The four megatrends

THE DECARBONISATION OF SOCIETY

This trend, triggered by social and political objectives to counter climate change, is being driven forward by the integration of increasing amounts of renewables into the energy system and the spread of electrification across society. Under the European Climate Law, which entered into force in July 2021, all member states are bound to take necessary measures at EU and national levels to meet the target of reaching net zero greenhouse gas emissions by 2050. The key role of sustainable finance in delivering this policy objective has been recognised, leading to the creation of the EU Taxonomy (see the section entitled ‘Political developments’ below). However, the steep increase in renewable energy generation and additional electricity needs are having important repercussions: the need for (long-distance) electricity transmission is increasing (as areas with substantial RES are often remote) and areas with different and complementary production patterns need to be connected. The mix of renewables and higher levels of electrification offer up flexibility to the system, and so new opportunities to steer and stabilise it.

THE DECENTRALISATION OF ELECTRICITY GENERATION AND NEW PLAYERS

In line with the decarbonisation of society, the move towards more dispersed, smaller and local generation sources - which are mainly connected to lower voltage grids - will likely persist, even though larger renewable installations such as offshore wind farms are also set to play a major role in the future system. Prosumers will continue to emerge, empowered by digital technologies that allow them to adopt a more prominent role in the energy system. New technologies, increasing electrification and sector coupling will also stimulate the emergence of new players, such as service providers targeting end consumers. This means consumers (both industry and households) will be providing the power system with additional flexibility. They will therefore actively participate in the energy sector whilst benefitting from increased value and comfort.

SUPRANATIONAL COORDINATION

This trend is largely a consequence of the previous two. The increasing share occupied by renewables in the energy mix, the move towards more decentralised generation sources with a much higher number of players, and the coupling of the electricity with other sectors such as gas, heating or mobility, are making the behaviour of the power system more variable and complex. In addition, all over Europe, grid development is lagging behind rapid changes in renewable generation. This is causing congestion problems (and their related costs) in some countries. Given the already high degree of interconnectedness and integration of the European power system and markets, responding to these challenges often requires a supranational approach. This approach can occur across European regions, such as through Regional Security Coordination Initiatives, or across the entire continent, as is the case for the Ten-Year Network Development Plan (TYNDP) prepared by the European Network of Transmission System Operators (ENTSO-E). Such an approach allows complementary regions to benefit from each other, ensuring that demand and supply for renewable energy can be matched, and provides European citizens and industry with a more costefficient and resilient power system.

THE DIGITAL TRANSFORMATION

The digital transformation, and the digitalisation of the energy sector specifically, is well underway: new technologies (such as electric vehicles, home batteries and heat pumps) are rapidly changing the way we produce, transport and consume electricity. This is accelerating our transition to clean energy, enabling market players to offer consumers services that they want whilst delivering the benefits of the energy transition to them, since (for example) they can better align their consumption patterns with moments when there are high amounts of renewable energy available on the grid. In addition, system operators are better able to manage a low-carbon energy system, thanks to the increasing contribution of distributed consumer flexibility. New digital developments such as big data, cloud computing, artificial intelligence (AI) and blockchain are already commonly used across our sector; the challenge here is keeping pace with these digital developments. An additional challenge presents itself in terms of facilitating appropriate access to data whilst ensuring that effective consent management and data security practices are in place.