Clean energy stakes: UK ahead of US and Germany

Exclusive research by Utility Week and Capgemini found that despite economic concerns, utility managers still believe the UK can be at the forefront of the clean energy revolution.

More than half the UK's energy company managers and directors believe the country can maintain a leading position in the switch to a clean energy future, and that the UK can be at the forefront of new initiatives such as smart meters. That opportunity remains, despite the economic downturn, many executives believe.

That was the message from exclusive research carried out for Utility Week and Capgemini over the past month. Interviews with 75 managers and directors of UK generation and energy supply companies were completed as Capgemini prepared to publish its eleventh European Energy Markets Observatory (EEMO) report.

Turning point

The Capgemini EEMO report reveals that utilities across Europe are at a turning point as they grapple with managing huge expenditure in the face of a drop in consumption, the first since the Second World War. The report says that in the short term, utilities will be deferring or cancelling investment, while in the long term a deeper change in their business models will be required.

Alistair Green, lead consultant, global energy utilities and chemicals for Capgemini, says: "The EEMO research shows that the recession has upped the challenge for energy firms in accessing the funds they need to invest in new generation capacity and grid infrastructure."

Impact of recession

The Utility Week/Capgemini research reveals that utilities in the UK do have concerns about the effect of the recession on plans for a switch to green energy. However, those polled were evenly split over how important the economic situation was. Asked whether the fall in consumption would affect the business case for clean energy generation in the UK, 45 per cent agreed and 45 per cent disagreed.

Many are still firmly optimistic about the UK's clean energy agenda, however. More than half - 55 per cent - thought the country would be leading in clean energy in 20 years' time. The UK got the vote of those polled ahead of the US (29 per cent) and China (23 per cent) and had far more support than current green energy leader Germany (16 per cent) and Scandinavia (11 per cent).

Respondents were less sure that current financial instruments were strong enough to fully support a switch to clean energy. Forty-seven per cent said the UK and EU package combined would be effective, while 29 per cent said it was insufficient. Twenty four per cent were undecided.

Energy efficiency

The research revealed that executives in UK energy companies are hopeful that there are opportunities for energy efficiency across the entire economy. Big wins are possible in the industrial, commercial, domestic and technological sectors, they believe. What is more, they are in broad agreement that distributed and demand-side solutions will be vital in helping address the country's energy needs over the coming two decades.

Among the largest opportunities will be the use of smart white goods such as refrigerators to help manage demand - 77 per cent thought the use of such appliances would be very or fairly effective. Respondents also expected big wins from the use of decentralised energy, which was seen as a very or fairly effective tool by 56 per cent of those polled, and from a switch to electric cars, which 54 per cent thought would be effective.

Smart supply

However, the executives polled were most enthusiastic about the possibilities of a "smart" energy supply industry. A massive 89 per cent thought that smart meters would be a key technology in meeting our energy needs, and 73 per cent thought that smart grids would be equally important. Those figures were no doubt driven by the assumption that smart grids and smart meters will be the basis upon which decentralised energy and demand-side management can be achieved.

Eighty per cent of those interviewed thought smart meters would directly contribute to energy saving by changing consumer behaviour. They were less sure about how big the change would be: 25 per cent put the likely energy saving at a maximum 5 per cent of current usage, while 33 per cent thought the saving was more likely to be at the 6-10 per cent level. A few thought the opportunity was even greater: 9 per cent suggested 11-15 per cent savings were possible and a similar proportion put it as high as 16-20 per cent.

Green said: "Investment in technologies such as decentralised generation and the smart grid are key to the energy security of the UK because they both reduce our exposure to imported fuels and help address the climate change impact of electricity generation.
"It is encouraging to see real confidence among the energy firms we spoke to that the government and Ofgem are acknowledging the challenges in building this sustainable future and its impact for end-user prices. This is essential for investors to have the necessary confidence to support the required investment."

Smart meter rollout

Within the UK, the slow pace of smart meter development has been a cause of frustration. However, the industry figures polled by Utility Week and Capgemini were optimistic about the potential for the rollout.

Almost one-third of respondents - 32 per cent - thought the UK would be the first European country to complete the large-scale rollout of smart meters. That belief put the UK, by a small margin, in the lead in Europe. Germany was seen as the next most likely to win the smart meter race, with 31 per cent of those polled suggesting it would be in the lead. France and Scandinavia - which were each seen as leaders by 13 per cent of those polled - were the only other countries seen as significant contenders.

Barriers

The UK's competitive and fragmented energy market has made the rollout of smart meters more complex and it has been seen as a barrier to deployment in the past. But for those polled by Utility Week and Capgemini it was not the major barrier. In fact, it was in third place, named by 29 per cent of respondents, and seen as not much greater than overcoming customer resistance.

Fear from the customer was thought likely to be a significant barrier, despite the benefits that smart meters would deliver. Twenty-eight per cent of those polled named it among their concerns, making it clear the industry understands there is an important job to do to reassure customers about smart meters and ensure they buy in to the rollout.
The framework for the rollout concerned 35 per cent of those polled. But by far the greatest barrier was the likely cost: 72 per cent of those polled named it as a potential stumbling block.

At a time when, as the Capgemini EEMO report reveals, utilities are re-examining their plans and assessing how they can meet the huge investment requirement of the coming years, cost - even with the many benefits smart meters will bring - is a real concern.

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