BY RICHARD HEAP:
Storage will play a transformative role for the global electricity system as we see more countries embrace renewables and electric vehicles. We hear this a lot.
But is storage really uppermost in the minds of those who run large utilities? We got an insight into this at Bloomberg New Energy Finance’s Future of Energy Summit in London on 1st October, at a panel session with EDP’s Antonio Mexia, Enel’s Francesco Starace, Engie’s Judith Hartmann, and Total’s Philippe Sauquet.
The discussion focused on how Europe’s large utilities should change their strategies as the electricity market grows, and moves from relying on fossil fuels to clean energy. It touched on the services that these firms were looking to offer; how to be profitable in a competitive market; and the technologies they should be using. Storage wasn’t discussed much explicitly – but it will play a key role in many of these discussions.
Storage cost trajectory
Of the four, the firm that has made the most high-profile move in storage in recent years is Total, which bought French battery maker Saft in 2016. It also bought a stake in French battery maker Ionic Materials in April.
Sauquet said Total has been investing in solar for more than 40 years and has seen the cost of solar panels fall rapidly over that period, and that he expects to see the same happen in storage. This would support the rapid growth that Sauquet said would continue in renewable energy including solar and wind.
“What has changed very recently is the acceleration of the market, and we want to speed up to give our customers what they are asking for,” he said.
Even so, oil and gas represents 94% of Total’s activity while renewable energy only represents 6%, though it plans to double the latter to 12% by 2028.
The balance between fossil fuels and renewables was understandably one of the big concerns for all of the executives interviewed. Mexia said that one priority at EDP was that the company didn’t want to “be a simple developer”. He said utilities had to find land, develop schemes, securing finance, secure a customer, and manage them too: “You need to be able to bring together what other people are doing,” he said.
Mexia didn’t mention storage explicitly, but it will be vital as utilities look to manage power generation at their schemes and deliver it to customers when they need it.
Engie’s Hartmann said similar. She said the French utility had to be able to design, develop, build, run and decommission a scheme. If firms in the storage sector make a strong case that they create value for utilities in this process, and help them to decarbonise the grid, then surely they will find themselves in great demand.
She said: “Nowadays, people want to know about provenance – where does the electricity come from? – and additionality.”
This means corporates want to know which schemes their power comes from, and that their support has helped to add new solar or wind farms to the grid.
We have seen headlines over the last year that reiterate how important storage is to European utilities. France’s EDF said last week that it wanted to lead in the electric vehicle charging market, and in April said that it would invest $10bn in energy storage by 2035; and E.On has been adding batteries to some of its wind farms too.
In addition, Enel Green Power North America last year bought US demand response company EnerNOC. That isn’t storage itself, but it does show the company is taking seriously the need to help companies manage energy use and dispatch power when it is needed. Starace said in the BNEF session that EnerNOC had been a huge value creation tool, and was helping it to achieve profitable growth.
Storage and value creation
For Starace, that latter point is key. He said he saw great opportunities in renewable energy at present because there was an alignment that people and companies want to decarbonise the grid, and the technology was there to enable them do so. But he added that utilities had to be “really ruthless at cutting costs” if they were to survive.
And, for storage, that’s the important point. Yes, these utilities see storage as an important thing in which they should be investing, but the people at the top are also looking to steer their firms through a fast-changing world and be profitable while doing it. The corporates buying electricity through long-term power deals will push them hard on price, and it is up to the utilities to develop the services that they need to survive.
Therefore, storage companies that can show these utilities how they add financial value, and help provide those in-demand services, will surely be onto a winner.