Evolutions in Energy Systems - Drivers of change and the impact on value distribution
Following the Energy Discussion Morning held the 20th of January in Paris @ Royal Monceau, we presented our last thinking and ideas in a position paper communicated to more than 200 key executives in the sector
This article is based on a principal observation: in the majority of OECD countries, the fundamental principles which determine how energy systems are organised and managed are being challenged due to a number of reasons. This is particularly true of electricity power systems.
The organisation of electricity power systems today is based upon the integration of networks and generation capacity, which started out as local networks, in the early twentieth century. Over the years, these systems which have become increasingly interconnected and co-ordinated, and are now managed according to the following characteristics:
- The final responsibility for balancing supply and demand is ensured by one administrator at a certain level (regional or national) whose remit ranges from long term infrastructure planning to managing the balance in almost real time.
- Any adjustments to maintain the balance are based primarily on managing the supply, thereby implying system calibration around annual peaks in demand, for generation capacity, especially spare generation capacity, and for electricity transportation and distribution.
- There is a minimal resort to demand curve management to achieve the balance, with the exception of specific tariffs aimed to move the demand at certain times, or the exceptional resort to demand response/demand side management.
- The flow of electricity goes from upstream (from the centralised generation plant) to the end consumer, and the flow of payments in the opposite direction i.e. the price paid per KWh allows the supplier to recover the majority of the development costs for system capacity.
Today, this system of organisation is being called into question by various changes, which have a political, more than economic impetus. […]
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