Navigant Research Blog

A Disruptive Approach to 100% Decarbonisation of the Global Energy System by 2050

— May 8, 2018

Decarbonisation of the global energy system is one of the big challenges society faces today. The Paris Agreement, adopted in 2015, states that efforts should be pursued to limit the temperature increase to 1.5°C above pre-industrial levels. This is a tightening of earlier agreements that put the limit at 2°C.

What Does Such Increased Ambition Mean for the Global Energy System?

The temperature effect of CO2 emissions is not primarily determined by the level of emissions in a future year; rather, it is by the cumulative amount of emissions, or the carbon budget. To stay within the carbon budget, emissions need to be reduced—and fast. If we keep on emitting CO2 at the current pace, the carbon budget to limit the temperature increase to 1.5°C will be exceeded in one or two decades.

What Could a Fast Energy Transformation Look Like?

Population and GDP growth results in an increasing demand for energy services like space heating and cooling, transportation, and materials production. There are several critical levers to constrain emissions against the background of these developments:

  • Ongoing efforts to deliver all energy services in an efficient way
  • Electrifying energy consumption, especially for buildings and transportation
  • Fast penetration of wind and solar in the electricity sector
  • Adopting a range of other renewable energy technologies, from solar heat to electricity-based hydrogen
  • Bioenergy as a fuel source for the manufacturing industry and specific transportation needs and a role for carbon capture and storage (CCS) in specific sectors

By giving preference to options that have high social and political acceptability, Ecofys, a Navigant company, developed a decarbonisation scenario where maximum feasibility is achieved. With strong energy efficiency improvement, this decarbonisation scenario shows it is possible to bring global energy use below current levels to 435 EJ, which is a strong contrast to business as usual growth to about 800 EJ. However, while the total primary energy supply in the scenario is reducing slightly, electricity demand is expected to almost triple. We estimate that all this energy can be supplied from zero-carbon or low carbon energy sources because of the unprecedented scale up of technologies such as solar PV, wind turbines, EVs, and heat pumps.

(Source: Ecofys, a Navigant company)

Despite the global energy system’s rapid reduction of CO2 emissions in our disruptive decarbonisation scenario, cumulative CO2 emissions beyond 2014 are calculated to be 680 billion tonnes, likely exceeding the carbon budget. However, combined with options such as afforestation and agricultural carbon sequestration, it seems possible to stay within a carbon budget compatible with a maximum temperature increase of 1.5°C.

Fast Global Action Is Needed

Fast global action is needed, and the way we live, produce, consume, and dispose of products and services needs to be redesigned to reduce dependence on future negative emissions. An energy system transformation as set out in a recent report by Ecofys, a Navigant company, Energy transition within 1.5°C, is feasible but highly disruptive because it is based on technologies that are already available. Nevertheless, it will influence all players in the energy system due to strong electrification and the increased use of bioenergy. Existing businesses will need to be completely reoriented and new business lines developed to cope with the energy technology requirements of the future.

 

European Utilities Have Increased Their Activity in New Energy Platforms: Part 3

— February 15, 2018

The energy industry is experiencing a profound transformation as the sector moves towards the more intelligent, more distributed, and cleaner use of electricity. Utilities’ traditional business models are being challenged by disruptive firms offering new services leveraging new technologies. In the first post of this blog series, I described how European utilities have reinforced their strategic interest in new energy platforms. In the second post, I showed that regional differences in new energy platform activity persist between North America and Europe. In this post, I argue that some of the new energy platforms have been highly active recently as European utilities strive to build their portfolio of digital services.

DER Integration and Electric Mobility Are Still Leading

Distributed Energy Resources (DER) Integration and Electric Mobility remain the leading new energy platforms, and they experienced increased levels of activity throughout 2015-2017.

(Source: Navigant Consulting, Inc.)

Most of the selected European utilities have announced key partnerships, investments, and acquisitions in these two platforms. A 50% increase in the number of announcements was recorded between 2015 and 2017. Activity in the Internet of Things, Transactive Energy, and Telecommunications Networks platforms has been steady, with the most active utilities being Centrica, ENGIE, E.ON, and Innogy. Fewer announcements were made in Smart Cities in 2017 versus the previous 2 years. Most originated from Enel and ENGIE, which remain pioneers in the platform serving municipalities and local communities.

Activity Types Are Shifting

There has been a shift in the activity type by platform. The Electric Mobility platform once consisted almost entirely of partnerships. Utilities would typically sign agreements with car makers and EV supply equipment providers to develop bundled offerings and run pilot programs. In 2017, several investments and acquisitions were announced: Total invested in Xee and OnTruck, ENGIE acquired EVBox, and Enel acquired eMotorWerks. This is representative of a platform getting more mature as utilities better understand where the value lies and which companies are the key acquisition targets. The activity in this platform has also intensified because the prospect of electricity as the major transportation fuel is becoming clearer. Several major car makers have announced aggressive plans to electrify their vehicle offerings, providing more evidence that the mobility sector is changing rapidly.

Lastly, the number and size of acquisitions have been increasing. The largest deals announced in 2017 are EnerNOC’s acquisition by Enel for $250 million and REstore’s acquisition by Centrica for €70 million ($80 million). Both companies had established leading positions in the demand response (DR) markets: EnerNOC in the US and part of Asia Pacific, and REstore in Europe. These deals epitomise the DER Integration platform reaching a critical maturity state. After several years of market consolidation among DR players, some large utilities are buying their way in by acquiring the leading, established players.

The Race Is Intensifying

The race to new energy platform services has intensified among European utilities. Players building a balanced portfolio across several new energy platforms and multiple geographies are more likely to succeed in a fast-moving industry. While numerous products and services developed by the new energy platform companies seem promising, not all of them will be successful. Utilities need to strategically select the players that have the most agile talent and can quickly react to market changes and evolving customer needs. Some of the new technologies are prone to disrupt the energy industry. Incumbent utilities should watch market signals and adjust their portfolio of partnerships, investments, and acquisitions accordingly. Some of the utilities covered in this analysis appear to be further along, while others are still defining their strategic priorities. 2017 was a highly active year for new energy platforms—2018 will be a year to watch.

 

European Utilities Have Increased Their Activity in New Energy Platforms: Part 2

— February 8, 2018

The energy industry is experiencing a profound transformation as the sector moves towards the more intelligent, more distributed, and cleaner use of electricity. Utilities’ traditional business models are being challenged by disruptive firms offering new services leveraging new technologies. In the previous post, I described how European utilities have significantly reinforced their strategic interest in new energy platforms. In this post, I highlight the key regional differences in new energy platform activity between North America and Europe. In the final post, I will argue that some of the new energy platforms have been highly active recently as European utilities strive to build their portfolio of digital services.

Key Regional Differences

Major differences can be drawn between North America and Europe: European utilities tend to acquire or invest in North American companies whereas they are mostly partnering in Europe (see the following figure).

(Source: Navigant Consulting, Inc.)

Activity in North America mostly consists of investments and acquisitions. California leads the way, attracting nearly two-thirds of partnerships, investments, and acquisitions announced in 2015-2017. Examples include investments in distributed energy resources (DER) management system provider AutoGrid and urban mobility data analytics company StreetLight Data, and acquisitions of EV charging platform provider eMotorWerks and battery storage systems integrator Green Charge Networks.

Additionally, European utilities have been strengthening their presence in California. Building upon the acquisition of EV charging platform provider Oxygen Initiative, Innogy set up Innogy e-Mobility US. The Los Angeles-based entity is responsible for expanding the utility’s Electric Mobility solution offering in the US. Similarly, Total Energy Ventures relocated part of its team from Paris to the San Francisco Bay Area to be closer to the local startup community, which accounts for half of its investment portfolio.

States such as California, New York, and Massachusetts benefit from qualified talent and access to capital. Many startup founders are alumni from leading US universities who developed their initial product in partnership with a research lab at their universities. Additionally, the US incubator, accelerator, and investor ecosystem is recognized as one of the most active in the world, thereby attracting startups looking for financial and advisory support.

Most of the activity in Europe relates to partnerships. The geographical proximity partially explains this trend, as European utilities typically test energy services in their core market before expanding. Enel has been building an EV charging network totalling 2,700 stations in Italy as of October 2017 and plans to nearly double the network capacity by the end of 2018. E.ON partnered with Google to expand Project Sunroof to Germany. Homeowners in selected German cities can purchase solar panels, energy storage, and system management software from E.ON—and the utility guarantees the financial returns estimated by the online tool.

New Trends

One new trend is the rising number of investments and acquisitions realised with companies based in Europe. The total number of deals concluded in 2015-2017 nearly matches the figure for North America (21 vs. 25), making Europe an attractive region for startup activity. This shift is also related to the trend of startups building upon successful business deployment in Europe and expanding to North America. Netherlands-based EV charging infrastructure developer EVBox, acquired by ENGIE in 2017, is now expanding to the US.

In conclusion, European utilities’ activity in North America remains focused on investments in, and acquisitions of, new energy platform companies. In Europe, although the majority of activity still consists of partnerships, an increasing number of investments and acquisitions has occurred over the last few years.

In the final post, I will argue that some of the new energy platforms have been highly active, as European utilities are striving to build their portfolio of digital services.

 

European Utilities Have Increased Their Activity in New Energy Platforms: Part 1

— February 1, 2018

The energy industry is experiencing a profound transformation as the sector moves towards the more intelligent, more distributed, and cleaner use of electricity. Utilities’ traditional business models are being challenged by disruptive firms offering new services leveraging new technologies. In this post, I describe how European utilities have significantly reinforced their strategic interest in new energy platforms. In the next post, I will highlight the key regional differences in new energy platform activity between North America and Europe. Finally, I will argue that some of the new energy platforms have been highly active recently as European utilities strive to build their portfolio of digital services.

Partnerships, Investments, and Acquisitions

The underlying analysis used here was built upon a methodology that I developed for a previous blog. I analysed the level of activity of the same eight major European energy utilities and grouped their strategic announcements into the six emerging energy platforms. This update reflects an extension of the time period analysed and a refinement to the categorisation of announcements. 2017 announcements were added, extending the time range to 2015-2017, and the categorisation was extended to differentiate between minority stake investments and majority stake acquisitions. Utility announcements were grouped into three categories: partnerships, investments, and acquisitions.

(Source: Navigant Consulting, Inc.)

New Energy Platform Activity

Most European utilities significantly reinforced their position in new energy platforms over the course of 2015-2017 (see the figure above).

Italy-based Enel has emerged as the most active of the selected European utilities. Enel’s most significant announcements in 2017 included partnerships with car makers (Audi, Groupe PSA, and Nissan) and electric utilities (Dubai Electricity and Water Authority, Rosseti, and Saudi Electricity Company) and acquisitions of battery storage management system provider Demand Energy, demand response (DR) service provider EnerNOC, and EV charging platform provider eMotorWerks.

France-based ENGIE and UK-based Centrica have been focusing on acquisitions. In 2015-2017, ENGIE led six major acquisitions of companies offering new energy platforms. Deals concluded in 2017 included EVBox, an EV charging infrastructure developer, and Fenix, a connected solar PV solutions provider in Africa. Centrica has been steadily acquiring a similar number of digital players. The utility recently took control of REstore, a DR service provider in Western Europe, and Rokitt, a data discovery and analytics provider based on the US East Coast.

Other utilities, including E.ON, Innogy, and Total, have led strategic investments and partnerships. E.ON and Innogy have been developing partnerships with companies offering new energy platforms. E.ON has been leading a joint initiative of over 30 energy suppliers with software company Ponton to develop Enerchain, a decentralised European marketplace for electricity trading using the blockchain. Innogy signed a groupwide cooperation with Kiwigrid to develop new services, such as industrial energy monitoring and vehicle-to-grid integration systems. Total Energy Ventures added eight new energy platform companies to its investment portfolio in 2015-2017. The latest additions include France-based Xee, a connected vehicle platform providing predictive maintenance and pay-as-you-drive insurance solutions; and Spain-based OnTruck, a road freight shipping platform optimising truck utilisation.

Vattenfall and EDF have remained the least active of the selected European utilities. Vattenfall made a strategic investment in Northvolt to help the Sweden-based company build Europe’s largest battery storage manufacturing facility. EDF recently established an in-house venture capital arm. It complements independently managed venture capital fund Electranova Capital, through which EDF holds an indirect stake in startups. One can therefore expect more investment activity by EDF from 2018 onwards.

In the next post of this blog series, I will highlight the key regional differences in new energy platform activity between North America and Europe.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Finance & Investing, Policy & Regulation, Renewable Energy, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"Energy Transformation","path":"\/tag\/energy-transformation","date":"5\/27\/2018"}