Main Impacts

The key issue to note in the market development is that the consumers will have much more of an impact on the market than has been envisaged in the past. Moreover, the consumers are free to make the choices themselves, they are not bound by the regulatory schemes, in some cases they are even encouraged by the regulators in making the change. As the amount of consumers making the change grows, the impact on the electricity market is more profound. Increased local generation lowers the demand further, additional energy storage capacity shifts demand and the need for flexible generation capacity becomes greater.

The impacts to the current energy market participants are significant. If we look at each typical market segment in isolation, we can make the following observations:

Energy generation:

  • the mix of generation technologies becomes greater as renewables become more commonplace
  • flexibility in generation becomes more important
  • investments in additional generation will need to be considered more carefully since the demand growth is likely

Energy distribution:

  • the technical management of the grid balance becomes more challenging as generation is connected directly into the distribution grid
  • local generation has an impact on the grid structure and equipment (two-way flow of electricity and information)
  • investments on the grid infrastructure need to be considered more carefully

Energy retailing:

  • it is no longer enough to compete on kWh price for customer engagement
  • new services need to be offered to support new technologies such as solar panels, energy storage and home energy management
  • new sources of revenue will appear (electric vehicles, thermostats)
  • pricing moves away from cents per kWh basis and includes things like flat-rates, Time-of-use, dynamic pricing and monthly fees for services

In addition to the above, there are certain issues that have an impact (and sometimes opposing impact) on multiple players in the value chain. For example, a price reduction will cut into a retailer’s revenue, but be a balancing factor for the grid load or generation during slow times. The management of these types of issues may require co-operation of the value chain participants, which sometimes is not permitted under the regulatory rules.

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