The arrival of grid parity marks when European utilities must face fundamental change: old business models will enter an irreversible decline, and new opportunities will emerge. But Europe’s utilities may be better positioned than those in other regions for the massive changes that lie ahead.
- Many of the technologies now transforming energy, transportation and other sectors were either first pioneered in Europe or are now being driven forward by companies based there.
- Regulatory pressure, an increased uptake of renewables, and ambitious carbon-reduction targets mean that many European utilities have already begun to pivot their business models.
For many of the region’s energy companies, the milestone of grid parity marks an opportunity to evolve further. The question is — how will they use that opportunity?
An industry-wide wake-up call
Serge Colle, EY’s Global Power & Utilities Advisory Leader, believes that, in years to come, the European energy industry will look back at 2022 as the birth date of a fundamentally different energy system.
“We are counting down to a tipping point,” he says. “When we reach grid parity, grid defection becomes an economically viable option.”
“While we don’t expect large numbers of consumers to leave the grid, the ability to do so will accelerate the pace of technological and consumer-led changes that will drive the development of the full potential of a digital, decentralized energy system.”
The role of the electricity network won’t change overnight. Utilities will still connect electricity supply and demand, though their role as integrator of multiple, distributed sources will significantly increase, and be complicated by the addition of battery storage.
For Colle, the critical question for European utilities will be about how they prepare for and then move forward from the consequences of grid parity.
“Will networks choose to do only what is needed to ‘cope’ with new technology — for example, by reinforcing the grid?” he asks. “Or will they be bold enough to seize its full potential? For example, battery aggregation, which would allow utilities to manage the intermittency that renewables bring, may be the killer application they need.
“The choices that utilities make now — to be on the defensive or to ‘go on the offense’ — will determine their future role in the new energy world.”