Germany's sustainable energy transformation disrupts utilities industry

12 May 2016 Consultancy.uk

Germany continues to strongly support the country’s Energiewende, which seeks to lift the share of sustainable energy to at least 60% by 2050, as well as reduce the country’s reliance of foreign energy, create jobs and help the Germans meet climate goals. The process is, however, shaking up the utilities industry, as a result the sector needs to reimagine a role for itself and transform its legacy operations to meet changing expectations. 

Germany has long prided itself on taking the issue of long term sustainability of the environment, for themselves, and their children, serious. The concept of Energiewende (or “energy transition”) continues to define a generation of Germans' relationship with future generations. Energiewende aims at reducing the country’s carbon footprint by encouraging households, communities and businesses to adopt green energy sources, through a range of levers, including subsidies. The effect of the focus on renewables has been stark, with the country now producing 25% of its energy demand from renewable sources. The long term Energiewende goal would see 60%-80% of energy generation stem from green sources by 2050.

In a new analysis from Oliver Wyman, titled ‘Power Generation Disruption: Germany’s case for change’, the consultancy explores the current Energiewende trend as well as the effect it is having on the legacy utility industries that are seeking to preserve, and even enhance, their networks, in the face of disruptive transformation hitting their frontiers. 

The survey finds that Germans have some concerns about the Energiewende programme, with particularly the increase in ‘on-grid’ energy prices cited as an issue. While there are concerns, the majority of respondents are willing to invest in the technology, with more than 60% willing to invest more than $1,100 into a sustainable investment. Two thirds of respondents require some form of subsidy to do so – with upfront costs projected to have paid for itself within three to five years. 

The research highlights that support for Energiewende remains very high among three key stakeholder groups, households, industry and utilities. 14% of households believe the strategy is very good and 64% believe it is good. Industry is more positive about the strategy, 22% say it is very good and 57% good. Utilities are a little more reserved, with 9% saying it is very good and 68% good. 

Recent changes to the German renewable energy act have been viewed as generally favourable by all groups surveyed, although private households were less positive about the changes than the utilities industry. 26% of households see the changes as negative, and 12% as very negative, while 22% of utilities see the changes in a negative way. 

While the changes to one of the Acts that underlay the current Energiewende are seen by a minority as negative, the vast majority of German households views the Energiewende as important on a variety measures. 

Reducing the country’s liabilities for the next generation is extremely important to 34% of those surveyed, while a further 34% thought it was very important. In terms of creating jobs, 34% cited as extremely important and 37% as very important. In terms of reducing the country’s dependence on foreign countries, 42% cited the phenomenon as extremely important while 32% saw it as very important. Climate protection goals were cited as at extremely important by 39% and very important by 31% of German respondents. 

The consultancy notes that the legacy centralised transmissions systems still operated by utilities may be in trouble as sentiment and technology converge on disruptive generation. The authors of the article further highlight that Germany’s energy transition should serve as a wake-up call for utilities everywhere. "Renewables and direct generation are part of a wave of disruption and innovation that will impact many energy markets in the future – much in the same way that mobile phones disrupted the previously static landline telecom industry and the Internet caused dislocation in a wide swath of retail and media business models. These other instances have demonstrated that treating innovation as a threat will end your business in a hurry; planning ahead, on the other hand, can open up tremendous new sources of value.”

×

WEF finds no progress made on greening economy

01 April 2019 Consultancy.uk

The reports of two influential bodies, in the space of a day, have warned that no progress is being made to prevent major climate change. The World Economic Forum has warned that greening of the global energy transition has stagnated over last five years, while the International Energy Agency has confirmed coal use rose again last year.

The position of the Academies of Science from 80 countries, plus a majority of scientific organisations that study climate science, is that humans are causing rapid climate change – often referred to as global warming. Roughly 95% of active climate researchers publishing climate papers endorse the consensus position that since the industrial revolution, the boom in carbon emissions from fossil fuel powered human activity has heavily impacted the planet, with rising levels of CO2 and other greenhouse gases trapping heat from the sun causing global temperatures to rise – something which will have catastrophic results in the near future.

Despite the steadfast consensus among the scientific community on the matter, however, there has been little to no meaningful action to avert disaster. In fact, while the signing of the Paris Accord was met with great excitement, since it came into force, global carbon dioxide emissions have continued to rise. Today, they sit at their highest levels yet, after a strong economy and extreme weather stoked a surge in energy demand last year.WEF finds no progress made on greening economyAccording to the world’s energy watchdog, the Paris-based International Energy Agency (IEA), energy spiked by 2.3% in 2018 – the biggest leap since 2010 – with that demand largely being met with fossil fuels. As a result, global emissions of carbon dioxide hit the record high of 33 billion tonnes in 2018, a rise of 1.7% on 2017’s figures. Commenting on the findings, IEA chief Fatih Birol said the rise in energy demand was “exceptional” and a “surprise for many.”

Birol added, “We have seen an extraordinary increase in global energy demand in 2018, growing at its fastest pace this decade. Looking at the global economy in 2019, it will be rather a surprise to see the same level of growth as 2018.”

The suggestion from Birol that 2018 is likely to be an anomaly which will not be seen again is strange, considering the added strain which the boom in emissions will place on the environment. To suggest that heightened energy demand was driven by extreme weather – which is increasingly difficult to claim is unrelated to man-made climate change – and then to suggest that such a thing is unlikely to occur any time soon in spite of emissions having increased seems contradictory.

Regardless of this, the bad news was further compounded within hours of the IEA’s release. A report from the World Economic Forum released on the same day concluded that the world's energy systems have not become any greener in the last five years. Despite the agreement of global climate targets, falling green power costs, and mounting public and business concern over the catastrophic impacts runaway climate change could wreak, the WEF’s damning assessment warned that little to no progress has been made on making energy systems more environmentally sustainable since 2014.

Coal is the largest hindrance of change on this front, according to the report. Recent years have seen improvements in energy access and security, but far too many nations remain dependent on coal power for the new energy systems to have made any environmental gains. At the same time, major economies have failed to decrease or even slow the amount of energy they use per unit of GDP, leaving smaller actors who have made changes micturating into a gale. Change on the part of the world’s largest economies is therefore crucial to driving the development of a greener, more efficient global economy, the WEF concluded.

Commenting on the findings, Roberto Bocca, leader of the WEF's future of energy and materials division, said urgent action is now needed to move toward decarbonisation. He added, "We need a future where energy is affordable, sustainable and accessible to all. Solid progress in bringing energy within the reach of more and more people is not enough to mask wider failures, which are already having an impact on our climate and on our societies."

The news comes even as sustainability continues to be talked about as a ‘top agenda item’ at the majority of the world’s largest corporations. While 85% say that it will be more important still in another five years, it is clear that the majority of the world’s most powerful businesses are failing to walk the talk on the matter, regardless of what governments do.