University of Leeds || Dr Stephen Hall || Valuing Energy Futures
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Dr Stephen Hall of the University of Leeds joins us at the Science: Disrupt London Session on Future Energy, to talk about how business models of energy supply markets shape energy transitions.
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University of Leeds || Dr Stephen Hall || Valuing Energy Futures
- 1. Valuing Energy Futures Dr Stephen Hall: University of Leeds s.hall@leeds.ac.uk
- 2. “Vetinari was looking intently at the blind, blank map. It was, he felt, very much like the future; a few things were outlined, there were some rough guesses, but everything else was waiting to be created….” Pratchett,T., (1999)The Fifth Elephant, Doubleday. 2
- 3. Scenarios NGrid - No Progression DECC 2050 - Higher RE, more EE DECC 2050 - High Nuclear, less EE DECC 2050 - Higher CCS, more Bioenergy NGrid - Gone Green RTP - Market Rules RTP - Central Co-Ordination RTP - Thousand Flower Electricity Demand TWh 309 490 555 461 361 504 402 301 Power Generation (incl. Import) TWh 349 530 610 556 454 573 464 370 Conventional Generation Capacity (excl. CCS) GW 49 0 0 0 18 15 5 0 CCS equipped Generation Capacity GW 0 13 2 40 11 46 32 23 Low-Carbon Generation Capacity GW 42 121 97 49 119 104 90 84 Number of Electric Vehicles mln. 3.9 24.2 31.0 24.4 9.7 25.2 25.2 25.2
- 4. Method
- 5. Market size in 2050 compared with new revenues and avoided costs. Market size and new values in 2050 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 NGRID No Progression DECC 2050 - Higher RE, more EE DECC 2050 - High Nuclear, less Energy Efficiency DECC 2050 - Higher CCS, more Bioenergy Ngrid - Gone Green RTP - Market Rules RTP - Central Coordination RTP - Thousand Flower bnGBP New Revenues Avoided Cost Market Size
- 7. VP # 2 Energy Services 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 2030 2040 2050 mGBP2015
- 8. EV Dominance in VP#2* 0.00 1000.00 2000.00 3000.00 4000.00 5000.00 6000.00 2030 2040 2050 mGBP VP#2 Energy Services decomposed by service in NGrid Gone Green Energy efficiency retrofit Home energy management Electric vehicle revenues Provocation #2: Utilities can capture lots of value from electric vehicles so they will lead the way on promoting them.
- 9. VP #3 Local Low Carbon 0 500 1000 1500 2000 2500 3000 2030 2040 2050 mGBP2015 0 500 1000 1500 2000 2500 3000 2030 2040 2050 mGBP2015 Figure 6 - Value Pool #3: Local Low- Carbon Electricity - Distributed Energy Lease Service - New Revenue Figure 7 - Value Pool #3: Local Low-Carbon Electricity - Solar PV Services - New Revenue
- 10. VP #4 Large Scale Low Carbon -5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 bnGBP2015 2030 2040 2050
- 11. VP # 5 Flexibility Optimisation
- 12. VP #6 Carbon Capture and Storage -1500 -1000 -500 0 500 1000 1500 2000 2030 2040 2050 mGBP2015 Provocation #1: Will anyone really invest in CCS when it is such a volatile value pool?
- 13. Provocation #3: Flexibility value is so volatile only small start-ups will bother with it and it will never reach the scale needed.
- 14. 14 Provocation #5: Regulation gets in the way of business model innovation. Provocation #6: Some business models just too risky for the levels of return in the sector.
- 15. Same but Smart • Free to switch companies as and when you want to • You will have a ‘smart meter’ with ‘live’ information at home and on your phone etc • Your supplier can see how and when you use electricity • You can change your behaviour (not use the washing machine etc) when you see that electricity is cheaper Energy Service Company • You have a 10-year contract • Your energy bills are guaranteed to be lower than you are currently paying for the duration of the contract • You receive one bill for all your light, heat and any electric car needs • You might have some new things installed, like insulation and a home energy management system • Your supplier can pause your heating and appliances (such as your fridge) occasionally for up to 15 minutes at a time, or take control of when to charge your electric car to help you avoid paying the highest prices, though you can opt out of this Peer to Peer • You have no contract with an energy supplier • You use an app on your phone choose who to buy energy from - you can choose based on price, type or location of energy. (For example, you might want local green energy, even though it might not be the cheapest) • You can change who you get your energy from as often as you like • If you have a solar panel on your roof you can make money by selling the energy from it through the app New Electrifier • You have a two-year contract • You get a discount for switching your home from gas to electric heat • It will cost about the same as now • You might have some new things installed like electric radiators or a heat pump • Your supplier can pause your heating occasionally for up to 15 minutes at a time, or take control of when to charge your electric car to help you avoid paying the highest prices, though you can opt out of this 3rd Party Controller • You have a multi-year contract • You tell the company how you want to live your life and it takes decisions on your behalf to deliver this • You receive one bill for all your energy, broadband, TV, mobile phone, electric vehicle and water services • Your company may offer to install equipment like insulation and a home energy management system to make your home more efficient and smarter • Your company can pause your heating and appliances (such as your fridge) occasionally for up to 15 minutes at a time, or take control of when to charge your electric car to help you avoid paying the highest prices, though you can opt out of this Paired Comparison design (=10 binary choices) Provocation #7: Some business models are technically possible but just too complex to understand.
- 16. Proportion of times each archetype was chosen over another archetype (out of 8096 eligible times for each) Provocation #8: Consumers are more engaged than we think when given meaningful choices.
- 17. Attractive Complicated Unpredictable Relaxing Flexible Trustworthy Fair Interesting Risky Bad Inefficient Expensive Liberating Popular Same as today Unattractive Straightforward Predictable Stressful Inflexible Untrustworthy Unfair Boring Safe Good Efficient Cheap Oppressive Unpopular Different from today Each archetype + current supplier were rated on various attributes (sliding scale between different ‘poles’) Provocation #9: Consumers are not as engaged as they say and any business model based on deep engagement is bound to fail.
- 18. • Provocation #1: Will anyone really invest in CCS when it is such a volatile value pool? • Provocation #2: Utilities can capture lots of value from electric vehicles so they will lead the way on promoting them. • Provocation #3: Flexibility value is so volatile only small start-ups will bother with it and it will never reach the scale needed. • Provocation #4 is: Distributed energy and electricity utilities will always be in competition because large utilities won’t pursue this value pool. • Provocation #5: Regulation gets in the way of business model innovation. • Provocation #6: Some business models just too risky for the levels of return in the sector. • Provocation #7: Some business models are technically possible but just too complex to understand. • Provocation #8: Consumers are more engaged than we think when given meaningful choices. • Provocation #9: Consumers are not as engaged as they say and any business model based on deep engagement is bound to fail. 18
Editor's Notes
- These value pools are linked, you would not go into these markets for the revenues, but you might go into it as a loss leader to ENABLE new markets and protect your access to other revenue sources such as the EV charging and distributed lease element.
- Current supplier vis a vis Same but Smart LESS: attractive, relaxing, fair, flexible, interesting (*much) + more expensive Peer to Peer