The strategy of the major European utilities is dominated by a few key concerns:
– The separation of production and sales, on one hand, that are activities belonging to the competitive field and transmission and distribution, on the other hand, that are activities remaining in the regulated area. The European Commission has included this separation in its third energy package to prevent utilities with distribution activities from being tempted to obstruct competition by making the access to their infrastructure too difficult.
The major European utilities all have distribution activities and face the need for a significant assets reorganization.
– The “energy transition” requires utilities to gradually reconstruct their capacity portfolio. Some are nevertheless in a particular situation: EDF (54% of production capacity in nuclear energy) faces the relative decline of this industry and too risky technology choices, EnBW has a very small share of renewable generation (less than 1%). ENEL has probably the most balanced portfolio.
The urgency is looking for a balance between new production technologies, risks and margins. Should the utilities favour short-term margins or take some risks on the future recomposing faster than the other its energy mix?
– The decline in energy prices on the wholesale markets further reduces the “corridor” of possibilities to maintain the level of operating margin.
– Uncertainty of policies and regulations provides an additional level of risk on all utilities.
Does it remain, besides these key points, room in the main concerns of utilities, particularly for cities and Smart Cities?
It is reasonable doubt even if utilities communicate much about the subject. We now know that communication is often the ersatz trying to hide the lack of action. The situation may be somewhat less pronounced for utilities that operate and not own distribution activities.
The Smart Cities know: if they depend on large national utilities, they will probably spend a lot of “energy” to induce them to their side.
I don’t believe in a leading role of large national utilities as innovation factors for smart cities and future energy systems. The new energy economies will be driven by factors as dezentralization, local value creation, BI and asset light. In all this fields our old, large players are badly positioned.
So true. I experience that on a daily basis. This assumption leads to a major reshuffling on the energy market. Countries such as Sweden, Switzerland, partly Germany and USA, with more local utilities, should be considered carefully as able to pave the way for future energy systems.