The pursuit of renewable energy looms large in the EU, where the energy transition is proceeding too slowly for the bloc to reach its climate targets. These stipulate that, by 2030, renewables must account for 27% of the energy mix across the continent. Yet is going to be impossible for Europe to achieve environmentally friendly, reliable and affordable energy supplies without a stable and secure market throughout the bloc. The solution? Intelligent regulation of the European energy market for 450 million consumers that fosters innovation and investment, according to the latest Roland Berger study, "Power to the People – The Future of Europe's Decentralized Energy Market".

Munich, November 9, 2017

The EU has set itself ambitious targets for the energy transition. And the role of decentralized energy systems in reaching them is growing continually. Decentralized storage capacities alone are predicted to grow worldwide from some 400 megawatt hours in 2015 to 50 gigawatt hours in 2025 – a trend helped by the growing competitiveness of renewable energies. The price of a solar module is already almost 80 percent lower than it was in 2010, to cite but one example. Yet there are still obstacles to overcome on the path to an energy revolution, a key factor being that the European energy market does not benefit from standardized regulation. Each EU member state is still responsible for its own market, and the differing political and market strategies across the bloc serve to impede one another and endanger Europe's shared climate goals.

Roland Berger Partner Torsten Henzelmann explains that, "If Europe's policymakers do not start to pursue a coordinated energy policy across the whole bloc, the EU will not meet its own climate targets and the continent will remain dependent on fossil fuel producing nations."

Policymakers must commit to intelligent regulation

The Roland Berger experts examine four possible scenarios in their study as they consider what Europe's energy sector may look like in the future. They ultimately point to intelligent regulation as the key prerequisite for market mechanisms to function properly.

"Regulatory pressure is forcing European countries to employ new and environmentally friendly technologies for energy production," says Henzelmann. "This in turn will see additional capital flowing into innovative start-ups and decentralized energy systems and translate into higher research and development budgets."

In addition, high-capacity energy storage systems are needed to compensate for weather-related and seasonal fluctuations in wind power and photovoltaic energy. Investments in such technologies and systems are indispensable for the success of the energy revolution.

Business model transformation among energy providers

For incumbent energy players, however, the further decentralization of energy systems in the coming years will necessitate business model transformation. New business areas will emerge in the field of smart storage solutions and new services such as digital energy consulting for private customers. Torsten Henzelmann advises utilities to "look carefully at their investments – and the timing of their investments – in fossil fuel based energy sources, as sooner or later these will be on the way out. Depending on the strength of companies' balance sheets, that will ultimately force them to hive-down entire assets."

The shift away from fossil fuels frees up capacities that companies can use for new technologies and business models. In a second step, companies should enter into targeted partnerships with start-ups, universities and research institutions in order to secure access to innovative technologies. In summary, Henzelmann sounds a note of caution: "Firms that do not adapt to the changes wrought by the energy revolution risk seeing their formerly successful business quickly turn unprofitable."

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