Who will lead the energy market in 2030?

There are many uncertainties that might determine the future of the energy industry in general and the landscape of network operation in particular. According to the Vlerick Energy Centre together with a team of European industry leaders two of these uncertainties call for deeper analysis as they are more relevant and most likely game changers for the power grid industry: consumer involvement and decentralised generation.

Depending on the level of consumer involvement in energy choices and the amount of decentralisation of the energy resources four scenarios were developed on how the energy market in Europe could look like in 2030. The co-creation process was supervised by Prof Paul Schoemaker, the world-leading scenario-planning expert from Wharton School.

Leonardo Meeus, professor of Energy Markets at Vlerick Business School: “I believe in a future with high decentralisation and high customer participation in the European power grid. Through their participation in our training programme and debates, the companies we work with are actively evaluating the consequences of such evolution on their business. I also think that energy regulators and policy makers should be part of this process as they have an important role to play. Customers have been pampered by the energy sector with a universal protection, keeping them largely passive. Customer empowerment should go hand-in-hand with accountability.”

Daniël Dobbeni, Chairman of the Vlerick Energy Centre: "For the last twenty years, policies have been driving the change in the power business. The next decades will see technology coming back in the driving seat. Communities of prosumers, generating and consuming electricity altogether, are already able through Internet to jointly balance generation with demand. Storage is getting closer and closer to our homes. Energy neutral buildings are a reality. Micro generation delivering electricity and heat is getting ready to become reality. The future of power systems is knocking on the door. Being able to adapt the company culture and its business model before it is too late is now, not tomorrow!"

Scenario 1: No worries, be happy

• The energy market is more or less the same as it is today
• The consumer involvement in energy choices is relatively low
• There is very little decentralisation of energy resources

This scenario is essentially a continuation of the power system that we know today. Most consumers would continue to buy their electricity from a central national or international producer, and have very little reason or inclination to get more involved or generate electricity themselves. Fossil and nuclear fuels are the most important source of energy compared to the more expensive renewable energy solutions.

Effect on TSOs and DSOs

The European TSO and DSO landscape remains stable while some of the roles slowly evolve. Overall, the grid companies have concentrated on operational excellence, and being strong targets for global financial investors because of the stable revenue they provide. This has made it difficult for new players to enter and get a foothold in the power grid business.

Scenario 2: Consumer power

• The consumer involvement has grown due to the implementation of the open market vision of European energy policy makers
• There are many more suppliers active in the market
• Prices are competitive and supply is stable
• Consumers also have access to sustainable energy solutions at reasonable prices

Effect on TSOs and DSOs

The DSO landscape is likely to remain stable.
TSOs will have released part of their monopoly. This has consolidated the TSO market into regional clusters and has given opportunities for the strongest European players to get involved in other European markets besides their own domestic market. With TSOs now increasingly regulated, there are simply some projects they’d prefer to share the financial risk or not to get involved in – cross border connections for example. This has led to other private companies stepping in to the breach, spurring competition.

Scenario 3: Our local community

• Nuclear power plants have been phased-out and the lack of regulatory certainty remains unresolved
• Energy shortages on a national level have become more of a regular issue due to too few investments in power generation technologies
• Driven by necessity but also by the need for efficiency and cost savings, many industrial and commercial customers are producing their own electricity and heat
• There’s a wide variety of different energy prices depending on the resources locally available
• Developing, once energy-poor countries, have ‘leapfrogged’ their way to a lower-carbon economy without passing through a phase of high-energy use, inspiring Europe with their power innovations

Effect on TSOs and DSOs

DSOs have become the core providers of energy services, while TSOs continue to deliver back-up power for emergencies and contingencies. New players now take on a leading role, particularly as they have been able to import innovative solutions from around the world in a kind of reverse Innovation Revolution.

Scenario 4: My comfort at home

• Energy resources are becoming ever more decentralised
• Consumers are highly involved in energy choices
• The off-grid movement is accelerating at a very fast pace
• Due to high prices the demand for fossil fuels is falling whilst PV installations and electricity storage have become competitive
• Smart grid technology has been deployed throughout the whole electricity system (from smart homes to smart transmission and distribution systems that function as back-up for local systems)

Effect on TSOs and DSOs

Both TSOs and DSOs have had to reinvent themselves to compete with the new players, but this has been good for the industry and for the consumer. Yet, the radical nature of the transition bears a risk to create stranded assets in the legacy system to an unprecedented extent.

About the Vlerick Energy Centre
The Vlerick Energy Centre is a multi-disciplinary research platform for discussing the future of energy, focusing on the roles of Distribution System Operators (DSOs) and Transmission System Operators (TSOs). Its flagship international executive education programme − The Future Grid Managers Programme − is a joint initiative with the Florence School of Regulation, which tackles the management challenges and opportunities specific to DSOs and TSOs in the energy industry in Europe.