2017 was a landmark year for the power sector. 2018 will be no less significant. Here is a roundup of five energy trends to keep an eye on in 2018.
Renewables: uneven deployment, continued cost reductions
Deployment of renewables will continue in Europe, but with an increasingly asymmetrical pattern. Some markets – especially in Western Europe – will see strong deployment. Others, especially in Eastern Europe, will come to a grinding halt.
The cost-reductions of variable renewables will continue and consolidate. This will be reflected in new subsidy-free deployment models from Dutch-style zero-bid auctions to corporate power purchase agreements and purely merchant projects. Yet, paradoxically, the decisive factor in renewables expansion will be politics, not economics.
As Member States reach their EU mandated targets, some drop the necessary enabling frameworks in order to slow expansion. In some countries, we have seen retroactive changes and even de facto bans on specific renewable technologies.
In parallel to the EU-level targets debate, we need to increase focus on investment barriers in Member States. Consistent, predictable frameworks are needed and targeted measures to tackle public acceptance and permitting barriers will be crucial for continued renewables deployment.
Batteries on the rise, but hydro stays king of storage
The strategic importance of storage will crystallise further in 2018 and we will see a number of significant developments in the storage space.
The drop in battery costs will continue. Ion-lithium batteries will outpace the forecasts again and we will hear more of new battery technologies. We will also see other technology strands mature further – thermal storage and power-to-X will become a more established part of the discussion.
Nevertheless, hydro will stay king of storage. In terms of installed capacity, flexibility specs and bulk potential. In several European markets, there is an untapped potential both technically and economically, for increasing hydro capacity, through repowering and new projects, that deserves more attention. The additional feasible hydropower potential in EU-28 exceeds 650 TWh. That is equivalent to the gross electricity production of Germany.
The changes caused by digital technologies will bring benefits to all parts of the value chain from generation, to distribution and retail and will deepen to a point where they alter the DNA of utilities. Some companies are already redefining their identity from utility to tech company, revamping their strategy, products and business models fundamentally.
Customers will see direct benefits from the digital revolution. More choice and tailored products. New services in mobility, smart home control and decentralized energy system management. Improved customer journey. The list continues.
But action will be required to remove regulatory barriers and unleash the full potential of digitization. A hypothetical, but realistic example: A Dutch utility has a large customer base in Germany, but wants to centralise data operations and run their cloud from a datacentre in Denmark. Technically, moving digital customer profiles between two servers will require just a few clicks. But differences in data protection rules could complicate such an operation immensely and hinder companies from exploiting economies of scale.
Supply-demand imbalances will increase
Whereas aggregate overcapacity will persist, regional bottlenecks and adequacy issues will get increased attention. Real urgency is two-three years away in most cases, but warnings from TSOs and generators will amplify in 2018.
There are several aspects to this. Economic growth is picking up across Europe. This means more power consumption by customers who buy new gadgets and services, and industries who rush to serve the increased demand for their products.
At the same time, an increasing amount of dispatchable capacity will decommission in the coming years. Platts expects that 60-70 GW of controllable plants will leave the market by 2025.
Finally, grid constraints and continued restrictions to cross border flows will add to the urgency around regional bottlenecks as demand for power increases.
New frontiers of electrification
2017 was the point of no return for electrification of passenger cars. In 2018, electricity will prove its potential in areas we had not thought possible even a few years back.
Two-wheelers: A quiet electric revolution has already begun in Asia where millions of scooters are shifting to electric. In 2018, this will reach the big brand name motorcycles. Harley Davidson just announced an all-electric motor cycle in January.
Buses: Another obvious segment for electrification due to predictable routes. Several cities in Europe will accelerate their shift to electric buses.
Maritime: Short-haul maritime is already seeing the beginning of a shift to electric. But electrification will move beyond small ferries. Hybrid solutions with electric elements will find way into long-haul maritime transport as well.
Aviation: The wave of electric flight start-ups and pilot projects from 2017 will continue and trigger concrete business plans and strategy announcements in 2018. The first one already came in January from Norwegian Avinor, which announced all short-haul flights to go 100% electric by 2040.
Industry: Expect to see new application of electric power for heavy industrial processes. Vattenfall just announced a pilot project for green steel fuelled by hydrogen from fossil-free electricity. Others will follow.
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