITALIAN ENERGY DATA PLATFORM 13
1. SII: an integrated information system 13
2. Next steps 14
SESSION 2 - INDIVIDUALS AND COLLECTIVES BEHAVIOUR: NEW VALUES 18
DIGITAL: MY ENERGY MY WAY 20
1. Newcomers to the energy field 20
2. Digital technologies 20
PROSUMAGE OF SOLAR ELECTRICITY: PROS, CONS, AND THE SYSTEM PERSPECTIVE 21
1. The pros and cons of prosumage 21
2. Prosumage in Germany 22
3. Conclusion 22
THE EXPONENTIAL PROSUMER: A QUEST FOR PURPOSE IN A DIGITAL WORLD 23
1. The race for data 23
2. Adapting to a new environment 23
3. Open innovation 24
QUESTIONS & ANSWERS 24
SESSION 3 - ELECTRICITY: BUSINESS MODELS AND MARKET DESIGN
DIGITALISATION OF THE ENERGY SECTOR: CASE STUDY OF ESTONIA 27
1. Introduction of smart meters 27
2. Digitalisation 28
3. Discussion 28
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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NEW BUSINESS MODELS TO VALUE FLEXIBILITY IN ELECTRICITY MARKETS 29
1. Changes to market design 30
2. Emerging business models 30
3. Conclusion 31
ENERGY TRANSITION OR ELECTRICITY TRANSITION? 31
1. Innogy overview 31
2. The challenge of system integration 32
3. The energy policy compass 32
QUESTIONS & ANSWERS 33
SESSION 4 - CENTRALISED VERSUS DECENTRALISED 35
THE PERSPECTIVE OF A FRENCH DISTRIBUTOR 36
THE PERSPECTIVE OF A PORTUGUESE DISTRIBUTOR 38
THE PERSPECTIVE OF A FRENCH MULTINATIONAL 39
PANEL DISCUSSION 39
QUESTIONS & ANSWERS 42
SESSION 5 - MOBILITY: WHERE ARE WE GOING? 45
ELECTROMOBILITY: NEW BUSINESS MODELS IN DEVELOPMENT 46
1. The electromobility challenge for energy 46
2. The market coordination solution 47
3. The contractual solution 47
4. Conclusion 47
CLEANER TRANSPORT AND MOBILITY: THE 'PROBLEM CHILD' OF CLIMATE POLICY 48
1. Emissions reduction 48
2. Five principal take-aways 48
3. Conclusion 49
GREEN MOBILITY: FOSTERING ENERGY (R)EVOLUTION IN TRANSPORTS 49
1. Natural gas vehicles 50
2. Electric vehicles 50
3. Conclusion 50
QUESTIONS & ANSWERS 50
SESSION 6 - WHEN LOCAL AUTHORITIES BECOME SMART 53
UNLOCKING SMART CAPABILITIES FOR LOCAL AUTHORITIES 54
1. Smart cities 54
2. Key enablers 55
3. New business models 55
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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GOOD DATA FOR SMART PLANNING: REGIONAL OBSERVATORIES SPEARHEADING THE
ENERGY DATA 56
1. The need for energy data 56
2. What's new? 56
PRESENTATION AND SELECTION OF REFERENCES ON CITIES 57
1. Cities at the heart of the energy transition 58
2. Case studies 58
QUESTIONS & ANSWERS 59
SESSION 7 - WHAT NEW BUSINESS MODEL(S) FOR ENERGY? 62
THE PERSPECTIVE OF THE REGULATOR 63
THE ENERGY POLICY COMPASS 63
EVOLVING BUSINESS MODELS 64
DECENTRALISED VERSUS CENTRALISED SYSTEMS 65
QUESTIONS & ANSWERS 67
CONCLUDING REMARKS 74
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Monday 22th May
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Opening speech
Olivier Appert, Chair, Conseil Français de l'Énergie
Good morning and welcome to Paris for this 6th European Energy Forum, devoted this year to the
question of business models for European energy systems.
We are clearly in the midst of a transition to a sustainable energy system. The energy sector today
therefore faces a certain number of major game changers.
First, a technological game changer: the digital revolution.
Second, an industrial game changer: the emergence of China and unprecedented levels of mass
production.
Third, a social game changer: a change in consumer behaviour with respect to energy use.
Fourth, a political game changer: the growing involvement of local territories around the world.
These game changers have a particular impact on two sectors – electricity and transport – that are
experiencing a strong growth in demand.
When it comes to the technological game changer, the digital revolution has opened up the possibility of
new services and new business lines based on availability of data. It represents a new ecosystem for
the creation of value. Energy production has already integrated the opportunities brought by
digitalisation. That is the case of big data for the shale production in the United States or the use of
predictive maintenance elsewhere. It also has an impact on consumption, with the optimisation of
motorisation and energy efficiency. Digitalisation has also led to the creation of new disruptive services,
with Uber being a case in point here. Finally, new players are emerging in the energy sector: the so-
called GAFAs with the Apple Car or the Google Car, and a large range of start-ups that seek to play the
role of integrators.
We also face an industrial game changer. Energy markets are increasingly global, and China has
emerged as a major technological and industrial player in this sector. This has led to an unprecedented
shift to mass production having a major downward effect on prices. It has also opened up new
perspectives for renewable technologies, which are highly favourable to decentralised production.
As renewables have a very low marginal cost, this considerably changes the mechanisms of price
calculation.
The social game changer means that these technological evolutions have changed the balance of
power between the producers and consumers of energy. Consumers seek to control their consumption
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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and become active consumers. This has led to the development of self-consumption system and the
use of new payment methods such as blockchains.
The political game changer means that local authorities have now placed the energy transition firmly
within their priorities, be it in transport or urban planning. That is exemplified in the smart city concept.
They are also becoming a key player in the energy sector.
Clearly, all of these game changers also have an impact on the business models deployed by the
energy sector. What strategies will be deployed by players in this context? What is the role of the
regulatory framework? Are we witnessing a revolution or an evolution in the business model? Over the
next two days, we will have ample opportunity to delve into all of these questions, which are so relevant
to the energy sector today.
Jean Eudes Moncomble, Secretary General, Conseil Français de l'Énergie
Welcome to Paris to the 6th European Energy Forum, which will be held in French and English.
The Forum will be organised as follows:
• Session 1 will consider the emerging technological developments, including digitalisation and renewable energy, and their impact on business models – those business models represent the
underlying theme of our 2-day meeting.
• Session 2 will explore the issue of consumer behaviour.
• Session 3 will focus on electricity, in particular regarding the regulatory framework, which will have to take into account the technological developments explored above.
• Session 4 will be a workshop led by the World Energy Council where we will consider centralised versus decentralised electricity production within the so-called energy trilemma.
• Session 5 will consider the question of urban mobility, which will have a significant impact on the business models deployed by the energy sector.
• Session 6 will focus on the role of local authorities, in particular with respect to the collection of big data and the development of new business models.
• We will conclude with a Round Table summing up the 2 days of discussions, with particular emphasis being give to the game changers outlined by Olivier Appert above. It should allow us
to answer the question of whether we face a simple evolution in our systems or indeed a
revolution or paradigm change.
Before moving to our first session, I would like to thank Pierre Gadonneix, former Chair of the World
Energy Council, for his presence at our Forum.
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Session 1
Technologies:
what’s new?
CHAPTER CONTENTS
How decentralized technologies have changed business models in Europe and the world
Accenture technology vision: 5 trends driven by digital disruption
The Italian energy data platform
Questions & answers
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Session 1 – Technologies: what’s new?
• Jens Weinmann, ESMT Berlin Germany
• Emmanuel Fages, Accenture France
• Alessio Borriello, Acquirente Unico Italy
• Moderator: Mihkel Härm, World Energy Council Estonia Estonia
Mihkel Härm, World Energy Council, Estonia
This session will focus on the most important technological changes that we are likely to see in the
coming years. In addition, it will explore the new business models that these technologies will allow us to
implement.
Jens Weinmann, ESMT Berlin, Germany
HOW DECENTRALISED TECHNOLOGIES HAVE CHANGED BUSINESS
MODELS IN EUROPE AND THE WORLD
Germany is a pioneer in the global energy transformation. Many new business models emerge during
that process, and are worthwhile observing and analysing. Most importantly, incumbent utilities are
losing their dominance in the electricity sector. Germany, for example, now has over 1.5 million
prosumers who actively participate in the power market. This represents a paradigm shift that is
probably more revolutionary than the liberalisation of the market in the late 1990s.
1. New business models and a new competitive landscape
Traditionally, the energy value chain is made up of primary fuels, large-scale generation, trading,
transmission, distribution, retail and the final consumer. Today, we have added the large-scale
generation of renewables at one end of the chain, and the new prosumer at the other. The storage
market is also developing, although it still represents a huge untapped potential today. Other new
markets include energy performance contracting, demand response, and building efficiency. We can
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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see that newcomers have been “nibbling away” the market shares of energy incumbents in all these
segments of the value chain.
In large-scale generation, companies such as Vattenfall, EnBW, Iberdrola or Dong Energy have
extended their existing portfolio to renewable energies, in particular wind power. In storage, we have
new players such as Sonnen-Batterie, Nest, Tesla, Qivicon or Innogy. In building efficiency,
new players such as REstore in Belgium or Getec in Germany are the dominant players.
In the “Smart Grid” and its connected IT infrastructure, major players are seizing opportunities to
capture this market, for example IBM, Deloitte, Cisco, or Omnetric (a joint venture between Siemens
and Accenture). These players pose a real threat to traditional energy incumbents due to their
expertise in systems integration and grid optimisation.
With respect to local initiatives or “civic power”, Germany has almost 900 energy cooperatives in
operation, which have already invested €1.2 billion in community power plants. Residents of urban
agglomerations engage in the “re-communalisation” of energy and transport services. In the period
2007 to 2014, over 230 municipal utilities bought back electricity and natural gas grids after the expiry
of concession contracts. A further 140 municipal utilities were newly founded as public service
providers. Berlin and Hamburg are two examples of local initiatives to re-communalise the distribution
network.
Bürgerwerke is an example how energy associations that are scattered across Germany bundle their
capacity. Over 50 energy cooperatives have joined forces to sell their renewable energy on the
wholesale market. Crowd funding is also being used, for example crowdEner.gy, which allows small-
scale, private investors to participate in energy projects. Urban dwellers can participate in initiatives
such as MieterStrom and QuartierStrom, which invest into decentralised power and heat projects in
larger cities like Berlin. Similarly, Sunride is another start-up that seeks to explore the potential of
renewable generation in an urban setting.
2. Industrial self-supply
The energy revolution also takes place in industry and commerce. A survey by the German Chamber
of Commerce and Industry suggests that around half of German industry has considered self-supply
in recent years. For example, ALDI has installed solar panels on 1,000 of its supermarkets, and BMW
has installed around 10 MW of wind energy in its electric vehicle manufacturing plant in Leipzig,
representing 20-25% of the energy consumption of the entire Leipzig plant.
In the area of building efficiency, Envio Systems is a start-up that has developed a solution for the
retrofit of commercial buildings. Bankymoon, a South African start-up, provides digital services based
on bitcoin transactions. TransActive Grid also uses a blockchain-based microgrid to provide a
platform for peer-to-peer trading to consumers in New York.
There are many other new opportunities currently emerging related to the Internet of Things and
machine-to-machine communication. There is a real possibility at hand that decentralised,
autonomous and self-organising micro grids represent a future trajectory for the electricity grid.
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Emmanuel Fages, Accenture, France
ACCENTURE TECHNOLOGY VISION: FIVE TRENDS DRIVEN BY DIGITAL
DISRUPTION
Accenture employs 400,000 people around the world. It is made up of five main departments,
including Accenture Strategy to which I belong.
I will focus on the major technological trends to have emerged on the basis of digital disruptions,
and their potential impact on today’s energy business models. There are five main trends that are
expected to emerge in the next 5 to 10 years. These are not a question of science fiction but are
already becoming a reality.
1. AI is the new UI
Artificial intelligence (AI) will increasingly play a crucial role in the way that companies function and in
the way they interface with their customers. Our top 3 predictions for this trend are as follows.
In 5 years’ time, more than 50% of customers will select a company on the basis of its AI rather than
its traditional brand. In 7 years’ time, most interfaces will not have a screen but will be integrated into
everyone’s daily tasks. In 10 years’ time, digital assistants will be so pervasive that employees will be
productive 24/7/365. These digital assistants will operate in the background of all workplace interactions.
2. Ecosystem power plays
Tomorrow’s business models will be based on platforms. Companies are increasingly integrating their
core business functionalities with the platforms of third parties. Our top 3 predictions here are as
follows. In 5 years’ time, the majority of customers will be purchasing goods and services through a
digital intermediary, for example messaging platforms and smart assistants. In 5 years’ time, 80% of
S&P 500 companies will be engaged in multiple industry ecosystems. In 7 years’ time, one of today’s
industry leaders will have transformed into an ecosystem spanning multiple markets
3. Workforce-marketplace
Talent management will occur through marketplaces and freelancers will abound. How employees are
dealt with in terms of managing talent or human ressources management will occur in a more
customised manner. Our top 3 predictions here are as follows. In 5 years’ time or less, our judgment
of full-time employment versus freelance work will have changed completely. In this context, it is
estimated that in 15 years’ time, half of US workers will be self-employed, providing their services via
talent supply platforms. In 5 years’ time, new dominant leaders with business structures based on
small cores and powerful ecosystems will emerge. In 5 years’ time, on-demand labour platforms will
be the primary driver of economic growth in both developed and emerging economies.
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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4. Design for humans
It will be possible to personalise the full range of products and services, at no extra cost to
companies. This concept of customisation will completely change our methods of production.
In 5 years’ time or less, governments will collaborate with businesses to drive sustainability shifts in
societal behaviour. By 2022, multinational organisations will introduce employee-facing technologies
that are able to identify when a worker is frustrated and then alter the style of feedback or guidance
automatically delivered to that worker.
5. The unchartered
Transactions will become completely decentralised, with a more peer-to-peer approach. Businesses
will not simply create new products and services; they will shape new digital industries.
Within 3 years, industry boundaries will vanish for companies like Tesla which have mature digital
strategies in place. By 2020, entire ecosystems will require the use of smart contracts in order to
participate. Within 5 years, new performance-based contracts will be used between parties.
These smart contracts will self-govern and self-execute. We have labelled this trend “the unchartered”
as we do not yet know just how quickly all of this will evolve. Nor do we know when these new
business models are likely to emerge.
If you require further information on these trends, I would invite you to consult Accenture’s online
report that addresses all of these matters in greater detail – Accenture Technology Vision 2017:
AMPLIFYOU.
Alessio Borriello, Acquirente Unico, Italy
THE ITALIAN ENERGY DATA PLATFORM
I will present our company’s developments over the past 5 years. With the full opening up of electricity
and energy markets, the number of operators involved in the switching process boomed from a few
dozen to a few thousand. Operators were using their own systems to manage this process, leading to
a situation where we had over 350 different standards in operation. A major communications issue
therefore arose between distributors and suppliers, and we had a total lack of completeness in our
consumer identification data.
1. SII: an integrated information system
To address this issue, a new tool was introduced into the Italian market: the Sistema Informativo
Integrato (SII) or Integrated Information System, a set of technological infrastructures and technical
rules for sharing, integrating and exchanging data. It was aimed at ensuring the uniformity of
treatment for all operators, guaranteeing data flows, allowing the simplification of processes, and
reducing costs for operators and consumers. It facilitates the exchange of data flows among
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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distributors and sellers, thereby making the switching process more efficient and rapid. This also
reduces entry barriers for new suppliers, and will allow customers to have full access to their data.
However, SII is not only a technological infrastructure; it is a focal point of connection for the systems
in the market. It is currently working at over 2 million operations per month for approximately
3,000 users. We can count flows of approximately 20 billion metering data to actors in the sector.
The authorities are already using this database for a wider range of matters. It has, for example, been
used to almost totally prevent the evasion of the Italian TV tax, with the amount of tax collected
increasing from €1.5 billion to €2.2 billion.
2. Next steps
The huge amount of data collected raises the question of what can be done with all this information.
We believe that data can be used for public policies or commercial purposes.
On the public policy side, the data has already been used as a proxy to tackle tax evasion or to
provide bonus payments. For example, low-income families are able to request a discount on their
electricity bills but, in practice, only about 35% of those who are potentially eligible actually submit a
request for the discount. By integrating the database with information on family incomes and profiles,
eligible consumers could automatically receive a discount on their bill, without having to submit an
application. That would be a major development in tackling energy poverty.
On the commercial side, there is clearly considerable potential for the data collected. To date,
consumers have not shown a desire to use the information at their disposal. Going forward,
the availability of data will hopefully allow consumers to fully understand their consumption paths.
This will enable them to become active market players, shaping the market according to their needs.
We therefore have to make data available to consumers in a manner that can be easily understood.
This will become increasingly important as Italy deploys its new generation of smart meters.
Once fully deployed in three years’ time, the SII will handle approximately 7,000 billion metering data
per year.
The regulated availability of data by operators will give suppliers the opportunity to better shape their
offers. Knowledge of consumption profiles will boost effective commercial policies and allow new
innovative entrants into the energy market. A world of innovative companies is already exploring the
use of this data, and the regulators have a relevant and challenging role to play in this transition.
In order to develop our system as a driving force for change in the energy markets, we aim to provide
our technical support to the government so as to protect the interests of both consumers and
companies. Italy has recently implemented data access for customers. At the same time, privacy
authorities are working toward a solution that will guarantee data protection and commercial
development.
The ultimate aim is that the liberalisation process will achieve the creation of a consumer driven
market. We are still in the early adopter phase of this process, and have not yet reached critical mass.
QUESTIONS & ANSWERS
Mihkel Härm, World Energy Council, Estonia
You referred to the emergence of new companies that are “nibbling” away at the market share of
incumbents. Will that also be the case for the grid itself?
Jens Weinmann, ESMT Berlin, Germany
On the one hand, we will continue to need a transmission grid at the national or regional level. At the
municipal level, though, different options will emerge, for example a residential unit could become a
micro unit in an increasingly autonomous network. There is a real possibility that the grid will become
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
15
less important with time. However, I believe that a significant portion of the system will continue to
require a grid, in particular in the urban context.
Mihkel Härm, World Energy Council, Estonia
You mentioned the emergence of ecosystem companies in all sectors. Will these be based on
existing incumbents or will we see entirely new companies emerging in the energy sector?
Emmanuel Fages, Accenture, France
Today’s incumbents have understood that the future does not lie in historical sources of value,
and they are trying to react to that notion. Are they best placed to set up this kind of ecosystem?
Not naturally, and it is very difficult to know if they will indeed succeed in doing so. Companies such
as ENGIE are already thinking in terms of platforms but we do not yet know if they will manage to do
this more rapidly or successfully than the newcomers.
Mihkel Härm, World Energy Council, Estonia
Will smart contracts also be part of Italy’s data platform?
Alessio Borriello, Acquirente Unico, Italy
The data platform should help develop these new contracts. Companies do not know enough about
their customers today, and they need to better understand the way their customers consume energy.
The huge amount of data we are collecting should allow them to do that
Mihkel Härm, World Energy Council, Estonia
Are there any start-ups active in this field?
Jens Weinmann, ESMT Berlin, Germany
The aggregators are currently still in their infancy stage. A company such as Next Kraftwerke has
been able to bundle a range of small players serving both supply and demand. A number of
consulting firms are also trying to enter this market, and we are seeing the evolution of completely
new types of business. As the barriers to market entry in the digital world are much lower than before,
the energy sector is very likely to be a market of great interest in the future.
Alessio Borriello, Acquirente Unico, Italy
A company in Germany is already providing these types of services for small business. In a next step,
the aim is to do so for households or individual buildings.
Isabelle Vincent, ADEME, France
We expect much change from the digital revolution, for example the new information available should
allow consumers to understand and change their consumption behaviour. However, sociological
studies in France have shown that providing information to consumers is not enough. They also need
human guidance to really change their behaviour. Have other countries given thought to the need for
both digital platforms and human intervention? In Germany, for example, it would seem that both are
being provided, and that this was crucial to success.
Emmanuel Fages, Accenture, France
The situation in France is quite different from Germany due to the fact that energy has always been
much cheaper in France. In Germany, industrials have been producing their own energy in a more
decentralised manner for some time. It is therefore easier for German customers to move to an even
more decentralised format.
Jens Weinmann, ESMT Berlin, Germany
I would respond on the basis of three narratives of the smart city. First, the innovation narrative.
We can all benefit of technical innovations that facilitate communication and allow for the optimisation
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
16
of, say, transport flows or energy use. Second, the empowerment narrative means that people,
enabled by digitalisation, can actively participate in communal life and collectively shape it according
to their ideas and visions. Third, the control narrative. There is considerable commercial – and
sometimes political – interest in data generated by the smart city, but we have to find societal
consensus where the limits on sharing and using that data should be.
Alessio Borriello, Acquirente Unico, Italy
The situation in Italy is quite similar to that in France. There are two trends at work here. On the one
hand, certain consumers want to do things for themselves with a high level of personalisation. On the
other hand, other consumers will require assistance and guidance. This raises the question of
whether or not it is possible for a supplier to provide such guidance. It could be that innovation helps
suppliers in this endeavour, and there is much that could be explored here.
Olivier Appert, Conseil Français de l'Énergie, France
Electricity represents only 20% of the world’s final energy consumption, and energy efficiency is
emerging as a major issue today. Is there anything new in technological terms with respect to energy
efficiency in industry, buildings or transport?
Emmanuel Fages, Accenture, France
Much has already been done in the energy efficiency sector to date, especially in the developed
world. The next stage is represented by load management (demand response) companies: these
already actively manage load demand for large industrials and they are now moving toward smaller
users. This next stage in energy efficiency is being enabled by new technologies. In transport, energy
efficiency will be achieved through an improvement in engines and the production of lighter cars.
We will also have to see the impact of new transportation technologies such as e-mobility.
In buildings, infrastructures are constantly being upgraded to produce their own energy and reduce
energy consumption through sensors and the Internet of Things.
Jens Weinmann, ESMT Berlin, Germany
Assuming that a major part of our electricity supply will come from renewable energies in the future,
there will be hardly any CO2 emissions linked to heating, air conditioning and ventilation if they are
fueled by clean power, especially with more efficient storage systems. Regarding mobility, China is
moving very fast on regulation to accelerate mass deployment of electric vehicles. The main initiatives
in this area will not come from our part of the world, but from emerging economies, such as China and
India. They will act as a trigger to drive mobility into different directions.
Alessio Borriello, Acquirente Unico, Italy
Energy efficiency cannot in fact be measured in Italy, and the information we have is based on
statistical methods only. Going forward, we could try to better measure the results of energy efficiency
actions taken. Using the huge amount of data available from our meters could help to suggest
different ways of using electricity and gas in consumers’ everyday lives. That information could also
be used to help develop energy policies.
Einari Kisel, World Energy Council, United Kingdom
In a context of such very fast moving technologies, what role should policy makers play? Should they
continue to draft new regulations for the new technologies as they emerge or should they simply give
up?
Alessio Borriello, Acquirente Unico, Italy
This question on the regulations is clearly central to our discussions. Regulators are keen to allow
changes if they understand who is in control. In blockchain, for example, the real question is who is
writing the algorithm. In Europe, it would be impossible to see any major change without the support
of the authorities.
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Jens Weinmann, ESMT Berlin, Germany
The energy policy triangle fluctuates between security of supply, environmental sustainability, and
affordability/efficiency. Whenever we go too far into one dimension, the others are neglected.
There will therefore always be some need for intervention.
Emmanuel Fages, Accenture, France
This is a difficult question. We need regulation to set the scene for what is possible. At the same time,
it is necessary to have both visibility and stability. We therefore need regulators that understand the
decision-making processes of the players involved in this industry.
Denis Bach, GEM, France
I have a question with respect to the blockchain concept. How does this actually work in practice?
How are payments made? Do users have access to information via an app?
Mihkel Härm, World Energy Council, Estonia
Jens Weinmann will provide you with this information over the coffee break. I will now close this
session and thank you all for your participation.
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Session 2:
Individuals and
collectives
behaviour:
new values
CHAPTER CONTENTS
Digital: My Energy My Way
Prosumage of Solar Electricity: Pros, Cons, and the System Perspective
The exponential prosumer: a quest for purpose in a digital world
Questions & answers
6TH EUROPEAN ENERGY FORUM: WHAT BUSINESS MODEL FOR ENERGY IN EUROPE?
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Session 2 – Individuals and collectives behaviour: new values
► Alain Chardon, Cap Gemini France
► Wolf-Peter Schill, DIW Germany
► Caroline Flaissier, Total France
► Moderator: Marco Margheri, World Energy Council Italy Italy
Marco Margheri, World Energy Council, Italy
I am very pleased to be participating in this meeting in France, a country that is currently leading a
wave of innovation in Europe. I will begin with a most abused quote in the energy sector, by OPEC
founder Sheikh Yamani. When asked if the lack of oil would lead to the end of the Oil Age, he replied
that humans did not move on from the Stone Age because they ran out of stones. Rather,
they stopped using stones due to a change in technology and behaviour.
Today, the Oil Age is progressively sliding into a new era. The factor that is still lagging behind is yet a
change in behaviour. That is, we already have the evidence of technology. 21 April 2017 was the first
day in history after the Industrial Revolution where the United Kingdom could spend 24 hours without
burning a single unit of coal for its electricity. In Italy, over ten years, the national transmission system
operator moved from having fewer than 1,000 inlets in the power grid to over 700,000. In Germany,
only roughly 1,000 hours were re-dispatched in 2014. Last year, around 8,450 hours required re-
dispatching. We are therefore clearly moving ahead in terms of technology.
However, are we already reaping all the opportunities of new business models? Hard to say so.
In February 2014, when Google acquired Nest, the industry thought that the world of traditional
utilities was soon to be over. In reality, it didn’t prove right and that ended up being a very
unsuccessful operation on Google’s side, probably due to an issue of behaviour and pace of change
in society. Business models and behaviours are therefore not moving ahead as rapidly as technology.
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Alain Chardon, Cap Gemini, France
DIGITAL: MY ENERGY MY WAY
I have worked in all fields of this sector, from generation, grids, supply and energy services. My point
of view is therefore that of an engineer, but I also have a more systemic view of the entire market and
its users.
The energy transition is based on consuming less, consuming better, consuming the right energy, and
flexibility – for electricity but also for heat and on. The key challenges for the energy transition are
therefore concerned with moving consumers and the industry around these four dimensions.
1. Newcomers to the energy field
We are seeing many newcomers in the energy field, in particular when it comes to electricity.
My clients were the usual players in this field: utilities, energy service companies, and equipment
makers. The newcomers include solar players who are going far beyond simply supplying smart
meters to their customers. Electric vehicle carmakers are also entering the market. Nissan, for
example, is now a major producer of electric batteries. In the future, Nissan Energy will propose smart
metering and smart home management. Other newcomers include supermarkets who are also
moving strongly on energy efficiency. All of these newcomers have succeeded in achieving the trust
of consumers.
When it comes to market segmentation, approximately 20% of households are ready to buy green for
environmental reasons. Another 20% are ready to change their behaviour if they gain an economic
advantage from doing so. 40% of households are simply followers, and a final 20% do not want to
bother with these issues at all.
In the past, electricity was a black box. Meters were read once per year and no one really knew or
was interested in knowing what it all meant. When smart meters were introduced, it was hoped that
they would lead to a reduction in consumption. However, even more importantly, smart meters will
provide visibility for electricity and that will be the real factor to drive change.
2. Digital technologies
Digital technologies are already leading to an evolution in the way that utilities and other players
construct their offers. For example, ILEK is a French platform for local electricity generation.
Consumers increasingly want to have access to local energy, rather than green energy per se,
and this is a very new idea on the market. ENERCOOP also provides energy close to the home,
and sells both electricity and energy savings. ekWATEUR is all about being digital and being local.
Direct Energie provides a standard green offer. ENGIE is more concerned with behaviour.
We can therefore see that, thanks to digital, all of these players are able to provide a mix of offers:
electricity from the grid, green electricity, energy efficiency, and so on. Digital also means that they
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are able to adapt their offers to consumer profiles. In the past, electricity was like a Ford T – you could
choose any car you wanted as long as it was black. Going forward, digital means that offers can be
highly customised. A recent Danone advertisement for yoghurt states that what it does on the inside
can be seen on the outside. Similarly, digital is not only concerned with making it easy to buy a
product online. It is also concerned with social media, mobility, analytics, prediction, the cloud and so
on. As such, digital means that consumers are able to buy energy in a way that reflects their own
profiles.
Marco Margheri
We have heard two very striking ideas. First, the move toward segmentation, customisation,
localisation and personalisation is really changing the way the energy sector works. Second, energy
has been ramped up in customers’ conversational agendas.
Wolf-Peter Schill, DIW, Germany
PROSUMAGE OF SOLAR ELECTRICITY: PROS, CONS, AND THE
SYSTEM PERSPECTIVE
I will be focusing on a recent article published in Economics of Energy and Environmental Policy
2017, which provided a qualitative discussion of prosumage from an economic perspective. It also
provided a quantitative illustration of selected system effects. Prosumage is potentially an important
driver of change in the electricity sector. We can draw on our article to explore the question of what
drives individuals – and partly also policy makers – in favour of prosumage.
Prosumage is defined as a combination of the PROduction of renewable electricity, the conSUMption
of self-generated electricity, and storAGE to temporally align supply and demand. Prosumers produce
their own renewable (PV) electricity at some times. At other times, they draw electricity from the grid,
they feed electricity to the grid, and/or they make use of battery storage.
1. The pros and cons of prosumage
The pros and cons of this concept will depend on whether one takes the perspective (a) of
consumers, (b) of the incumbent industry or emerging players, or (c) of the electricity system.
The arguments in favour of prosumage include, amongst others, the following:
• Consumer preferences for local renewable energy solutions or self-generation. There is some empirical evidence for this from international studies, in particular in Germany, but it is not
completely clear if this applies to a majority of consumers or only to a small niche.
• Participation in and acceptance of energy transformation. It is hoped that decentralised infrastructures could mitigate some of the perceived problems of centralised grid
infrastructures such as transmission expansion projects. Prosumage is also seen as a way of
realising the PV potential of rooftops.
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• Lower and less volatile electricity costs. This is a key selling argument for PV battery storage systems – yet it is only valid from a consumer perspective and not necessarily from a system
perspective. In addition, it is only true for the self-generated share of electricity.
• Distribution grid relief. The distribution grid benefits will depend heavily on the way the battery is operated.
Other arguments in favour of prosumage include the activation of private capital; improved system
flexibility, sector coupling and energy efficiency; transmission grid relief; increased competition; local
benefits; and political economy and new institutional arguments.
The arguments against prosumage include:
• Efficiency losses as compared to centrally optimised power systems. Prosumage systems tend to be sub-optimal both with respect to investments and dispatch. They can lead to the
setting up of redundant infrastructures.
• Distributional impacts. First, there is the question who is able to engage in prosumage. If only those who are well off enough to own a rooftop are able to engage in prosumage, this can
lead to distortions. Second, there is a potentially regressive effect related to volumetric grid
charges and other surcharges for electricity drawn from the grid. This is also related to the so-
called “utility death spiral” phenomenon: the same grid costs are increasingly allocated to
fewer and fewer customers, creating further incentives for self-consumption. Yet to put things
into perspective, the size of the prosumage market segment is relatively small and its
distortionary potential is therefore not very large.
Other arguments against prosumage include rebound effects; path dependency; and concerns about
data protection and remote control.
2. Prosumage in Germany
Germany has both indirect and direct support mechanisms for prosumage. Indirect support is related
to recent developments in feed-in tariffs (FITs), the levelised cost of PV electricity (LCOEs), and
household tariffs. Traditional consumers pay volumetric grid charges and a volumetric renewable
energy surcharge. These charges do not apply to self-generation. In recent years, there has been a
strong decline in FITs and LCOEs as compared to household tariffs, which provides increasing
incentives to engage in prosumage.
In addition, Germany provides direct support for prosumage. The “KfW Programme 275” provides
subsidised loans and investment grants for PV storage systems. This programme is linked to
conditions that incentivise the system friendly design of installations. This has led to substantial
deployment in Germany. As of 2015, every second new small-scale PV system was installed with a
battery. As of January 2016, there were approximately 34,000 such systems in operation, a figure that
has risen to around 60,000 today. Moreover, there is substantial additional potential when increasing
PV capacities drop out of the support scheme after the mid-2020s.
3. Conclusion
In conclusion, prosumage is still a niche in Germany, but one that is growing strongly. Ongoing trends
in battery costs, household tariffs and feed-in tariffs could drive prosumage even further in the future.
Large PV capacities will drop out of support schemes before the end of their technical lifetimes,
and these are likely to be equipped with batteries. At the same time, it is not clear how the regulatory
framework will evolve with respect to FITs, grid fees, and grid codes.
It would be of value to have more research to quantify the effects of prosumage, as the empirical
evidence is rather weak today. Finally, model illustrations show the importance of system friendly
prosumage behaviour. Regulation should therefore aim at making the flexibility potential of these
systems available to the fullest extent possible. As such, prosumers should receive the right price
signals, either directly, or indirectly via aggregators.
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Marco Margheri, World Energy Council, Italy
Thank you for that systems perspective, which highlights the importance of political implications and
social beliefs.
Caroline Flaissier, Total - Gas, Renewables & Power, France
THE EXPONENTIAL PROSUMER: A QUEST FOR PURPOSE IN A DIGITAL
WORLD
Everyone in this room has a point in common. We all want to address a number of key challenges:
demographic challenges, economic challenges, and environmental challenges. In 2016 Total set up
its Gas, Renewables and Power branch, aimed among others at developing new solutions for our
Group in this area.
1. The race for data
According to research by Deloitte, 8 out of 10 people check their phones less than 15 minutes before
brushing teeth. 52% of users check their phones less than 5 minutes before they go to sleep.
This means that enormous amounts of data are being generated, and we face a huge challenge with
respect to what can be done with that data.
Today, the GAFAs (Google, Amazon, Facebook, Apple) are driving this data race. These companies
are setting the marketing and customer relationship standards as we move forward. In the past, we
spoke about customer profiles, had different customer segments, and so on. Today, that is no longer
the case and our focus has shifted to customer behaviour. We ask ourselves, “what does our
customer like?” To answer that question, we have to know more about our customers and the way
they consume, and we have shifted from CRM systems to data management platforms.
2. Adapting to a new environment
Traditional companies are having a hard time adapting to this new state of affairs.
Customer satisfaction is down, as customers search for a genuine customer experience rather than
simply buying a product or service. Retail satisfaction in the UK fell from 78% in 2013 to 53% in 2014.
Customer expectations are therefore higher than they have ever been, and customers are more and
more demanding. They want to be able to take action on a multichannel basis. They want security,
reliability, efficiency, speed and flexibility. They want a seamless and simple process, and a
customised offering.
The customer also has certain beliefs. Some want local energy; others want green energy; some want
to be able to offset their greenhouse gas emissions; others want to produce their own energy or
engage in the production of community energy. We therefore have to be able to address all of those
beliefs and expectations.
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We are moving toward a concept of purpose-driven companies, with consumers seeking meaning in
all they do. In a world made transparent, it is very important that the inside of a company is aligned
with its outside. This requires flatter corporate organisations, and greater transversality. It also implies
new management and human ressources practices, and increased openness. In summary, we need
to create a new type of ecosystem that is much more open to the rest of the world.
3. Open innovation
In this context, Total Gas, Renewables & Power is using open innovation as a key growth driver.
That means working with many new players and start-ups, and allowing ourselves the possibility to
fail fast to learn fast. By working together, we can learn much about our own business and accelerate
the creation of new start-ups. We recently launched a programme with a US accelerator and
companies such as Renault, FDJ, Groupama and Air Liquide. The aim is to accelerate 10 start-ups
each year in disruptive areas such as the Internet of Things, big data or blockchain, and so on.
We also launched our internal Innovathon in April 2017, which led to the identification of two new
products that can rapidly be included in our offers, as of this year.
Marco Margheri, World Energy Council, Italy
Thank you for demonstrating that incumbents can indeed do things differently as fast-moving start-
ups to adapt to this new era.
QUESTIONS & ANSWERS
Carsten Rolle, Weltenergierat, Germany
I am rather confused. On the one hand, the electricity market is more and more segmented; it is no
longer a commodity in economic terms. On the other hand, there may not be as much differentiation
as we think. In addition, when it comes to investment – in particular households investing in PV and
storage (batteries) – they do so not on the basis of a rational economic decision. That is, consumers
are less rational when producing electricity than when they buy electricity from third parties. What are
the key success factors here? Why does price differentiation not work as well for regionally produced
versus nationally produced electricity? Why are these markets so different?
Alessio Borriello, Acquirente Unico, Italy
Customers want a lot of things, many of which are contradictory. However, who will ultimately pay for
all this?
Volahasina Rasendramalala, L2EP, France
Do you believe that the logo “My Energy, My Way” is an illusion? From a technical point of view,
we cannot really give the customer what they want; we can only give them a “more or less” solution.
Marco Margheri, World Energy Council, Italy
As to the question of finance, we have to distinguish between 1 MW of centralised power and 1 MW
of decentralised power. In one case, we are dealing with corporate or state finance. In the other,
we are dealing with retail finance. A much bigger share of the total value therefore remains in the
financial system. That can create marketing opportunities but it has to eventually be factored into the
algorithm of whether or not the consumer benefits from this.
Wolf-Peter Schill, DIW, Germany
Regarding financing, in the current low interest environment, capital should not be a bottleneck for the
energy transformation. Nonetheless, the activation of private capital is a good thing and should not be
prevented. In general, consumers should receive the right price signals for the electricity they
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consume from the grid and for the electricity they feed to the grid. Otherwise, good capital may be
raised for inefficient investments. Consumers may not always be rational, and some early adopters
have invested in storage systems that are not economic. The evidence suggests that there may be a
more or less silent majority that does not really care about these new ways of engaging on energy
issues.
Caroline Flaissier, Total - Gas, Renewables & Power, France
The finance needed to start a new business often comes from corporate sources. Digitalisation will
add an initial cost to that, but will significantly lower downstream costs such as customer support.
As to what the customer wants, they want it all: lower costs, more customer services, greater
flexibility, ease of use, low-carbon solutions, and so on. This is the case for customers worldwide, and
it is up to us to find a solution to that.
Alain Chardon, Cap Gemini, France
Is electricity a commodity or not? Today, we are still not seeing what we consume. When we are able
to do that, it will be less and less of a commodity: the more we know about the electricity we are
buying, the more we can make decisions about it. As to how the transition will be financed, there are
two questions that we must address. First, what is the intrinsic value of the change? Second, what
can it contribute today according to existing business models?
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Session 3
Electricity:
business models
and market design
CHAPTER CONTENTS
Digitalisation of the Energy Sector: case study of Estonia
New business models to value flexibility in electricity markets
Energy Transition or Electricity Transition?
Questions & answers
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Session 3 - Electricity: business models and market design
► Karla Agan, Estonian Energy Estonia
► Fabien Roques, Compass Lexecon & Université Paris Dauphine France ► Volker Stehmann, Innogy Germany
► Moderator: Jean Eudes Moncomble, Conseil Français de l’Énergie France
Jean Eudes Moncomble, Conseil Français de l’Énergie, France
This session will be dedicated to the link between business models and market design, specifically
within the electricity sector.
Karla Agan, Estonian Energy, Estonia
DIGITALISATION OF THE ENERGY SECTOR: CASE STUDY OF ESTONIA
Estonia has a population of only 1.3 million, so we don´t have a huge so-called budget at our
disposal. Estonians have a pragmatic mindset and are very smart about what we do.
Enefit is Estonia’s national, vertically integrated energy company responsible for mining, logistics,
generation, maintenance, power sales, renewables, distribution and energy trading in the Baltic Sea
region. Enefit has introduced digitalisation to all levels of its business, from production to the smart
grid, and sales & service, and this is changing the way our business processes work. Technology is
only the last step in this process: the real challenge lies in making the initial decision to change.
1. Introduction of smart meters
Enefit launched the “Industry 3.5” programme to improve the efficiency of its production chain.
In terms of the smart grid, Estonia decided to introduce smart meters to its entire network:
over 600,000 metering points. Estonia is one of the most liberal electricity markets, and switching
suppliers is extremely easy. All consumption data is collected in a central data hub that is managed
by the Estonian transmission system operator (TSO), as a neutral party. Every seller who wants to
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enter the market is able to access customer data (with customer permission), and make a personal
offer on the basis of that data. As of 2017, the data hub also includes gas consumption data.
What was actually gained from this programme? First, network losses were reduced by 20%,
from 5.7% in 2012 to 4.1% in 2016. Customer satisfaction was increased from 39 points in 2012 to
52 points in 2015. Finally, customer inquiries were reduced by 50%. The whole smart meter
programme cost approximately €100 million but the investment pays off in less than 7 years.
Today, smart meters do not only measure consumption data. They can zoom into each consumption
point (household, town, village, region) and identify issues, which can then be communicated to the
relevant consumer. This enables preventive maintenance. In addition, the data can show us where
and when we need to invest in the grid. It can therefore optimise investment costs, further
demonstrating the excellent business case of this programme.
2. Digitalisation
The data hub is operated by the national TSO. It contains personal data on consumption, calculates
amperage levels, and provides tools for bundling electricity agreements. It is used by service
providers to build new services to customers.
Estonia has a very active market in which switching is easy. As market awareness grows, we can see
an increased proportion of agreements based on spot prices rather than fixed prices: one-third of all
electricity contracts today already use spot prices.
In terms of the retail business, the use of digital began in the 2000s. Today, 90% of all electricity
contracts are signed digitally. Over 90% of all invoices are sent and received digitally, and 30% of
consumers visit our e-channels at least once a month. We have also become more mobile: 8% of
customers have now downloaded the Enefit app, which will include a gas functionality later this year.
The app provides price updates for the next day, consumption history and data, price alarms, and
billing information and payments.
In summary, we have named our digitalisation experience “e-Energy”. Making this change was all
about policy and change management. The technology itself is in fact the easiest part of the process;
the real difficulty lies in developing the right regulatory framework and changing people’s mindset.
Estonia was able to set up the right regulatory framework to allow the market to function correctly.
Of course, doing that at the country level is a huge task, especially for bigger countries such as
France or Germany.
3. Discussion
Jean Eudes Moncomble, Conseil Français de l’Énergie, France
You noted the need for the right regulatory framework. How would you define such a network?
Karla Agan, Estonian Energy, Estonia
The right regulatory framework is concerned with putting incentives in the right place. If that is
successfully done, it will be clear exactly who is responsible for what. It is, of course, difficult to agree
on in-country or cross-country regulation. It would therefore be valuable to have case studies at the
local level that demonstrate the benefits of a given approach.
Volker Stehmann, Innogy, Germany
One-third of your customers are using spot based tariffs. How much do they actually save by doing
that?
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Karla Agan, Estonian Energy, Estonia
It all depends on the time period being analysed. Nordic countries have had spot prices for the past
15 years, and these have fluctuated immensely. Sometimes the consumer wins; sometimes they lose.
Most consumers still prefer fixed prices, and we predict that it will be the case for many years.
Philip Lowe, World Energy Council, United Kingdom
Who has access to the consumption data from the smart meters? Is it necessary to regulate access to
data?
Karla Agan, Estonian Energy, Estonia
With the permission of the consumer any electricity seller can have access to the consumption data
for the purpose of preparing the sell offer.
Didier Sire, World Energy Council, United Kingdom
Culturally speaking, it would be difficult to practise spot prices in France. Did you experience any
reluctance from consumers in Estonia with respect to spot prices?
Karla Agan, Estonian Energy, Estonia
Initially, very few customers were willing to take the risk on the spot market. The difference for
consumers is probably only about €2 per month, which is quite negligible. However, larger consumers
and companies can save more. Frankly, consumers do not think much about electricity in their day-to-
day lives. It all depends on how informed the society is. In Estonia, we organised an active
information campaign for our consumers when electricity market opened. Of course, that is more
easily done in a small country.
Fabien Roques, Compass Lexecon & Université Paris Dauphine, France
NEW BUSINESS MODELS TO VALUE FLEXIBILITY IN ELECTRICITY
MARKETS
I will talk about new business models as they relate to changes in regulation and market design.
When we talk about digitalisation, we are in fact putting in place machines and processes that will do
things for us in our place. Regardless of whether we are using a human or a machine, we need a
signal to which that human or machine can react. That signal is pricing. We can therefore say that the
foundation of the new digital world is having the right price signals so that machines (and humans)
can react as desired. This is not just a question of technology. It is not just a question of business
models. It is a question of having the right price signals to react.
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We are all aware of the “death” of the traditional business model for European utilities. The profitability
of the traditional business models has fallen in recent years, as margins upstream have collapsed due
to the drop in power prices. This has led to over €100 billion of impairments by companies since 2010.
This is not only a transitional trend but a structural issue that undermines the sustainability of
investments in generation.
1. Changes to market design
What changes in market design can we use to enable the energy transition? In the 1990s and early
2000s, the focus of policy makers was on the integration of EU wholesale markets. There was a
dominance of variable cost technologies, and a focus on optimising existing networks. Today, the
focus of policy making has shifted to (a) decarbonisation, and (b) security of supply. On the
technology side, the focus has shifted to decentralised generation and storage, both of which are
fixed cost technologies. Networks are deploying smart technologies and, on the market side,
the focus is on consistency between retail and wholesale markets.
When it comes to the upstream or wholesale market, we need a signal for short-term dispatch and
long-term investment planning. In the old world of vertically integrated utilities, both short-term
dispatch and long-term investment decisions were centralised. In the past 10 years, this has become
decentralised: prices on the wholesale side determine both short-term dispatch and long-term
investment. However, that is no longer true. 80% of European investments in generation have been
financed by long-term contracts. We are therefore in a hybrid situation based on decentralised price
signals and centralised planning processes, both of which provide short-term and long-term
coordination. Another dimension of that is whether we can provide consumers with direct access to
wholesale markets. In some countries, we have seen the emergence of aggregators who provide
such direct access. However, the vast majority of EU countries do not allow aggregators.
When it comes to the downstream or retail market, we need to decide on the price signals for
prosumers. The main issue we face is whether electricity will continue to be sold under commodity-
based pricing, or whether it will shift to service-based pricing. In a world of service-based
consumption, who will receive the price signal as the consumer will no longer care about the price of
electricity? We also have to consider the question of prosumer activity: to what extent are consumers
ready and willing to self-produce? If we have a mix of highly engaged prosumers and other
consumers who are not engaged, some will react to the retail price and others will react to other
signals.
In terms of market design and regulation we therefore face a very complex situation. We talk a lot
about business models, but we should ask whether these models are opportunities under today’s
system or whether they are really sustainable in the longer-term. Unfortunately, the vast majority of
business models we see today are based on shaky foundations from an economic point of view.
2. Emerging business models
New business models are emerging upstream in the value chain with respect to flexibility. When it
comes to monetising flexibility in electricity markets, we know that there are five key sources of value:
capacity, reserves, energy, network, and environmental. The key is to find a combination of these
different revenue streams, but that combination is highly market dependent. Certain models will make
sense in one country and others in other countries.
Such new models monetise distributed generation, storage and demand response. In this, it should
be noted that it is possible to dematerialise the value chain, and create value not in the ownership or
operation of an asset but in its optimisation. Many companies are already operating on these new
business models today.
New business models are also emerging downstream in the value chain, and these are centred on
consumers. Here, the key issue is to develop an interaction platform between (a) prosumers,
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(b) energy service companies, and (c) network operators. The traditional role of network operators
and utilities will have to be reconciled with the emergence of new platforms, and the key challenge
here is to limit the “des-optimisation” of the system.
3. Conclusion
Consistency in price signals across the retail and wholesale markets is key today. The three EU
legislative packages in the 1990s and 2000s focused almost exclusively on wholesale markets.
This is because the price signal needed to integrate European markets was a wholesale price signal.
There was never an attempt to harmonise taxes or network charges across Europe.
The rise of prosumers and decentralised resources represents a radical disruption that requires a
fundamental re-thinking of our approach to market design: it requires us to think about the retail price
as the main price signal. Our key objective is therefore to ensure consistency across retail and
wholesale market price signals.
Network charges have to evolve in order to reflect cost structures and the increased weight of fixed
charges. They also need to evolve in order to provide consumers with geographically differentiated
and dynamic price signals.
Finally, we have to radically re-think energy taxation and funding for decarbonisation. We have to
reduce or remove the taxes on production and raise taxes on electricity consumption.
Volker Stehmann, Innogy, Germany
ENERGY TRANSITION OR ELECTRICITY TRANSITION?
We are in a world where decarbonisation, decentralisation, and digitalisation are on the way to
transforming the world of energy – the so-called 3 D’s. This is fundamentally changing all of our
energy systems.
1. Innogy overview
To address these changes, RWE decided to set up Innogy in 2016 as a blueprint utility for the new
energy system. It thereby divided its activities in two. RWE continues to be responsible for
conventional production (nuclear, coal and gas), large-scale storage, and trading. Innogy is
concerned with the downstream part of the value chain: distribution networks, sales, and production of
renewable energy.
Innogy is now a major European energy utility company. It is n°5 in terms of renewable production in
Europe, and N°3 in terms of offshore wind production. In Germany, it is the top distribution grid
operator. It is most important markets are Germany and the United Kingdom, but it is also present in
Spain, Poland, the Netherlands and France. It has approximately 23 million customers in
11 European countries. As well as setting up this new company, we also changed our mindsets.
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We now have a more decentralised perspective on our activity, which represents an important change
in the way we see the world.
We offer future-oriented energy products and services to our customers. These include e-mobility
services in the form of over 5,400 charging points in over 20 countries, or connected home units
(800,000 units sold). We also provide energy management solutions including energy audits,
maintenance and repair. We follow technological developments very closely, with offices in the
world’s global hot spots for the energy revolution, namely, London, Berlin, Silicon Valley and Tel Aviv.
Our start-ups provide solutions to meet the needs of customers, for example MOVE 24 (an innovative
removals service), Heliatek (organic electronics) or Lemonbeat (an IoT protocol).
I believe that, today, RWE and Innogy are working more efficiently than they did in the past.
The separation of our company into two different activities has therefore been a very positive step in
our history.
2. The challenge of system integration
Are we really talking about an energy transition or an electricity transition? We know that there has
been a steady growth of renewables in Germany and elsewhere. Furthermore, the production costs of
these renewables have significantly declined. The German renewable support scheme (EEG) was
very successful in boosting large volumes of renewable energy into the system, and renewables
represented over 32% of all gross electricity consumption in 2015.
However, this rapid growth in intermittent renewables was not accompanied by grid expansion.
Going forward, there is therefore a growing need to counterbalance grid congestion through the
curtailment of renewables and the re-dispatch of conventional plants. The 2017 EEG has in fact
restricted grid expansion areas in the North Sea, for example. In addition, more and more consumers
are producing their own electricity, as a way of reducing their electricity bills.
3. The energy policy compass
Now that we are an independent company, we sought to determine what our political position should
be with respect to the energy sector. Innogy’s “Energy Policy Compass” is based on its overarching
policy target of decarbonisation. On the technology/fuels side, this means more renewables, more gas
downstream, combined heat and power, and improved energy efficiency. On the framework side,
this requires decentralisation, digitalisation, and European integration. Overall, the key driver here is
sector coupling, which is a major focus for our company.
There is potential for more electricity in the system. Today, the overall share of electricity in end user
energy demand is relatively low: approximately 20%. It would be possible to replace approximately
two-thirds of non-electric energy with electricity. This is especially the case in the heating and
transport sectors. A pre-condition for this to occur is a level playing field of taxes and levies on energy
carriers.
It should, however, be noted that this does not necessarily mean we want an “all electric” system, and
decarbonisation also requires the development of “green” fuels. Gas also has to a play a key role
going forward and, to that end, it needs a convincing greening story.
In conclusion, we can see that the world of energy is moving rapidly. Innogy was set up to address
that move, and the trends that we are seeing emerge and develop today.
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QUESTIONS & ANSWERS
Jacques Percebois, CREDEN, University of Montpellier, France
We have heard a lot about a possible rapprochement between Innogy and ENGIE. What is Innogy’s
strategy with respect to ENGIE?
Volker Stehmann, Innogy, Germany
We do not have a specific strategy with respect to ENGIE, and I do not have any information on this
subject to share with you today.
Richard Lavergne, Economy and Finance Ministry, France
Are the various business models presented equivalent in terms of their total social costs for the
economy as a whole? In the 1990s we were told that liberalisation would be profitable for consumers.
However, that was not really borne out in our electricity bills. If the costs of the new business models
are to be borne by taxation, that should be made clear to policy makers.
Fabien Roques, Compass Lexecon & Université Paris Dauphine, France
There are two issues at work here. First, taxation remains the responsibility of each individual country
in Europe. If taxes to support decarbonisation constitute the majority of what one pays for electricity,
consumers will be able to bypass those taxes through self-production, for example. Second, the use
of taxation makes electricity proportionally more expensive than other fuels, some of which are not
carbon free.
If the energy transition is considered a public good, then the cost of that transition should be borne by
upstream taxation on production rather than a tax on consumption. The simple answer is therefore to
pay for renewables not through a levy on one’s electricity bill but through the general state budget.
That is far more efficient than continuing with the biased incentives that are part of today’s system.
Volker Stehmann, Innogy, Germany
This very discussion is currently underway in Germany. We have a multitude of different taxes and
levies on electricity in Germany. The highest is the renewables surcharge (approximately €0.06 per
kWh). Ideas have emerged to take at least part of that out of the electricity bill and finance it via the
state budget. Denmark, for example, is changing its system in that direction.
Einari Kisel, World Energy Council, United Kingdom
As long as we have renewable subsidies, producers will have an incentive to be part of the grid. It is
therefore necessary to be in the grid to obtain a subsidy but this, in turn, increases the amount of
taxes and subsidies to be paid. If subsidies are discontinued, there will no longer be an incentive to
connect to the grid and we will see the emergence of off-grid solutions. Would you agree that that is
the case?
Fabien Roques, Compass Lexecon & Université Paris Dauphine, France
We are already seeing early signs of this. Large industrial companies are signing deals with
renewable providers, and building private cables to onshore or offshore wind farms. That allows them
to bypass grid connection and usage charges, as well as associated taxes. This could make sense if
the needs of these companies are sufficiently distinct from the needs of others. However, it also
means that we are losing the driving force of having a network: mutualisation and sharing. How can
we keep some of the benefits at least of mutualisation in a new world in which many players have an
incentive to get rid of the grid?
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Volker Stehmann, Innogy, Germany
We are also seeing this trend in Germany. There is not yet a level playing field here but the theory
behind this is quite convincing.
Philip Lowe, World Energy Council, United Kingdom
Given the three major trends in the market (decarbonisation, digitalisation and decentralisation),
I would have expected that the major European utilities would have diversified their portfolios toward
an “energy services” offer, rather than separating out their renewable and conventional portfolios.
Would such a diversified portfolio not be less risky and more robust for these utilities?
Volker Stehmann, Innogy, Germany
Separating out the business alone will not improve profitability. However, it does make one more open
to different ideas and concepts, and more open to taking risk. Moreover, the two businesses are
aimed at very different customers and there is less of an “integration premium” than in the past.
I understand that E.ON has also taken a similar approach.
Fabien Roques, Compass Lexecon & Université Paris Dauphine, France
German companies have not simply split off the new world from the old. Rather, the types of
consumers they serve have changed radically. The old business was very much based on the
wholesale market, and integration of the value chain. The new business is focused on the end
consumer. That requires a different company structure and a different company culture.
Therefore, the two types of companies both have a future but they have an inherently different way of
creating value.
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Session 4
Centralised versus
decentralised
CHAPTER CONTENTS
The perspective of a Fench distributor
The perspective of a Portuguese distributor
The perspective of a French multinational
Panel discussion
Questions & answers
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Session 4 – Centralised versus decentralised: workshop by the World Energy Council
► Jean-Baptiste Galland, Enedis France
► Grzegorz Gorski, ENGIE France
► Ricardo Prata, EDP Distribuição Portugal
► Moderator: Philip Lowe, World Energy Council United Kingdom
Philip Lowe, World Energy Council, United Kingdom
In this session, the World Energy Council is looking forward to feedback for the preparation of this
year’s Trilemma Report and Trilemma Index, the major theme of which is centralisation versus
decentralisation. Is this simply a question of centralised supply versus decentralised generation?
Does it mean central planning rather than decentralised planning? Does it consider the demand side
of energy at all?
In the earlier sessions, we saw that there is a renewed focus on consumers, and on energy services
as well as energy. The transformation occurring across energy systems is therefore not only about the
technological shift from thermal and nuclear to renewables; we are talking about centralised or
decentralised systems. That means that we are not simply talking about the technicalities of energy
but also about the politics of energy. We also need to ask whether the market for energy is a
wholesale or retail market. How do the different changes on the generation and system sides impact
on systems as a whole? What models and systems should we be moving to in order to meet the
objectives of the trilemma: sustainable, affordable and secure energy systems?
THE PERSPECTIVE OF A FRENCH DISTRIBUTOR
Jean-Baptiste Galland, Enedis, France
Enedis is France's largest distributor, distributing electricity to 95% of the French population. We have
to consider the question of centralised versus decentralised in an evolving context marked by two
main characteristics. First, people are now very much aware of global warming, particularly in the
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post-COP21 context. Second, it is now possible to share information very rapidly and very efficiently
thanks to the digital revolution.
France has been undergoing a significant change on the distribution side. It now has 20 GW of
renewable energy connected to the distribution network, and that will be more than doubled by 2020-
2025. We have therefore made a great deal of progress in this area. In the past, the system was
based on adapting supply to demand.
The advent of electric vehicles is also having an impact on the system. There was a 50% increase in
the number of electric vehicles in France in the past year alone (103.000 EV by the end of 2016).
France has 100,000 charging points today, with 7 million expected by 2030. France has already
decarbonised its energy sector, and now needs to decarbonise its transport sector. The use of electric
vehicles is an important means to that end as transport is the second greatest generator of
greenhouse gases after energy.
Going forward, it is demand that will be adjusted. That’s the reason why the energy transition is also
concerned with an increase in flexibility, from 2 GW in flexibility today to 6 GW. This requires the
deployment of 35 million smart meters by 2021, and the reduction of energy consumption by 12.3% in
2023 compared to 2012. Smart meters should make it possible for consumers to make informed
decisions and better manage their consumption.
Is energy transition an economic, technical or political question? As a national distributor, we have
always been concerned by the political dimension of these questions. Going forward, we will have to
address two new factors: the technical-economic challenge of an increasingly flexible network,
and the challenge of organising coordination between the different components and different levels of
the system. All of this goes much further than the challenges we faced in the past.
In terms of pure distribution, we have a very clear transformation plan. First, the network must be
managed in an active and not a passive manner. Second, we have to provide information to all
players related to our business and not only to consumers. Third, we need to facilitate the operation of
energy markets. This is particularly important for France, which is a very market-oriented country.
Finally, we have to ensure that the system is safe and secure. In the past, managing distribution
networks was relatively simple: it was an “invest and forget” matter. However, we now need to ensure
the safety and security of the system at the local level. That is part of what we call the distribution
system operator (DSO) model.
Another important aspect is to ensure a good relationship with the regulator. The fact that we are
undergoing rapid changes means that there are many tensions in the system. We therefore need to
try out new ideas and resolve any problems that are encountered. Finally, the question of investments
is also important, especially in a system that includes regulated stakeholders and competitive players.
In that context, we need clear and efficient economic signals that address the free rider issue in
particular.
I will close with a quotation from Elon Musk who stated that, “energy providers have only one solution:
to act like new entrants and to re-think business from end user needs, ignoring burdens associated
with the existing construction (technological, regulatory or otherwise) that as to evolve or is to do so”.
Philip Lowe, World Energy Council, United Kingdom
You noted the interaction between competitive frameworks and regulatory frameworks. Is it not
necessary to ensure that the distributor is not the only actor with access