Tomaž Orešič
energetski blog / energy blog

Winners and Losers

‘Every transition has Winners and has the Losers’, have been the words of Marie van der Hoeven, the executive director of IEA during her presentation at the very first Energy Transition Dialogue in Berlin. It is not all too hard to identify the first and the latter, following the last week’s debates in the German Foreign Ministry premises.
If somebody would listen to the presentations and discussions and would somehow miss the developments in the energy sector in the last 5 years, he might get the impression that the 4 German incumbents haven’t even existed. It has been pretty much one sided, rolling over the past of the energy industry. In this regards the words of the Energy Minister of United Arab Emirates were just in place. He was saying that if we say transition, it doesn’t immediately mean elimination. He emphasized the importance of the level playing field competition, mentioning also the need for managing the transition in a timely manner and taking in to account the specifics of every country. Just these country specifics were I’d say the key missing ingredients in the debates. Especially the financial aspects, when it comes to the load the end consumers can bear for the purpose of renewables subsidies.
The fact is that not only we are not facing a global level playing field, the fact is the asymmetry between the countries in regards to the growth of renewables is even growing as a result of s.c. countries’ specifics. It is hard to compare a country where households pay 300€/MWh with a country where they pay 100€ or less for the very same commodity. Or a country with no nuclear with the one where the nuclear is being subsidized.
The difference in the pace of renewables penetration will inevitably lead to a situation where there will be countries with a major or at least significant portion of generation portfolio with the zero marginal costs and the others which will stay behind with the existing portfolio, whichever it is. The benefit of the latter is however going to be they will be absolved of financing the whole learning curve. According to Jeremy Rifkin just this zero marginal costs phenomenon, which has moved from the TelCo and IT sector into the energy one, is proving the real transition in the sector.
Coming back to the incumbents, they were obviously not invited to the table. I’m sure they would have some experience and some new business models ideas to share. It shall not be perceived they are not understanding the game change just because many of them have to bear the load of the existing portfolio or due the non-existing supporting national scheme for the renewables. These are the real challenges of the ambitious forthcoming Energy Union. Stopping the trend of further disintegration of national energy markets or policies could become one of the first goals.
It is first of all about financing, about the countries’ ability of financing the transition, about existing portfolio, natural resources, environmental policies and many more. The technical part is doing much better, coordinating well on the European level and successfully connecting and balancing the volatile renewable generation to the grid.
The extremely ambitious Chinese plans prove that the energy transition march is irreversible, but still, as Ms.van der Hoeven was saying, it is less about the price, more about the policy.

Tomaz Oresic