Valuing Energy Futures

Dr Stephen Hall: University of Leeds

s.hall@leeds.ac.uk

“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.

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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 CapacityGW 0 13 2 40 11 46 32 23

Low-Carbon Generation

CapacityGW 42 121 97 49 119 104 90 84

Number of Electric

Vehiclesmln. 3.9 24.2 31.0 24.4 9.7 25.2 25.2 25.2

Method

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

VP#1 Efficiency

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2030 2040 2050

mG

BP

20

15

VP # 2 Energy Services

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2030 2040 2050

mG

BP

20

15

EV Dominance in VP#2*

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

2030 2040 2050

mG

BP

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.

VP #3 Local Low Carbon

0

500

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2030 2040 2050

mG

BP

20

15

0

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3000

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mG

BP

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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

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

bn

GB

P 2

01

5

2030 2040 2050

VP # 5 Flexibility Optimisation

VP #6 Carbon Capture and Storage

-1500

-1000

-500

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1000

1500

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mG

BP

20

15

Provocation #1: Will anyone really invest in CCS when it is such a volatile value pool?

Provocation #3: Flexibility value is so volatile only small start-ups will bother with it and it will never reach the scale needed.

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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.

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.

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.

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.

• 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.

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