Can the power grid save Europe’s bid in the race to net zero?

Although Europe has not yet lost its first-mover advantage, the US is a hair’s breadth behind. Grid orchestration, the dispatch of flexible clean tech assets, may prove key to maintaining Europe’s competitive streak.

An early mover on the road to net zero, Europe and its Union have long enjoyed being an early adaptor and an authority in the energy transition.

However, with the advent of the US Inflation Reduction Act (IRA) in 2022, the continent’s competitive position has started to come under scrutiny.

According to Enlit’s Re-energising the Transition report, nearly 60% of energy sector professionals in Europe believe it has already lost its first-mover advantage or will lose it in the next five years.

Re-energising the Transition draws on the results of a survey among energy professionals collected in the second half of 2023, in-depth expert interviews conducted at the Enlit Europe live event as well as insights and recommendations of the Enlit Europe Think Tank – a half-day workshop that took place in Paris at Enlit Europe 2023.

According to the survey, 62% are concerned the IRA specifically will divert technology supplier attention away from Europe and toward the US.

The report highlights that Europe has focused for too long on renewables as the ‘lowest hanging fruit’. Integration into the grid is now proving a harder task.

Commenting in the report, Joerg Gmeinbauer, Global Senior Vice President of Energy of Bureau Veritas, said: “It may appear that things are slowing now, but that’s because it got harder. The low hanging fruit is gone. We now have to focus on grids and storage.”

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Keeping apace

According to the report, grid operators cannot keep up with the speed of the transition. There are unacceptably long queues for new connections, with some forced to wait six or seven years.

Both transmission and distribution operators, it adds, lack the resources to throw at new connections and grid reinforcement. And their siloed processes hinder the digitalisation that can accelerate new connections.

However, although grid integration is now proving a pain point, if done right it may also prove key for the continent to maintain its competitive placing against the US.

This is according to Jeremy Klingel of US-based consulting company West Monroe.

Klingel believes that the EU and UK have been ahead of the US, both in renewables adoption and in “thinking about the grid in a more connected way.

“The market mechanisms have been different and I think they’ve been able to capitalise on that.

“When I think about the greater adoption of wind and battery technologies and solar proliferation, I don’t think they’re going to slow down.”

According to Klingel, who is a senior partner of energy & utilities, from an economics perspective there is no doubt that Europe has been able to maintain its lead.

However, the US has now gained an opportunity to slingshot ahead due to the investment incentives following the IRA.

Klingel’s insights are in line with findings of the Re-energising the Transition report, which lists regulation as a core reason behind Europe potentially losing its lead.

Said Klingel: “Being able to secure that capital and prioritise it is important.”

Commented Nico Arcauz, smart grids director of Iberdrola, within Re-energising the Transition: “Regulators are not thinking ahead. Instead, their focus is on efficiency, which is tantamount to achieving the lowest cost. We are at war. The focus must be on effectiveness.”

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Competitive orchestration

According to Klingel, one element that could set Europe apart is that of grid orchestration and flexibility, especially when we consider the number of non-traditional players now moving into energy.

“There are a significant number of tech players who have not spent time in the energy space…now starting to dip their toe into this concept of orchestrating a very interesting, disparate set of assets.

“Because of the way the European energy market operates, they have value. They have access to a flexibility market that’s more mature and interconnected than what we have in the US.”

According to Klingel, should these tech players then create a grid orchestration platform that works, we would be witness to “a game changer.

“If we see these players create a grid orchestration platform … that can move beyond just a single distribution utility, including TSOs, DNOs and even more players from a macro grid point of view within Europe and the UK, that could be a game changer.

“All of a sudden, they’re going to be able to capitalise on all these existing assets and if they can start to then deploy more energy storage … and control a broader set of assets and bring that benefit to fruition … that could put them out in front of us, because we are behind in the US on having that ability, that connective tissue between the different parts of our grid.”

Of course, such tech advancements will not be limited to the European context, they have and will continue to find their way into the American market.

However, emphasizes Klingel, early mover success in this realm, is sure to prove a major advantage.