In its latest Renewable Energy Country Attractiveness Index, professional services company Ernst & Young Global Limited (EY) places a strong focus on the energy storage market.
While it recognizes the "game changing" nature of storage, it says the time has come for the identification of concrete investment opportunities. Suitable markets also need to be pinpointed, and new business models implemented.
" with a number of storage technologies already proven and costs falling fast, we must stop thinking about storage as something that will arrive tomorrow. It arrived yesterday, the game is already changing and investors need to ask themselves, how they can use the technology to secure the necessary returns in the future," state the reports authors.
Energy storage is creating new revenue streams through the new services it is providing to both electricity generators and consumers. As such, EY has identified three business models it says can address the issues of technology, energy security, energy savings and revenue generation: (i) generation support, (ii) grid support; and (iii) consumer support. See chart for more details.
Like Roland Berger Strategy Consultants, which last week outlined the opportunities and challenges facing electrical utilities, EY says utilities are going to have to redefine their business models to cope with a more decentralized energy production landscape, which is benefitting from the rise of the prosumer (producer-consumer).
"New technologies and new ways of buying and selling power are changing everything. Policymakers must now focus on enablement rather than intervention and energy providers can no longer simply pick sides," comments Ben Warren, EYs Global Power & Utilities Corporate Finance Leader.
Currently, says EY, renewables account for around 25% of the EUs electricity supply and this is set to increase to 50% by 2030, 12% of which, said Roland Berger, could come from solar. Distributed generation, as well as microgrids and behind-the-meter services, can help to meet these targets, by overcoming such issues as aging or absent transmission infrastructure. This will also help regions, like MENA, which is targeting 75GW of renewables, also by 2030.
With rooftop solar PV, among other off-grid energy solutions, providing more energy security, cost savings and revenue generating opportunities, decoupling supply from demand will be key for utilities, as will consumer-centric power offtake business models.
"Business as usual is no longer an option," continues Warren. "Survival in the energy market of tomorrow requires new thinking and perhaps most critically, a more diligent focus on the needs of customers."
EY further states that the Mediterranean is facing an "energy crisis"; the result of the global financial crisis and political unrest. The north part of the Mediterranean, specifically, is a net importer of energy, while in the south and east, annual energy demands are said to be increasing by an average of 6%.
"In less mature MENA markets in particular, keeping the lights on has become almost synonymous with maintaining social order given its importance in driving economic development, making energy a top priority no matter who is in government," adds EY.
Consequently, energy security has come to the fore, with EY stating that renewables can help tackle the issues, and create both sustainable jobs youth unemployment is said to be 31% in the region, compared to a global average of 12% and economic growth, due to its ability to overcome the aforementioned challenge of aging or absent transmission infrastructure.
Overall, the company has identified three areas, where progress needs to be made: (i) policymakers need to shift from intervention to enablement, including removing barriers to competition; (ii) industry must focus on cost reduction and flexible business models; and (iii) investors need to develop innovative financing solutions.
Furthermore, it may be time to remove the "artificial barriers" preventing energy from competing on a level playing field, such as legislation around competition, and subsidies. "In the wake of energy market distortions resulting from a prolonged period of subsidies and intervention across many parts of the region, and as renewables in particular become increasingly cost-competitive, it is arguably time for the market to be left alone," states EY.
RE country attractiveness
In EY's renewable energy rankings, China, unsurprisingly, came out on top, followed by the U.S. and Germany. Looking at solar, specifically, China, the U.S. and Japan took poll position.
Commenting on the Indian energy market, EY says the government is targeting 10 GW of solar over the next ten years, and plans to increase the renewable purchase obligation of large power distributors from 3% by 2022 to 8% by 2019.
Meanwhile, regarding China's decision to raise its solar PV target from 15 to 17.8 GW this year, EY says the government has requested detailed action plans to achieve this from 26 provinces.
Although not out on top, Romania received a mention on the back of its government plans to try and make renewables an attractive prosepct via changes to the current support program.
Read the full EY report.
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