Is the energy transition the same for everyone?

In Europe, the energy revolution is underway. Renewable energies are expanding, energy systems are digitized, micro-producers are organizing themselves and disintermediation movements are underway. That sounds a lot; I am convinced that we are only at the beginning of the transformation of the energy sector. Can we then consider that all actors are and will be impacted in the same way by this transformation? Are they confronted today in the same manner?

The major European electricity producers are probably among the most affected: their production capacities are not all depreciated, although some production costs are no longer competitive. It is often cheaper to buy electricity from markets than to produce it: for example, the big Swiss producers, who are owners of hydropower generation capacities that are virtuous, have been paying the price for this situation in recent years.

The various generation assets of the producers face several difficulties: some, such as coal and oil-fired power plants, are too emitting CO2 regarding the increasingly restrictive legislation. Others, such as nuclear power plants, face significant maintenance and upgrading costs, necessary to meet increasingly stringent safety requirements. More and more have production costs that are now higher than those of some renewable energies.

For these producers, the energy transition requires a courageous search for a compromise between asset renewal and the juicy exploitation of end-of-life assets. In Europe, these producers can now be schematically classified into three categories: those who prefer to exploit their assets, even if they step closer to the abyss, those who resolutely decided to operate rather quickly a substitution of their former assets by new capacities, and finally those which develop their renewable production capacity in an entity separate from that which manages the “vulnerable” assets.

In Europe, some historical energy producers combined production activities with energy distribution and sales activities. Every business must adapt to this energy transition: it is probably difficult for them to address all stakes together. These big players probably have a lot to lose and must organize themselves with will and courage to transform themselves deeply and innovate to keep their leadership.

Their large size makes them potentially less agile and the preferred target of alternative energy companies, new entrants to the market.

These alternative energy providers have little to lose and much to gain. They can innovate without jeopardizing any historical activity.

Medium-sized energy companies are just as exposed as big ones; on the other hand, they are more agile and, probably, as they feel themselves more threatened because more fragile, they have embarked on major refoundation programs. To do so, they must have taken distance with the greatest energy companies they have been following for a long time. This emancipation requires them to develop new skills and a new managerial boldness.

Smaller energy providers, active in rural areas and in small towns, had a later exposure to  the energy transition and its consequences; their lack of structure and means did not always allow them to become aware of the changes in progress and of their real degree of exposure. This lack of resources, coupled with a lack of awareness, increases their vulnerability. Some, however, have had the lucidity to approach larger organizations and hang themselves to them as to a locomotive.

These players, operating, in the competitive world share a common point: exposed to the devastating effects of the energy transition, they have become vulnerable and forced to adapt quickly so as not to face the worst difficulties. In the last 12 months I have seen how this European energy community has set in motion.

Other actors are also facing the effects of the energy transition; I mean the TSOs (transmission system operators) and the DNOs (distribution network operators). They are part of the regulated world; their vulnerability is a priori extremely reduced. Nevertheless, the more they are specialized on a simple energy, the more vulnerable they are to a substitution of this energy by another.

From the point of view of the territories, countries, regions or cities, these actors have an essential role to play because their transformation and progression condition the energy performance of the territory they cover and the development of energy producers and vendors which operate in this territory.

The challenge for DNOs (distribution network operators) is to become DSOs (energy system operators). Of course, the meaning of the S is essential because it defines the perimeter on which the energy system will be optimized; this definition is often the role of the regulator. On the basis of this definition, the objective of the DSO is to offer the optimal level of optimization and the widest range of development possibilities to the actors of the system.

The great paradox of this situation is that the most vulnerable actors partly depend on the least vulnerable to survive.

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