Over the next decade, traditional fuel-based generation will shrink as a proportion of the power mix. This will increase the flexibility needs of the market, according to Wood Mackenzie.
Companies including Centrica, EDF, Enel, Engie, Shell and Southern Company have set themselves up to execute on evolving, rigorous energy demands by establishing distributed practices through a series of mergers and acquisitions during the past decade.
These efforts have resulted in the creation of compelling, vertically integrated business units, but additional capabilities will be needed to solve the increasing number of grid-balancing challenges associated with a more intermittent and renewable generation fleet.
The imperative to identify and implement these solutions will lead the industry to continue to experiment with innovative market reforms to unlock growing and as-yet-unrealized flexibility potential. Efforts to integrate these resources will lead to the creation of new revenue opportunities via wholesale and distribution value streams throughout the decade.
What are the biggest global trends to watch in 2020 and beyond? Wood Mackenzie Research Director Ben Kellison and Research Manager Elta Kolo see five key themes:
- Regulatory reform
- Evolution of market models
- Grid edge investment to complement electrification
- Grid-balancing will increasingly rely on flexible resources
- De-risking investments so the distributed energy resource (DER) market can scale
"Initially, flexible volume will be attained by dynamically leveraging what is already integrated," explained Kolo. "Resources already enrolled in existing demand response programs will be the lowest-hanging fruit.
"In the U.S., FERC is pushing regional market operators to formalize market designs that are inclusive of DERs. FERC has mandated operators under its jurisdiction to survey interconnection practices within their footprints and assess the economic benefits of ensuring individual resources and aggregations are on an equal footing with traditional system-balancing resources."
Like other regulators around the world, FERC recognizes the value of flexibility. As distributed resources scale, their operations will impact not only their owners' balance sheets but also market prices.
Electrification will continue to grow as governments and customers seek to reduce their emissions.
"Electrification directly creates the need for demand orchestration," said Kellison. "Orchestration at the site level will be necessary to meet higher energy and power demands while minimizing the need for grid upgrades."
Notably, flexible resources can enable load to better match variable output.
"Electrification offers an unprecedented opportunity for ⦠industry partners to promote investment in equipment and software that can help shape customer load for decades to come," said Kolo.
For more information, visit www.woodmac.com or call (713) 470-1600.
