Decentralized Energy, Digitalization, Europe

Interview: The barriers to a digitized and decentralized energy sector

“You can’t picture a decentralized energy system working without digitalization – it is needed to enable decentralization.”

So says Frauke Thies, executive director of smarten, a European industry group of market players driving digital and decentralized energy solutions.

In an interview at European Utility Week in Vienna, she said digitalization and decentralization “inherently go together in a decarbonizing system”.

And while both have already brought significant change to the European energy landscape, she told me that there are some “very tangible” barriers to the further rollout of innovative business models, and “many of them are in the field of regulation”.

“Our market design was made with centralized generation in mind and also non-active consumers. Now, the whole system looks entirely different and that means rules and regulations have to change.

“We need to allow consumers to participate in the system – something that is not a given at all. Not many markets are open for distributed resources to participate, so we need a whole change of access conditions, pre-qualification, minimum bid sizes and allowing aggregated products and not just individual single units.”

And she adds that some incentive structures have to change as well. “In the past, system operators basically had the task to build a grid and keep it stable, and they could recover their costs. Now we need to change the whole mindset. It’s no longer just about building a grid. It’s about using whatever resources are there to make the system most cost effective. It’s about system operators procuring flexibility. And that means the whole regulatory framework has to change from a capex-based world to a world where operational costs are taken into consideration as well.”

To hear her thoughts on what else needs to change to enable a digitized, decentralized Europe, plus her predictions for the year ahead, watch the full interview here.