The Energy Market is Dead, Long Live the Energy Market
- Aug 24, 2017 10:04 pm GMTAug 24, 2017 9:42 am GMT
- 3901 views
The old energy market is on its deathbed. The cause? A combination of advancements in technology, the rise of renewable energy, the peer-to-peer movement and the increasing availability of microgrids.
In its place, a new energy market is being born. One in which innovative energy providers are embracing the very things that drove those changes, and seeking ways to combine consumers’ engagement with renewable energy with the commercial need to provide a secure, reliable power supply. In this new market, energy providers understand that some of the power is literally in consumers’ hands.
It all starts with residential solar power generation. Solar panels, when combined with batteries, digital meter readers and existing infrastructure, create microgrids that provide a fully sustainable renewable-energy micro-habitat. Consumers can generate solar energy, store it in batteries, and sell any surplus to their neighbours.
In the absence of a commercial energy provider to manage these transactions and track the associated consumption are blockchain-enabled peer-to-peer energy trading platforms. Blockchain technology, originally developed to support cryptocurrency transactions, provides a transparent, tamper-proof digital transaction ledger. In this new, emerging market paradigm, the role of established energy providers is irrevocably changed. While still a dominant force in the market, established energy suppliers are no longer the only option. Consumers who seek more transparency, and wish to take a more active role in local energy markets, now have an opportunity to do so.
However, this new market brings with it a significant uncertainty: who will fund the necessary infrastructure investment? In the old-world paradigm, energy providers also assume some level of responsibility for the networks, either directly or via established commercial relationships. But as consumers increasingly move towards generating their own power, energy companies’ profits will decline. Furthermore, it will be difficult for the utility companies to justify continued investment in 50-60 year central assets while customer volumes decline. Already many network businesses are refusing to make 5- and 10-year investments of this kind, due to the accelerated pace of evolution in the market. Times have clearly changed, and it’s time that energy companies change their thinking too.
Energy companies still see themselves as the central planners, controller of investments and generators of power. While this was once true, it is no longer. It’s time to accept that consumers are investing in the means to generate, store and distribute renewable energy, enabling them to operate entirely off-grid, and to facilitate others doing the same. It’s time for energy companies to seek ways to cooperate with consumers, and find opportunities for joint investment.
Both energy companies and consumers have a vested interest in the continued operation of energy networks infrastructure. And so, both parties must find a way to invest in their maintenance and development, in a way that reflects the new market dynamics.
Consumers have little understanding of network development and maintenance, and even less incentive to find a way to pay for what they don’t understand. While going entirely off-grid is not yet a possibility for the majority of consumers, the pace of technology developments mean it will one day be a possibility.
So the onus is on the energy companies: the incumbents, who have the deepest understanding of the matter, the deepest pockets to fund it, and the most to lose if they don’t find a new way forward. Exploring new, cooperative commercial models for funding network infrastructure is a critical step towards retaining market share, relevance and survival in the new energy marketplace.