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Top 10 sector trends for 2019

Guy Doyle, Chief Economist for Energy & Carbon at global consultancy Mott MacDonald, outlines the 10 key trends to watch out for in the energy sector next year

10 | Corporate power purchase agreements for renewables

Corporate power purchase agreements for renewables

Already a hot topic, this trend is likely to be stimulated especially in the UK if the Contracts for Difference programme stalls. That said, major corporates may be reluctant to commit to long term power purchase agreements in an uncertain economic world. 

9 | Overall system architect

Overall system architect

The increase in the number of parties becoming active players in the electricity and more general energy market, the ever-present cyber threat and the tendency for complex system interfaces to breakdown is leading to renewed calls for the establishment of an energy system architect as proposed by the Institution of Engineering & Technology and National Grid. The system architect would provide a central oversight and co-ordinating body that would address the issues arising from complexity in the system. Whether the UK government acts on such calls which may be seen as addressing long-term issues, will depend on its ability to free time and resources for such matters.

 

 

8 | Tariff rebalancing

Tariff rebalancing

There is a view among European regulators and host utilities that electricity, and to a lesser extent gas, tariff structures are not cost reflective and that there needs to be a shift away from incremental energy per unit charges towards fixed-capacity fees. This is part of a wider debate about tariff structures, including the role of time-of-use rates for energy and capacity and shifting fixed charges to a regular insurance premium, which are largely unavoidable without full grid defection.

7 | New nuclear developments

New nuclear developments

Commissioning of three Chinese pebble bed modular reactors and further tests on Toshiba’s radical E-Vinci reactor could see increasing interest in small modular reactors. Meanwhile, rumours abound that deals may be close for the UK’s GW-scale projects, led by CGN at Bradwell and Hitachi at Wylfa, backed by large equity stakes by Chinese and Japanese governments respectively, and both with matched equity from UK Government.

 

6 | Floating wind

Floating wind

Early days of Equinor (previously Statoil)’s Hywind floating wind turbines indicates that floating wind may be a viable option, building on trials in Japan and Norway. The industry will be watching Hywind as it builds out to a full scale 380MW.

5 | Concerns about interconnectors

Concerns about interconnectors

Two further interconnectors to Europe will be commissioned in 2019, increasing UK interconnector capacity from 4GW to 6GW. A further five interconnector projects totalling 5.7GW are also in the development phase, which would double capacity again by 2023 if all reach financial close. The latest tranche is all backed by the cap and floor support mechanism crafted by Ofgem and the European Commission. Several industry voices are arguing that the UK is in danger of being over-interconnected as the incremental value of additional interconnectors is low, perhaps even negative, and is ultimately deterring adequate new build of generation plant in the UK. An acrimonious Brexit would almost certainly focus attention on these matters.

4 | Local energy markets

Local energy markets

Interest in local energy markets has been increasing during the last year and this could gather further pace in 2019 as the result of the confluence of several factors. These include technical and operational innovations such as blockchain in trading and aggregation, implementation of half-hourly metering and settlement, support from Ofgem for increasingly large pilots and backing from local governments.

3 | Batteries behind electric vehicle charging stations

PivotPower is seeking to roll out 20 ~50MW batteries located at grid substations which will provide buffer storage for rapid charging electric vehicles on motorway service stations. This could lead to mobility services underwriting big expansion of batteries into energy/balancing trading and further ancillary services.

2 | Demand side response from domestic customers/prosumers

Demand side response from domestic customers/prosumers

Competition among aggregators and equipment providers, along with technology improvements and the extension of half-hourly metering and settlement, are likely to stimulate further application of demand side response.

1 | Buildings-as-power stations

Buildings-as-power stations

Expect to see more news from Swansea-based Specific’s net-zero energy new build programme. Specific combines a portfolio of smart building design and control, seasonal and daily storage and active and passive solar, and so far have demonstrated an office, classroom and home. They have ambitions to roll these out in the thousands.

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10 | Corporate power purchase agreements for renewables

Corporate power purchase agreements for renewables

Already a hot topic, this trend is likely to be stimulated especially in the UK if the Contracts for Difference programme stalls. That said, major corporates may be reluctant to commit to long term power purchase agreements in an uncertain economic world. 

9 | Overall system architect

Overall system architect

The increase in the number of parties becoming active players in the electricity and more general energy market, the ever-present cyber threat and the tendency for complex system interfaces to breakdown is leading to renewed calls for the establishment of an energy system architect as proposed by the Institution of Engineering & Technology and National Grid. The system architect would provide a central oversight and co-ordinating body that would address the issues arising from complexity in the system. Whether the UK government acts on such calls which may be seen as addressing long-term issues, will depend on its ability to free time and resources for such matters.

 

 

8 | Tariff rebalancing

Tariff rebalancing

There is a view among European regulators and host utilities that electricity, and to a lesser extent gas, tariff structures are not cost reflective and that there needs to be a shift away from incremental energy per unit charges towards fixed-capacity fees. This is part of a wider debate about tariff structures, including the role of time-of-use rates for energy and capacity and shifting fixed charges to a regular insurance premium, which are largely unavoidable without full grid defection.

7 | New nuclear developments

New nuclear developments

Commissioning of three Chinese pebble bed modular reactors and further tests on Toshiba’s radical E-Vinci reactor could see increasing interest in small modular reactors. Meanwhile, rumours abound that deals may be close for the UK’s GW-scale projects, led by CGN at Bradwell and Hitachi at Wylfa, backed by large equity stakes by Chinese and Japanese governments respectively, and both with matched equity from UK Government.

 

6 | Floating wind

Floating wind

Early days of Equinor (previously Statoil)’s Hywind floating wind turbines indicates that floating wind may be a viable option, building on trials in Japan and Norway. The industry will be watching Hywind as it builds out to a full scale 380MW.

5 | Concerns about interconnectors

Concerns about interconnectors

Two further interconnectors to Europe will be commissioned in 2019, increasing UK interconnector capacity from 4GW to 6GW. A further five interconnector projects totalling 5.7GW are also in the development phase, which would double capacity again by 2023 if all reach financial close. The latest tranche is all backed by the cap and floor support mechanism crafted by Ofgem and the European Commission. Several industry voices are arguing that the UK is in danger of being over-interconnected as the incremental value of additional interconnectors is low, perhaps even negative, and is ultimately deterring adequate new build of generation plant in the UK. An acrimonious Brexit would almost certainly focus attention on these matters.

4 | Local energy markets

Local energy markets

Interest in local energy markets has been increasing during the last year and this could gather further pace in 2019 as the result of the confluence of several factors. These include technical and operational innovations such as blockchain in trading and aggregation, implementation of half-hourly metering and settlement, support from Ofgem for increasingly large pilots and backing from local governments.

3 | Batteries behind electric vehicle charging stations

PivotPower is seeking to roll out 20 ~50MW batteries located at grid substations which will provide buffer storage for rapid charging electric vehicles on motorway service stations. This could lead to mobility services underwriting big expansion of batteries into energy/balancing trading and further ancillary services.

2 | Demand side response from domestic customers/prosumers

Demand side response from domestic customers/prosumers

Competition among aggregators and equipment providers, along with technology improvements and the extension of half-hourly metering and settlement, are likely to stimulate further application of demand side response.

1 | Buildings-as-power stations

Buildings-as-power stations

Expect to see more news from Swansea-based Specific’s net-zero energy new build programme. Specific combines a portfolio of smart building design and control, seasonal and daily storage and active and passive solar, and so far have demonstrated an office, classroom and home. They have ambitions to roll these out in the thousands.

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