Technological advances in renewable energy, inventory and digitization innovations, and the development of distributed power generation accelerate the pace of global energy transition, according to the latest EY study conducted in collaboration with IDC, a top global research firm.
One year ago, the EY and IDC teams outlined the main factors that will forever change how utilities operate and trigger reverse counting to reinvent this industry.
The most recent analysis, which includes Europe, the US, Oceania, the Gulf Cooperation Council (GCC) countries, China, India and Latin America, shows a faster pace than the most ambitious estimates, reaching critical points two years.
The study identifies four key vectors that create a combination of factors that compress the time span until the emergence of a new world of energy and which pave the way for a new energy system, transforming the world into an environment where almost every aspect of life will be supported by electricity from renewable sources.
1. Superior and cheaper technology
Accelerated switching to renewable energy sources used by utility companies, complemented by cost savings for decentralized generation and storage solutions, places 2018 as the seventh consecutive year in which the volume of new renewable energy capacities outperforms conventional energy capacity installations.
Digital technologies that accelerate the deployment of renewable energy capacities such as battery storage, electric vehicles, artificial intelligence and automatic learning have evolved rapidly from emerging trends to integral parts of the energy system. The study indicates that innovations in the field of batteries (especially the adoption of storage solutions by utility companies) mark a major turning point that will dynamize other areas.
2. Revision of policies and more ambitious green energy targets
Throughout the world, governments are positively reviewing renewable energy targets, many of them imposing significant increases that rapidly change the energy mix of their own countries. As technologies and markets mature, states are increasingly abandoning some of the policy mechanisms that have encouraged the adoption of renewable energy in its early stages. Although price guarantee policies remain central to national support programs, procurement of renewable energy purchases is gaining a prominent role.
3. Distributed generation is gaining momentum, especially among companies
The analysis indicates that a strong combination of consumer demand, sustainability goals and the desire to cut costs and secure energy needs encourage companies to conclude their own direct energy purchasing contracts (PPAs) or generate electricity with their own resources. For many companies, the main motivation is an economic one, because significant cuts in renewable energy costs, as well as maturing the market and policies have made green energy an attractive source of energy itself.
At the same time, the pace of adoption of the use of photovoltaic panels at the residential level continues to grow faster than expected, and community energy programs are developing, affecting the market shares of energy companies.
"In line with global trends, distributed generation is facilitated in Romania with the adoption of the regulatory package for prosumators," says Mihai Draghici, Senior Manager of Business Advisory Services EY Romania.
4. The actors involved are remodeling energy investments
Over the last few years, the landscape of energy investments has changed significantly, renewable sources and energy technologies have attracted new types of investors.
These include private equity firms and capital funds seeking investment with shorter maturity periods and greater potential for innovation.
At the same time, the pressure of activist investors, as well as regulatory regulators, customers and public opinion, forces companies to focus on green electricity sources.
In addition to the above vectors, "total electrification" is an important factor underlying this change in energy mix. By 2050, nearly 70% of the world's population is expected to live in urban areas, and electricity will account for 50% of total final energy consumption.
This indicates that electrification of buildings, heating systems, industry, data centers and transport is a critical lever for building sustainable cities that do not affect the climate.
In major energy markets, the phasing out of internal combustion engines in favor of electric vehicles is a very visible component with a strong impact on this trend and is encouraged by emissions reduction initiatives and the creation of urban mobility networks.