More innovation and deployment is needed
By Inger Pihl Byriel
What are the effects and value creation of R&D? It’s a very relevant question, although not very easy to answer in a short sentence. Among transmission service operators (TSOs), it can be even harder to answer since the value creation at some TSOs is measured at the socioeconomic level, which is much less tangible than when a company uses R&D to develop new products to increase its profit. Then why do we spend resources and man hours on R&D?
The European energy system is undergoing a dramatic transition. A new climate and energy policy was proposed by the European Commission (EC) in January 2014, which contained the goal that, in 2030, 27% of energy should come from renewables. There should be 15% interconnector capacity compared to production capacity in all member states. And finally, the EC confirms that the internal energy market for electricity and gas is still a high priority. This has a tremendous impact on the European transmission system and market, and “off-the-shelf” solutions are not available!
This is the main reason why new solutions are so urgently needed, and for this we need R&D! R&D activities facilitate the needed development of technologies and market services and identify technological dead ends. This is of great importance when it comes to minimizing technological and investment risks. An attractive investment environment is a precondition to carry out the conversion to an energy system with 27% renewables in 2030 and an internal energy market virtually by now!
But maybe R&D is not the only thing we need. There should be a much higher focus on innovation and deployment. We need to show possibilities that inspire market participants to develop products and services that support our vision and needs. The European TSOs are not able to find all the solutions themselves. It has to be done in close cooperation with our surroundings; this is why programs such as FP7, Horizon 2020, NER 300, and ERA-NET+ are needed to ensure this cooperation. Otherwise, it will be only cooperation among TSOs, and this is simply not creating sufficient value and doesn’t consolidate the solutions needed to reach the ambitious goals in a very limited time.
Let’s look at market solutions as an example. Energinet.dk is one of the central partners in the EcoGrid EU project funded by FP7. In EcoGrid EU, a real-time market concept as an extension of the existing power balancing markets in Europe is being developed. The development of a real-time market is considered one of the most efficient ways to meet the challenges of operating a system with increasing shares of renewable sources. The demonstration in EcoGrid EU started in the fall of 2014, and expectations are high. Several different partners are involved: distribution system operators, manufacturers, aggregators, and end users, covering the whole
chain from production
to market. Thus solutionshave been developed among partners with very different backgrounds, having very different needs, and this has contributed tremendously to the height of innovation but also to solving a problem for each of the partners.
The EcoGrid EU real-time market will increase demand-side market participation and thereby reduce the need for costly flexibility on the production side or compensate for traditional balancing power and services from conventional generation displaced by generation based on renewable sources. We have used these findings in developing our new strategy.
One of the keys to producing flexibility on the demand side is to foster investment in innovation and new business models in the retail market, which provides a variety of products and services. Innovation is also the best driver of competition and efficiency in the electricity markets. From the latest report “Smart Grid Projects Outlook 2014,” from the Joint Research Centre, it is evident that Denmark is leading within R&D in smart grids and that the next step is the deployment of R&D results. The deployment is essential to cash in on the benefits from the R&D efforts and must be facilitated by demonstrations and secure frames for investment. It is therefore Energinet.dk’s ambition to provide a framework for investment in innovation and new business models in a retail market undergoing rapid and fundamental transition.
Several years of ambitious initiatives mean that today Denmark has built the foundation to develop a more mature retail market, strengthening both competition and customer-focused innovation. Our strategy is to take an active international role, where Denmark’s position is used to promote scalable Danish solutions to European challenges. It is crucial to support innovation, investment, and competition by not creating unnecessary risks affecting prices and frameworks in the energy market. To ensure this development, we will continuously need new solutions consolidated in our surroundings through R&D activities and even to a higher degree there is a need for innovation and deployment.
Maybe R&D is not very visible, but it is inevitable, although it should be twisted to a higher focus on innovation and deployment with the substantial involvement of our stakeholders! Let’s make cross the border of innovation and deployment together to ensure the right and the most cost-efficient solutions!