The fossil fuel industry has been obsessed by its battles with renewable energy – wind and solar in particular – as it struggles to prop up its disintegrating business model. But in Europe, another more dangerous nemesis is emerging – energy efficiency, an unfashionable yet economically alluring investment that analysts at Citigroup say could reshape power markets for ever, and remove fossil fuels as the primary driver of market prices. Energy efficiency has long been held by its enthusiasts as the most obvious lever to reduce emissions, and save costs. A megawatt hour of electricity not used is the cheapest form of abatement, they say, and have even coined a term – the “negawatt” – to market the idea. But try as they might – and despite the almost immediate returns on investment from energy efficiency – the idea never really captured the attention of the public or politicians. And the powerful fossil fuel generators in Australia used their regulatory influence to ensure that any major initiatives were quietly jettisoned. In Europe, however, the opposite has occurred, and Citigroup says the combination of EU-wide energy efficiency targets, its renewable energy policies and the emergence of ultra efficient appliances and zero carbon homes will have a big impact on power markets. In effect, the combined impact will be to significantly reduce demand to the point that fossil fuel generators will largely lose their pricing power. The Citigroup analysts also suggest the market will also have to “say goodbye to peak demand too,” as the combination of reduced residential demand, lower lighting demand, and an increase focus on demand side response and storage development will likely result in peak demand becoming gradually less pronounced. This is a radical reshaping of energy markets, but one that Citigroup says is poorly understood.
Renew Economy 24th Nov 2016 read more »