Currently we are experiencing three major trends in the electricity market, which will have a significant impact and will lead to several changes. But how do these trends affect the market? Which new business models can be applied to take advantage of the new challenges? And what do the sectors of automotive, public and telecommunications have to do with them?
Curious? Then have a look at our 4-part article series on the topic of “New business models & new alliances in the electricity market”.
Major trends in the electricity market – New business models & new alliances are necessary
So what are the current trends in the electricity market and how do they affect it? We from accilium see the following 3 trends as the major ones in the electricity industry:
- Energy efficiency
This is the result of our analysis of several scientific studies and more importantly of our talks and engagements with our partners and customers.
1. Energy efficiency – electric devices becoming more efficient
Energy efficiency is a major trend of our generation and is based on the need for cost reductions, higher awareness of the environment and climate change, as well as a political desire of reducing energy imports and/or increasing energy exports.
As a result, you can hardly see any conventional light bulbs in European countries anymore. Most of them have been replaced by highly efficient LEDs or other energy saving lamps. Moreover, the electricity market itself is facing an ongoing shift to more and more efficient technologies. This can be clearly seen in the sector of renewable energies, especially in the usage of photovoltaics. Using photovoltaics for electricity production means that efficiency is the key to success. This is why electricity producers often replace their photovoltaic cells before their lifecycle ends with cells that perform better. In other words: Efficiency is becoming economically more important than new investment costs.
Therefore, the trend of energy efficiency lowers the demand for electricity, however this will be overcompensated by the following trend.
2. Electrification – the future of mobility will be electric
Electrification describes the trend of electrifying actions, tools or habits that used to be performed by non-electric methods. This trend can easily be observed in our everyday life. Sitting in a subway just a couple of years ago you would have seen the majority of people reading a book or a newspaper, whereas today smartphones and tablets are dominating the scenery. But not only these tools are affecting the market.
Technologies like the electrical motor might not be the number one present in vehicles today, but the trend and also long-term strategic focus of the automotive industry are clear: Electric cars will be of significant importance for the mobility of the future!
Moreover the energy industry fosters the usage of technologies such as ‘power to heat’ or ‘power to gas’ to take advantage of the flexibility electric energy offers.
These conditions are also affecting the electrical market in terms of higher demand of electrical power. Although the devices being used by the modern society are becoming more and more efficient, the trend of electrification is leading to an overall higher demand of electricity.
3. Decentralization- electricity production is decentralized
The trend with the most tremendous impact on the electrical market, however, is in fact decentralization.
Until nowadays the production of electrical power has been based on centralized power plants with huge capacities installed and mostly based on fossil fuels. Nevertheless, a change in the mindset of the population in direction of more environmentally friendly solutions has led to different regulations and political conditions, which support the generation of electricity through renewable resources.
Sun, wind and waterpower can, in most cases, not be generated in large volumes in one single place. Therefore, it is necessary to build more power plants with small capacities in order to fulfil the market’s demand for green energy. Since we are now seeing plenty of small green power plants spreading over great areas, we are talking about decentralization of the electricity production.
The replacement of centralized power plants by decentralized renewable power plants is moving forward very quickly and is, therefore, also causing several problems to a market that has not seen many major changes for a long time.
Due to the fact that the sun is not always shining and the wind is not always blowing when needed, there is a great demand for flexible electricity production as well as storage to compensate the volatile energy production of decentralized renewable power plants.
Moreover, with decentralized power plants electricity might not be produced in times where demand is high. Therefore, demand driven coordination of such power plants will gain great importance in the near future.
The world is turning into an electronic society
Summing up, we could see that the world is turning into an electronic society that is becoming more efficient with the resources it uses. On top of that, the new awareness of the environment, as well as the wish for energy independency have led to a golden age for small renewable power plants which produce electricity decentralized.
The main question that concerns the market, however, – and might also lead to some sleepless nights of one or the other top manager – is how they can transform the newly identified threats into chances for the future. Curious? Then don’t miss out on our next articles, concerning the new business models & new alliances in the electricity market.