ROLAND BERGER SRL

  |  02.10.2015

Decentralized generation is becoming a high growth market globally

Solar PV energy alone could provide up to 12% of the European electricity demand by 2030

Decentralized energy generation (based on traditional sources – diesel generators, micro CHPs etc., but also renewables – small wind farms, solar PV, biomass etc.) is becoming a high growth market globally; and solar PV is one important piece of the decentralized energy puzzle: in 2014 only the increase in solar PV capacity of 39 GW is close to the nuclear power capacity of Japan and total global capacity now stands at 177 GW. However, in Europe, traditional utilities are absent in this market segment. "Utilities own less than 1% of all solar PV capacity. Project developers, investors, households and commercial companies have started to compete with the utilities in power generation," according to Codrut Pascu, Managing Partner of Roland Berger in Central and Eastern Europe.

 

In Europe, more and more households and commercial players are expected to make the decision to invest in solar PV and install it on their rooftop, especially on the back of set-up costs becoming more attractive over time. 

 

Until not long ago, solar PV take-up was fully reliant on existing support schemes, but in some states the technology already reached grid parity: in Germany for example, the price of solar PV is already 17 cents/kWh cheaper than the retail electricity price. Adoption rates are expected to increase on the back of battery storage systems progress, which will enable consumers to monetize the energy generated in low consumption periods in peak demand times – in the following years, significant cost reductions are expected for battery storage systems as well. Together with smart-home systems, they will raise the amount of solar PV electricity that will be used by the owner himself, preventing the excess generated electricity being sold at lower prices in the grid.


It is expected that all these developments will reflect into an adoption rate of solar PV much higher than initially expected. "The impact is large," says Szabolcs Nemes, principal in the Bucharest office of Roland Berger. "In our view, solar PV could be responsible for 9-12 % of total electricity production in Europe by 2030, largely exceeding expectations of IEA, the World Energy Council and even Greenpeace."


In Romania, solar PV had a very good progress in 2013, when solar parks of more than 800 GW became operational. "Further investments have been discouraged however, on the back of the green energy support scheme update, coupled with green certificates prices decline, as well as overall power market prices drop" stated Andra Ioana, Senior Project Manager in the Bucharest office of Roland Berger. Last year the solar park of Romania expanded with only 350 additional MW, reaching 1,223 MW in total – in 2014, solar energy generated accounted for approximately 1.5% of total power delivered into the system.

 

"Projects developed so far in Romania mainly consisted of generation units for power retail/ trading purposes. In contrast with other European states, relatively few companies or households in Romania decided to install solar panels in order to cover their own consumption" added Andra Ioana. The new support scheme could however change the local set-up, as it could support small producers sell the generated power for regulated tariffs and thus make individual generation projects more appealing. "Solar PV could become the catalyst for a larger trend towards decentralized energy generation, and all power utilities need to develop a sound strategy of addressing this potentially disruptive opportunity" said Codrut Pascu. 


The more solar PV and other technologies gain ground, traditional generation capacities face the risk of being excluded from the merit order or being accessed only in peak demand times. More export and storage becomes necessary to deal with the market situation. Codrut Pascu adds: "The magnitude of the solar PV impact could compare to the shale gas revolution on the energy industry. It will drastically change the energy landscape for utilities. Utilities will have to deal with increased fluctuations of the energy system, loss of generation volumes (if they own generation assets) and lower prices, and even new players may enter the scene."


"Utilities will have to prepare for lower demand for their power, especially in the higher-margin market segments. They should reduce the scale of the generation assets and make them more flexible to respond to demand and supply swings" states Szabolcs Nemes. With more intermittency, security of supply becomes more important as well and utilities will have to develop new models to price access to power capacity. Related to intermittency, utilities will have to shift their role from providing energy, to one of matching power demand and supply, thereby increasing their presence in trading. 

 

"However, utilities can exploit their long-established access to their customers and can turn all potential threats for the traditional business model into business opportunities" added Nemes.


Codrut Pascu concludes: "The energy landscape becomes more interesting. Utilities that position themselves right, can seize new business opportunities of the future. And this future is closer by than most of us have thought."


You can download the study at:
http://www.rolandberger.com/press_releases/515press_archive2015_sc_content/solar_pv_energy.html.

 

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