The Energy Sector Reinventing Itself

After having spent the last few days and the Eurelectric Power Summit in Ljubljana, Slovenia, I am really impressed with what I have seen and the many discussions that I have had. I am also very proud of the performance of the leaders from the Nordic countries that have been on stage.

I have reflected on how much the energy sector has actually changed over the last years, but also how much more change remains to be done and how exciting it is to be working with energy and electricity these days.

All in all, I had five major items as takeaways

Major change is needed. This was where the Power Summit started off and there was a discussion that is absolutely not certain that the owners of the most assets has the best prerequisites to make the most money anymore. There was even a discussion if there will be an Uber or AirBnB of the energy sector so that the largest energy company in 10 years will not own any grids or generation. The panel did not rule that out, but it seemed that they were prepared to take the fight to be the leaders also in the future. Pekka Lundmark, CEO of Fortum, said that “Someone will innovate our product, if we don’t do it someone else will”. He also had some interesting reflections on how the telecom sector transformed many years ago and how there was a lot of internal resistance to that change then.

The change is also needed in how the companies in the industry interacts with customers. The question was how to have an engaging discussion with customers, adding purpose to the product and talk about things that are fun and not so much about the energy itself.

Digitalization was also a topic, for example on how distribution companies can use digital technologies. Lowina Lundström, Ellevio, shared some examples on how they use digital technology and robots to drive efficiency and Knud Pedersen shared some examples from Ørsted.

There is no doubt that renewable generation is the future. It was a clear view from many participants that new investments will be in renewable energy, in particular wind and solar. There will for sure be large powerplants remaining for many years but, as someone said, it is the end of fossil fuels. Magnus Hall, the CEO of Vattenfall, talked about their commitment to become fossil free in one generation.

Optimization of the end to end system is critical and storage is needed. The added volatility with intermittent wind and solar production as well as more intermittency on the demand side makes it even more important to optimize the end to end system. This is not just how to manage congestion in the grid or how to do the real-time balancing, but also how to optimize the portfolio in the long run. There were discussions, both on how to create flexibility and then the technical and commercial mechanisms to manage the flexibility. Also, a lot of discussions on the need for storage in batteries or pumped hydro storage, where water is pumped back into the dam in times of surplus electricity. Other means of storage like converting electricity to gas or hydrogen were discussed.

There is significant potential in electrification. Everyone has been talking about the electrification of transportation, especially on the electric cars. Jannicke Hilland, CEO of BKK, talked about the experience from Norway, where in the first months of this year 28% of all new cars sold were pure electric and 47% were fully electric or plug-in hybrids. Another 11% were hybrids. She also spoke about the electrification of shipping and even aviation, with the first electric plane being delivered soon.

There is also potential of electrification in many other sectors. Eurelectric presented an interesting study on that. Magnus Hall mentioned several examples of where Vattenfall is working on electrification of steel manufacturing and cement manufacturing. In both cases, this would mean significant reduction of carbon dioxide emissions and increased use of electricity.

New business models will emerge and customers are far from “only” households. It is easy to see customers as residential customers, and for sure that is one important customer category. However, we should not forget that the large industrial customers have far larger volumes. The potential for new business models exist in all customer categories. Christian Rynning-Tønnesen, the CEO of Statkraft, talked about how they manage the output from a large number of powerplants and gives them market access. This is just one example of business models outside of the traditional business of utilities.

An overarching question at the end is really if the current regulation is supporting all of this? This was discussed in several sessions, and sometimes in the past I think this has been an excuse for not acting. However, as the Director DG Climate Action in the European Commission, Artur Runge-Metzger, said; “The industry is now looking for solutions themselves”. This sounds very reassuring, but of course does not take away the need for regulations adapting to the rapidly transforming industry.

All in all, a very inspiring interaction about key questions for the energy industry.