The Role of Transmission Companies in the Energy Transition
A new report from the World Energy Council, in collaboration with PwC, examines the future for electricity transmission companies and how they are preparing for a possible acceleration in the pace of energy transition as the world moves to a cleaner, more affordable and more interdependent energy system. In advance of the report’s release tomorrow, 16 June, two of the expert advisers behind the report discuss its findings and reflect on the impact of the coronavirus pandemic on the sector.
Martin Young, Senior Director, Scenarios and Business Insights, World Energy Council: The breadth and depth of participation in this initiative is really noteworthy. CEOs and senior leaders from 37 different entities in 35 countries contributed to the report through in-depth interviews. Between them, they cover more than two thirds of the global transmission network and there is great regional diversity. This is no ‘think tank’ or ‘ivory tower’ perspective. It is detailed insight into the views and concerns of transmission companies.
Dr. Paul Nillesen, Partner, PwC’s Strategy& the Netherlands: The topic is of great interest to people in the industry. There’s been this latent demand to talk about these things and, of course, a big interest in comparing experiences with counterparts in other countries. The challenges that they are facing are very similar so there is a real commonality and a community of interest around the world.
Martin Young: Yes, that commonality is interesting because we are talking about very different country and political contexts. And yet the challenges that they’re dealing with resonate across the board - reliability in an era of variable renewables; the need for long-term planning and working with new market actors; digital delivery; incorporating new and uncertain technologies; and, of course, interconnection, integration and geopolitics. They are all having to manage those five issues. It reinforces our view that there is no one size solution for all, and that countries and companies can learn with and from each other to avoid reinventing the wheel.
Paul Nillesen: And all of them are managing uncertainty. They have a clear goal - a reliable, clean electricity grid to fit future needs. But that simple goal masks considerable uncertainty, complexity and new coordination challenges with other system operators. More than ever, it requires intensive collaboration with other actors, especially DSOs.
Martin Young: The coronavirus pandemic has added new societal anxieties to pre-existing uncertainties. Pre-crisis, we were highlighting the shift in value-creation towards the end-user / customer, while the response to the crisis has accelerated digitalisation of the whole value chain. Digitalisation is the way that many companies and economies have managed to keep operating during the lockdown. It has really come of age during the response to this pandemic.
Paul Nillesen: The performance of transmission companies so far during the pandemic is a great calling card for their resilience. In a major crisis and with considerable added technical challenges as demand dropped, the lights stayed on. I’m even more proud to work in this sector than before. COVID-19 has been a road test for digitalisation and a test for just how good these transmission companies are at managing crisis.
Martin Young: We have all benefitted from the resilience of the grid while the crisis has also revealed the need for the resilience of people and value chains. In particular I think we are starting to see a rethinking of resilience in terms of what I would call the integration, interconnection and geopolitics conundrum. Interconnection is increasingly important as it enables you to optimise resources. If you have excess renewable generation in one area and a deficit in another that is an energy trading opportunity. But clearly the geopolitical concern is about control. We will see more interconnection, but I don’t think there will ever be a single global grid. You will have connected global grids with multiple points of control. Being connected doesn’t mean being controlled.
Paul Nillesen: Yes, it is important to make a distinction between connection and control. Being connected increases resilience and the coronavirus crisis has again highlighted that. The widespread view from transmission companies is that more interconnection, more cooperation and more collaboration will be key to future developments, and this comes through strongly in the report.
Martin Young: The plethora of new players and interactivity means that there is both an opportunity and a need for TSOs and ISOs to define themselves as facilitators of energy transition by evolving beyond being physical infrastructure providers to being shapers of a wider ecosystem of energy and power actors with diverse interests and needs.
Paul Nillesen: The role and position of transmission companies is changing. They have traditionally been in the background but are now coming into the foreground. They are having to talk and interact with all kinds of stakeholders. This requires a mindset and skillset change. You need to open up, interact, be transparent, and explain the possible scenarios and options. The skillsets and capabilities they need are changing. Their position gives them a responsibility to lead and be the neutral arbiter, helping drive the energy transition.
Martin Young: I think they recognise the need for new skillsets and some cultural change. For example, data science capabilities are now important. It is broader than the traditional engineering skills. They have always been good at forecasting, making sure they meet demand which can be highly variable and volatile. But now it is a much more complicated system because it is more dynamic and fragmented. There are going to be very challenging goals for the energy system and their expertise is needed to inform the policy makers and regulators on what is really viable.
Paul Nillesen: And that role in shaping the energy ecosystem also crosses over into the need for transmission companies to have a social conversation, not just with stakeholders but also the wider public, on the choices that lie in front of the energy system. Maintaining and building their social licence to operate with their community is key.
The full publication “Performing While Transforming: The Role of Transmission Companies in the Energy Transition” will be available 16 June.