European Utility Week: ‘The confidence is coming back’

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It’s not just about the utilities anymore. After merging with Powergen earlier this year, last week’s European Utility Week, held in the French capital, included representatives from the power generation industry, and energy providers. The aim is to target the whole energy industry; and to reflect this development, the show will be rebranded “Enlit” as of next year.

Promising to represent the energy industry “from end to end,” as European Utility Week director Paddy Young explained, the switch to the new brand is likely to coincide with greater representation from renewable energy generators.

Independent of this development, the show promises to be the key destination for anyone looking to work with utilities and stay on top of energy sector developments. Although not everyone in that bracket had a booth at last week’s expo, they were present on the show floor, which was spread across two exhibition halls.

The origins of the trade fair, which sprung out of the smart meter industry, were still evident at this year’s event, with a section devoted to meter data management (MDM) – a necessary concern, either because distribution system operators have already rolled out smart meters, or because they will be required to in the near future. The large number of smart meters already deployed is busily generating a mass of data.

An example of this is Energyworx, which presented a solution using the Google cloud to store and process smart meter data, as director of solutions Rinse Veltman explained. The company, which counts French energy giant Engie among its investors, leaves data handling to the Silicon Valley giant and places its MDM system on top. The Energyworx solution can be adapted by customers to their needs and Veltman said it could even be used to monitor PV systems and control battery storage, if adjustments were made.

Tracking down representatives from the solar module and inverter space was a more demanding task, although Siemens, one of the show’s main sponsors, did include an inverter stand and Georges Makdessi, global account manager for inverters, said he had seen considerable interest from utilities. Siemens has boosted its central inverter offering by retailing Kaco string devices, partly under its own brand.

Although solar and storage were not center stage at the show, the change, which is also being effected by renewables penetration, is. For example, the two did come under the spotlight at the European Association of Distribution System Operators’ (E.DSO’s) second stakeholder and innovation council event. Here, it was discussed how in three months, DSO experts, together with regulators and scientists, have devised strategies to cope with the challenges of the new energy world.

Assistance required

“We are convinced that we need external input,” said E.DSO chairman Christian Buchel. The organization approached the topic from three standpoints: (i) Grid edge transformation through flexibility; (ii) customer engagement by design; and (iii) innovative resilience.

“In the wake of new challenges and emerging threats – including extreme climate conditions, cyber threats and market disruptions – DSOs [power distribution system operators] must adopt a ‘resilient by design’ concept,” said the association in a press release.

The term “utility” is becoming increasingly obsolete, as energy companies evolve and take on many different forms. This can be seen in France, on the one hand, where the status quo has an industry-leading utility providing as many services under one roof as is legally allowed for a company, under the EU unbundling requirements. On the other hand, in countries like Germany, the old power giants are under intense political and regulatory pressure, and are being pushed to respond to decisions to accelerate the phase-out of nuclear and coal.

“The interesting thing will be about which of these approaches is going to work: EDF and Engie’s cross-value-chain approach, or E.On’s focus on networks and solutions, or RWE’s generation focus?” said David Linden, director for power and renewables consulting at Wood Mackenzie.

Unbundling vs. monopolies

Power companies intending to focus on generation are under pressure to move to a renewable energy portfolio, said David Linden. They must employ business models that allow for efficient capital allocation. This may work with fixed-payment power purchase agreements (PPAs) that guarantee a revenue stream with a fixed offtake price, and a so-called farm down model. For the farm down model, they will sell a stake in the project when the asset starts operating. In this way, they improve financial returns and free up capital, he said.

But the power giants will have to get used to the idea that they no longer have free rein to do as they wish, warned Linden. “It will be interesting to see what new entrants will do and how this will change the market dynamics and structure,” he said.

European oil multinationals, including Shell, Total and BP are investing in renewables across the electricity value chain. However, renewables are still far from being close to their core business; at Shell, clean energy accounts for less than 10% of overall investment.

Shell, at least, has declared its intent to become an electricity supplier. U.S.-based peers, such as Exxon and Chevron have not taken the same path, because public and shareholder pressure is not as intense, according to the WoodMac consultant.

As the market moves into a more merchant world with less guaranteed revenue streams, other risk management tools will also be needed. Having in-house power trading knowledge should provide an advantage in less certain power markets. “Here utilities will have an advantage,” he said, as this is a skillset which has been developed in these companies.

The renewables age

The pervasive influence of renewables is also manifesting itself in the financing of power companies. “In the first six months of the year, half of the utilities issued their bonds as green bonds,” said Sean Kidney, CEO of green investment campaign the Climate Bond Initiative. Such eco-friendly bonds are rewarded by investors who feel they future proof the companies concerned, he said, adding that this is already reflected in the stock markets, and offers more resilience in the event of severe bond market downturns.

Green bonds are usually corporate bonds and not directly related to projects, so companies are liable for them. However, they refer to corresponding projects, said Kidney. Among other criteria, certifiers such as the Climate Bond Initiative check that no reference is made to the same project more than once. To date, only around 30% are currently certified, he added. The European taxonomy, which is currently being developed and is expected to be published next year, could give the field of green bonds a big push.

A few years ago, utilities and other energy industry stakeholders might have been regarded – and possibly have regarded themselves – as dinosaurs, but the buzz at this year’s show, and the inclusion of Powergen, showed confidence has returned, according to expo director Paddy Young. The conference program reflected an energy-industry-wide outlook, which included renewables.

A section devoted to commercial and industrial energy provision, which considered PPA variation across different nations, illustrated the evolving nature of European Utility Week. With natural gas, “renewable gas” and power-to-gas also in evidence, from next year the European show – and its Asian and Australian sister events, organized by Clarion – are ready to be Enlit-ened.