Blue is the new black


Few, if any, individuals should look towards U.S. President Donald Trump for guidance on energy policy. Since his appointment, Trump’s relationship with power generation sources of all stripes has been marked by a series of missteps. His biggest stumble came on June 1 when he announced – to the surprise of nobody – that he was to pull the U.S. out of the Paris Agreement on Climate Change.

An unabashed climate change denier, Trump is essentially staring hard science in the face and shaking his head in disagreement. But while America’s actions do obviously have ramifications beyond U.S. borders, very few within the solar industry are unduly concerned by this latest act of self-sabotage.

Solar will survive and thrive with or without U.S. involvement in the Paris Agreement. Some even make the argument that Trump’s hear-no-evil handling of renewables may actually be a boon for the wider world, prompting other nations to pick up the slack in lieu of American engagement.

But the surest sign that the world is finally ready to tackle climate change has come not from politicians, but from big business. Socially and environmentally conscious blue chip companies such as Apple, Google, Facebook, Ikea, and Walmart have all pursued renewable energy policies. This is something to be welcomed and celebrated. But even more importantly, many of the world’s leading utilities – hitherto knee-deep in fossil fuels – are now embracing the opportunities that solar, wind, and other forms of renewables offer.

And most are not doing it out of the goodness of their hearts. Rather, they realize that solar makes economic sense, and offers something that their customers – their lifeblood – want.

“The train has left the station, and it won’t be coming back,” Claus Wattendrup, Head of Business Development for Wind and Solar at Swedish utility firm Vattenfall told pv magazine. “Vattenfall knows better than most how the energy system is changing, with more flexible systems and prices. Renewables and storage play an important role in this, which is why we have begun to pursue these industries over the past couple of years.”

One of Europe’s largest producers of coal, Vattenfall nevertheless has the overall goal of becoming CO2-free, with Wattendrup admitting that the company has no alternative but to change its approach if it wishes to remain a pivotal player in Europe’s new energy mix.

And it’s not just Vattenfall. Throughout Europe, most of the largest utilities have made a series of head-turning investments in the world of solar, storage, and wind. Germany’s E.ON pivoted towards solar in 2014, and has since begun to branch out beyond Germany into the U.K. and the U.S., partnering with both Google and German battery developer Solarwatt to offer a new suite of services and products.

“We were originally very skeptical about solar,” admits Markus Nitschke, spokesperson for E.ON Climate & Renewables division. “The old E.ON was driven by large coal and gas-fired power plants, but now we are a bit more agile, and that means solar has a more important role to play.”

Both Vattenfall and E.ON admit that the tumbling price of solar, allied to being an energy source that customers like and want, was enough for the two giants to alter their course. “Solar is a market for B2C, a customer-driven energy source,” said Nitschke. “We can gain new customers more easily by offering solar, especially when combined with digital services.”

E.ON has partnered with Google and Solarwatt to offer rooftop solar+storage bundles for residential customers in Germany and the U.K. The cooperation with Google has brought a digital dimension to the firm’s offering, replacing paper bills stuffed through letterboxes with a more user-friendly online platform that allows homeowners to better manage their energy consumption.

“We are becoming more of an IT company, in all honesty, learning more about digital marketing as we go along. We launched a solar cloud 1.0 version, and will extend and improve this step-by-step,” explained Nitschke. “In former times rolling out a new platform would have been unwieldy and taken a lot of time, but now we have a first launch and then work together with our customers to develop the next steps, drawing upon their feedback and experiences.”

Agile, but stable

This agility, this reactive fleet-footedness, felt initially jarring for some E.ON employees, admits Nitschke – a view shared by Vattenfall’s Wattendrup. But as the old energy structures have begun to erode, so too have conservative mind-sets.

“The Vattenfall board is fully behind renewables,” said Wattendrup. “For years it has been clear to management that this is the growth area. The majority of our investments are now in solar and wind. Of course, as in all parts of society, we have colleagues who have worked at Vattenfall for 30+ years on coal power plants who initially had a hard time understanding why we chose not to renovate a coal plant but invest instead in a solar plant.”

This, Wattendrup admits, has been a source of conflict at times, stressing that such resistance is normal when a company changes. “Partly it is our own fault. We have perhaps been a bit arrogant in the past, and maybe stood in the way of smaller developers to hinder their progress. And this is not forgotten.”

The reputation of big utilities in the eyes and minds of customers is both a hurdle, but also a source of opportunity, added Nitschke. “When pivoting to solar, we quickly learned that people expected E.ON to have the ability and the capacity to do solar, and do it well. It is the same with our new e-mobility venture – customers expected this of E.ON, for us to be in these spaces. And of course, nobody questions whether our products will be reliable. Because it is an E.ON service, it is never a question for them.”

Vattenfall took a different route towards renewables, heading first to the large-scale wind market before finally making the move into solar and decentralized energy as the price of PV became competitive. “Solar is not as intrusive as wind, and people definitely like it more,” Wattendrup said. Vattenfall is currently working on a 400 MW pipeline for wind-solar hybrid installations where PV plants are to be added to existing Vattenfall wind farms across Europe. “The benefit for Vattenfall as an existing wind developer and operator is that we have already built good relationships with land owners and authorities, and we have the grid-connection in place. Adding solar is cheaper, and offers a more balanced feed-in profile at the grid-connection point.”

Vattenfall will add solar to all of its wind farms, aside from those in the very north of Scotland, Wattendrup said. The firm’s total investment in solar and storage over the next two years will be more than $225 million.

Money talks

Solar now offers better bang-for-buck than most other forms of energy, finite or otherwise. Half of all new energy generation capacity added globally in 2016 was solar, and an increasing portion of this growth is being funded by utilities. GTM Research data show that Europe’s top five utilities have all invested hundreds of millions of dollars in renewables over the past 12 months, led by the U.K.’s Centrica (which invested $632 million), France’s Engie ($491 million), Germany’s E.ON ($344 million), and fellow German utility RWE via its renewable energy platform, Innogy ($206 million).

In the U.S., volumes are lower but the pattern is the same, with Southern Company ($472 milion), Exelon ($257 million), and Duke Energy ($127 million) all spending big. Since 2010, GTM Research finds, utilities have invested more than $2.9 billion in distributed energy companies, with more than $1 billion of that figure coming in 2016 alone.

Peering under the hood of these figures, it becomes clear that utilities have, almost en masse, performed a U-turn on their relationship with renewables, moving from attack to embrace in a short space of time.

A survey of more than 100 utilities executives by Accenture found that 58% believe distributed generation (DG) will lead to revenue reduction among utilities by 2030, driven by energy prosumers. Crucially, though, this trend is no longer viewed as a threat by the fossil fuel giants, but rather an opportunity.

“The rapid evolution of technology, better economics and the growing accessibility and environmental appeal of residential solar PV has pushed DG from the fringe to a mainstream factor on the grid,” says Stephanie Jamison, Accenture’s Managing Director of Smart Grid Services. “Despite the challenges the integration of PV at scale brings, it is essential to meet the growing expectations of consumers in order to position utilities to provide services-based business models that could drive much-needed new revenue.”

GTM Research senior grid edge analyst Andrew Mulherkar remarked in a recent report that although utilities still have a reputation of being risk-averse, a growing number of them now see DG as a growth opportunity and are taking new, calculated risks through venture investment.

One such utility prepared to take these calculated risks is U.S. firm Duke Energy. Its CEO, Lynn Good, recently said that despite Donald Trump’s talk of reviving the coal industry, Duke will not alter its current path. “Our strategy will continue to be to drive carbon out of our business,” Good said, adding that the current economics of coal are really challenged and this, more than any government position, will prove more important in the long run.

Home is where the heat is

The economic incentive offered by renewables is no longer something utilities can ignore. Prices are not so volatile, and going in only one direction – south. Almost half of the Fortune 500 companies now have ambitious climate and energy policy goals. Green means good business, and is absolutely vital for the image of a company, particularly as the consumer is being brought increasingly into the fold.

In mature solar markets in Europe, many utilities have looked on enviously at the strong relationships solar providers have struck with their customers, and they want in. The UK’s EDF Energy, for example, has recently teamed up with Lightsource – the largest generator of solar power in the U.K. – to offer its Sunplug product, a complete solar solution combining panels, home battery storage, and a home energy management system.

Sunplug customers can either choose the complete bundle or add a battery and management system to their existing solar panels. Financing options include buying outright or no up-front payments, allowing homeowners to benefit from a fixed ROI of 2.5% per year, Lightsource told pv magazine. Chief Strategy Officer James Brooks said that the Sunplug offering is “a different way for consumers to interact with their utility,” stressing that the entire aim of the product is to “approach the trend for self-generation from a consumer perspective” and to lower the barriers to entry by making the system available at no up-front cost.

Also in the U.K., the nation’s largest utility Centrica is launching a $24 million pilot project to develop a distributed energy network in the English county of Cornwall, placing renewables and storage at the heart of the program. The idea is to create a virtual energy marketplace for more than 150 homes and businesses, enabling them to generate, store, and sell energy capacity to both the grid and the wholesale energy market at times of high or low demand.

Utilities that embrace decentralized renewables will not only improve customer relations, their environmental footprint and corporate image, but can also – vitally – deliver lower costs and participate fully in the future energy mix. “The energy system will change,” said Wattendrup. “Nobody knows where this will end up. Maybe we won’t have an energy-only market in 10 years. Perhaps it will be some kind of capacity payments or flexible pricing market. What is clear is that renewables and storage will play an important role, and so to still serve our customers we have to do so with clean energy, not fossil fuel energy. That is for sure.”

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