Powering the Green Recovery in the post COVID-19 world

(L) Sean Casey, EY Ireland. (R) David Cashman, EY Ireland.

As economies across Europe adjust to the impacts of COVID-19, policy makers face increased pressure to facilitate a balanced recovery. In the immediate response, fortifying healthcare and welfare systems was at the forefront of the minds of national decision makers; however, as economies emerge from varying levels of restrictions, the social and environmental agendas will emerge as key recovery drivers. Utilities have been at the centre of ensuring the continuity of essential services in responding to the crisis and will play a significant role in delivering the recovery.

The EU Green Recovery stimulus plan aims to repair and prepare the EU for a decarbonised future that is supported by a resilient economy.

Underpinning the plan is the EU Green Deal which sets ambitious targets across key sectors including electricity, transport and the built environment. With these well-defined policy targets and the focus on delivering a just recovery, there is now a clear decarbonisation trajectory that utilities can proactively pursue to support the green recovery.

The Green Recovery

The EU’s Green Deal has been flagged as a key driver for stimulating the economies of member states following the COVID-19 impacts. As utility companies adjust to the new normal, opportunities exist in delivering the decarbonisation targets outlined in the Green Deal. The plan outlined on a wide range of ambitious targets that will transform many areas of society.

Growing renewables

Generation and consumption of energy accounts for 75% of emissions in Europe. The deployment of large-scale renewables is an essential driver in decarbonising all areas of society. Utility companies will be the enablers of the transformation of energy generation. By advancing grid operations, introducing appropriate market frameworks and acting as central coordinators, utilities can actively increase renewable penetrations to achieve the net-zero target by 2050.

Modernising grids

The COVID-19 crisis has highlighted the fundamental importance of electricity, gas, water and communications networks. Essential changes in these networks are required in the coming decades to facilitate the green transition. Modern infrastructure will be required to transport energy from offshore renewables and to transport low carbon fuels such as hydrogen. Investment in innovative and digital technologies will also be required to increase resilience in these networks and facilitate the SMART grids that will enable the transition at the customer level.

Efficient and connected homes

Buildings account for 40% of the energy consumed in the EU. Significant energy efficiency initiatives through the ‘renovation wave’ will reduce the carbon footprint of private dwellings and commercial buildings. Coupled with this, the digitisation of homes and buildings through connected devices will facilitate more active monitoring of energy consumption. Utilities can actively support the transition to more energy efficient and digitally enabled SMART cities and homes.

Low carbon transport

Transport is one of the largest contributors – accounting for a quarter of emissions – and the targets require a 90% reduction by 2050 to achieve net-zero. By 2025 13 million low or zero emissions vehicles will be in operation in Europe. Utility companies will play a key role in delivering the infrastructure to enable electrification of transport and the hydrogen economy. As new business models emerge in these areas, utilities will need to adjust to remain central to driving the low-carbon transport journey.

Enabling the energy customer

The participation of the end customer in the energy transition will be a foundation of realising the ambition of the Green Deal. Increased behind-the-meter generation, Smart home appliances and Smart Meters will provide the basis for active energy citizens. The introduction of Smart Meters enables customers to more actively engage with their energy usage and enable them to sell energy back to the grid. Increased data and functionality from smart meters will support more retail energy offerings to customers as well as supporting network operators in enhancing their resolution of network issues impacting customers.

Utility companies can act as the catalyst to incentivising active energy solutions and facilitating customer participation. In addition to this, the post-COVID world will require a more socially focussed transition. Issues such as equitable access for vulnerable customers and eliminating energy poverty will be key elements of delivering a just transition.

What should utilities focus on:

In the current environment, utilities are focussing their efforts on stabilising and fortifying the resilience of their core operations against the disruption of COVID-19. In planning for the Green Recovery, for utilities, there are a number of opportunities to enhance resiliency in their operations, reduce costs and gain benefits through proactivity. Utilities should consider five key areas when approaching their response to the post COVID-19 world and the Green Recovery.

Call to action, how to respond:

1. Accelerating digital: Harnessing digital technologies will be essential for utilities to deliver the transformation on their grids to facilitate the uptake of green technologies across all areas of society. Technology will play a key role in advancing real-time operations, ensuring grid resilience and enabling the uptake of new green initiatives. The deployment of digital and smart grid technologies both on the grid and behind the meter will enable utilities to facilitate the green targets.
2. Empowering customers: In the future green-focused world, the customer will become a much more active participant in the energy transition. Regulatory and policy drivers along with technological advancements in customer offerings will enable the customer to actively participate in the future green economy. Putting the customer at the centre of strategic planning and driving more insights from customer behaviours will ensure that utilities can be more flexible in responding to the new world.
3. Innovation ecosystems: Decarbonisation across the core sectors including industry, transport and buildings will involve a merging of traditional industry boundaries. This will result in new innovative business models emerging to respond to the challenges which in turn will rely on the core grid infrastructures. Utility companies will be at the centre of the transformation and hold a unique position to set up innovation clusters and drive collaboration to enhance outcomes.
4. Influencing policy: Utility companies hold a long tradition of delivering the infrastructure that enables strong economies and societies. It is now imperative that utilities engage policy makers to shape the future frameworks and stimulus packages that enable a successful transition. This includes ensuring the appropriate frameworks are set and that the funding is provided to achieve ambitious targets for renewable penetrations and the participation of customers.
5. Sustaining a just recovery: The post COVID-19 world will have increased focus on societal outcomes and ensuring a just transition to the Green Deal will be one such area of focus. Energy poverty is one primary area that must be addressed to ensure that vulnerable citizens have equitable access to the opportunities that the green transition brings. Utilities will need to ensure this focus over the longer term to ensure that a just transition is realised.

Utility companies have played a central role in delivering the continuity of essential services during the Covid-19 crisis. The Green transition is at the centre of many European economies as they look beyond the current crisis to the recovery phase. Utility companies have a significant opportunity to power the green recovery and should proactively adjust their activities to respond to this opportunity.

Sean Casey
Head of Energy and Assets
EY Ireland
sean.casey@ie.ey.com

David Cashman
Senior Manager, Energy and Assets
EY Ireland