In Navigant Research’s 2013 white paper, Smart Energy: Five Metatrends to Watch in 2013 and Beyond, we discussed key shifts in the energy landscape. In this post, I’ll review those trends and discuss which have come to pass and which have yet to materialize or have fizzled out.
The white paper covered the following metatrends:
- Energy is becoming increasingly democratized
- The role of government innovation funds is changing
- Technologies are converging
- The Southern African Power Pool is becoming the new BRIC
- The role of utilities is changing
Distributed generation (DG), which lies at the heart of the energy democratization shift, has gained significant traction in recent years. The growth of DG – spurred in part by greater consumer awareness, cost reductions for technologies like solar PV, and improved financing models, among other things – is one of the most dynamic factors driving the evolution of the traditional utility business model. In Navigant Research’s report, Global Distributed Generation Deployment Forecast, we state that between 2014 and 2023, DG is expected to displace the need for at least 321 GW of new large-scale power plants, valued at more than $1 trillion in power plant construction revenue. Annual DG capacity additions are expected to outpace centralized generation capacity additions by 2018, underscoring the importance of this metatrend going forward.
Government Innovation Funds
The white paper argued that quasi-governmental funds would step in to fill the void left by private equity and venture capital exiting the energy sector. The role of government funds would expand to drive innovative technologies from R&D to commercialization. While this has proven to be partly true, significant capital has exited the energy space, leaving many fledgling companies (and technologies) exposed to market realities. Spectacular flameouts have rocked the cleantech financing landscape. That said, governments remain key sources of funding across the innovation lifecycle, so the jury is still out with respect to this metatrend.
As discussed in our recent webinar on January 13, Energy Storage for Renewables Integration, storage reigns supreme within this metatrend, allowing for greater flexibility in managing electrons across both space and time. Whether in an electric vehicle battery or advanced batteries deployed as peaking plants on the grid, energy storage has proven to be a linchpin technology unlocking the potential of distributed wind, solar PV, and microgrids. For example, hybrid solar and storage deployments create exciting opportunities for energy consumers at the edge of the grid. This is certainly a trend that has begun to emerge in a significant way.
Southern African Power Pool = the New BRIC
This metatrend is among the more difficult to measure, as specific goals remain longer term. Economic growth appears to be gaining momentum across the region, but developments in Brazil, India, and China continue to overshadow the emergence of dynamic energy economies in Africa. There is a general sense that investment to date in emerging energy technologies and infrastructure throughout emerging BRIC markets is just the tip of the iceberg.
Utility Role Changing
The changing role of the utility remains the most dynamic metatrend overall. While predictions of a “utility death spiral” may prove to be overly dire, most acknowledge that utility business models will need to adapt to changing electrical grid realities. In most cases, this will entail more complex partnerships with customers as utilities move toward more integrated service offerings. In other cases, utilities may narrow their focus on one or two aspects of the grid, essentially becoming ”poles and wire” companies.
Summarizing, three out of five of these metatrends have materialized in significant ways. While it is still too early to tell with the others, heading into 2015, we can expect a sustained global shift toward localized power generation and increased pressure on utilities to adopt (or at least explore) alternative business models.
For more on these dynamic changes and others, please see Navigant Research’s free white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond.
Tags: Distributed Generation, Energy Technologies, Finance & Investing, Policy & Regulation, Renewable Energy, Utility Transformations
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