The global energy system is changing, and customers must take centre stage
Just about five years ago when I started as CEO at RWE and later Innogy, the annual photo-voltaic installations in Germany began climbing. For a number of years, we saw a growth of seven gigawatts and more. Since that time solar energy has become an important part of our day-to-day business and the capacity in Germany reached 41 GW by the end of 2016. During this short time, it became clear that this form of distributed grid edge energy is the most widely recognised innovation in an arena of completely new ways of producing, consuming and sharing of energy.
In contrast to earlier energy system evolutions, the arena this time is undergoing a truly disruptive transformation. We are in the middle of a complex change process not only centered around the customer but much more driven by the customer. By taking the stage, the customer reminds us that it is for them that we transform the energy system in the first place. Don’t get me wrong here — by no means does this qualify the need for overarching policy making. My point is that surely the ground-breaking Paris agreement as well as the absolutely impressive grid edge technology improvements, for example in distributed solar and batteries, are given and trend-setting truths. They are setting the scene for more and more engaged and active customers. They can profit from modern technologies and transform the energy system in a world which limits global warming. So the customer today is not a consumer, but rather a prosumer combining own generation of energy with ever more efficient and increasingly smarter consumption. This is why I believe, the change is not customer centric. The customer is the change itself.
So then, the customer successfully taking the stage is a sure cut thing? Well, it is probably not that easy, as it will require coherent stage setting by utilities and by regulators just as well.
As a utility, we are leaving behind the traditional task to produce and deliver energy. Instead we take on a much more exciting but also demanding role as the enabler for the customer. Redefining customer experience for us means enabling the customer to conveniently and individually engage in the transformation of production, consumption and sharing. On the production side, we enable our clients with innovative products and services in installation, optimization, management and integration of decentralized assets. Of which there are millions in Europe already as of today. On the consumption side, soon several billions of assets will become connected. As a utility, we promote the resulting rise of the new digitally enabled energy consumer with our behind the meter services and products. Our secure and convenient smart home appliances are just one of our many steps in contributing to the development of the internet of things. Customer transformed production and consumption will only work if both are connected. And connectivity allows for what is most exciting; the sharing of energy.
Here, sharing has three aspects.
First of all, it means sharing between people, between communities and between regions. This is the traditional, well established role of a distribution system operator which I firmly believe will prevail and even grow.
Second, sharing in a customer transformed energy system will also mean sharing of energy between different energy use cases. Renewable electricity will be transferred to other sectors such as heating and mobility where it has traditionally only marginally been applied. In this sense, sharing is exactly what sector coupling is all about. It involves fuelling electric cars as well as substituting the inefficient oil-fired boiler with a modern electric heat pump.
Thirdly, sharing involves peer-to-peer models connecting prosumers with consumers, pooling distributed storage systems and generation assets to virtual power plants, as well as enabling the joint use of assets like e-vehicles.
A platform is required that enables these three levels of sharing. A platform which provides to the customers on the one hand the efficient and flexible physical exchange of energy just as the indispensable security of supply. And on the other hand, a platform that at the same time incorporates data and increasingly non-physical ways of exchange for instance in transaction schemes offered by the development of blockchain technology. This side of the platform will manage and make use of the increasing data flow from connected physical generation assets, from smart meters and from demand response applications in electricity, heating and mobility. The utility of the future provides exactly this integrated platform to the customers in order to empower them to act autonomously and independently in production, consumption and sharing.
As for future regulation, the Forum report on Grid Edge Transformation makes evident the key features on how to foster the customer driven transformation while providing a stable framework for investors. I would like to highlight only two aspects here. First, I suggest more regulatory emphasis on the transformative power of smart energy, concentrating on the new connected energy system as a whole. Second, a level playing field between different forms of energy is necessary. This can be achieved by cost reflective pricing structures. Energy prices and tariffs should support the customer in taking the stage to transform the energy system and allow for efficient decarbonisation.
The ongoing transformation is about making a sustainable energy system happen. Without the customer, we would not even move much beyond the prologue. A joined masterpiece can only be reached if utilities take their part in inspiring customers how to act in the arena.
This means inspiring people how to live and work. And this is why in 2016, after 120 years of RWE, we have formed Innogy, our utility of the future. Innogy’s three growth areas are the renewable energies, grid and infrastructure, and the retail business. They are all consistently paired with a profound innovation DNA and ready to form the platform for the customer driven transformation. I invite every reader, every policy maker, every technology pioneer and most of all every customer to join Innogy on the journey to the new decarbonized, decentralized and digital energy world. A better world, where it is only about the customer.
The Future of Electricity: New Technologies Transforming the Grid Edge is available here.
Originally published at www.weforum.org.