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CONFERENCE ON THE FUTURE OF UTILITIES : FROM BANKRUPTCY RISK TO NEW BUSINESS MODELS

A Conference of the Chaire European Electricity Markets (CEEM) at the Université Paris-Dauphine.

Wednesday 27 September 2017, 9h30 to 19h00
Université Paris-Dauphine
Salle Raymond Aron, 2nd Floor

ATTENDANCE IS FREE BUT PRIOR REGISTRATON IS REQUIRED:
Registration

The Workshop was held in English.


Organisation
Jan Horst Keppler (Université Paris-Dauphine and CEEM), Fabien Roques (Compass Lexecon and CEEM) and Dominique Finon (CIRED and CEEM).

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Conference Objective
Deregulation, energy transitions and technological transformations put great stress on the traditional utility as the dominant paradigm for organising production and supply in the electricity sector. In the past, large vertically integrated and horizontally diversified utilities dominated generation and provision.

The longevity of the integrated utility resulted from a combination of technical increasing returns with a concentration of engineering prowess, the ability to hedge technological and financial risk as well as the competence to navigate complex legal, environment and regulatory requirements. While the explicit or implicit monopoly power resulting from these factors allowed finance directors to have a comparatively quiet life, there was an implicit quid pro quo, namely that utilities would provide very high levels of security of supply and rapid response capabilities in case of accidents. This tacit compound between utilities and the public no longer applies. Neither politicians, nor the public or investors, are ready to rally to the rescue of the utilities of old. At the same time, there exist in the short term no obvious alternatives for the provision of bulk electricity around the clock.

The key drivers of change are progress in information and communication technologies reducing the fixed cost of entry as well as regulatory frameworks favouring the introduction of variable renewables (VRE) such as wind and solar. The first implication is the emergence of new players in VRE deployment as well as in the management of variability through demand response, storage or capacity provision.

The second consequence is the drop in electricity wholesale prices, primarily due to large capacity additions of VRE with out-of-market financing. This in turn implies that in the foreseeable future, no investment will take place based on market prices alone, leading to ever more comprehensive re-regulation. The new market dynamism thus coexists with a growing role for network operators and regulators to ensure the smooth working of the system.

Established utilities have responded to the double challenge of low prices and new players with a mixture of defensive and offensive measures. On the defensive side, thermal assets with insufficient revenues have been depreciated and spun off into defeasance structures, where their best hope is to wait for generalised capacity remuneration mechanisms. On the offensive side, utilities are expanding in areas where revenues are either regulated or more predictable such as renewables, network services, including flexibility provision, and energy services, including energy efficiency as well as demand side management.

The question is whether these adaptations are giving rise to genuinely new business models. For the unregulated segment of the market, in particular, it is difficult to identify sustainable business models in the current price environment, beyond the squeezing of assets that have already been written off. In the regulated or service-oriented segment, utilities are leveraging their brands and customer portfolios in the same markets as newcomers and niche players, but it remains to be seen whether providers and customers can draw benefits from synergies between different work streams or genuine economies to scale.

The challenge to identify new business models is compounded by the fact that both technology and the regulatory framework are evolving fast, in particular in the final leg of the value chain, distribution. A major question in this context is whether decentralised auto-production, smart grids and smart meters can decisively leverage the involvement of retail customers in the working of the electricity market. New market rules for the aggregators of demand response and storage will further keep this segment dynamic as well as, at least to some extent, unpredictable.

Electricity market participants have to confront the twin challenge of understanding the complex changes under way and proposing frameworks that can ensure security of supply and provide much needed stability to the sector. Whatever the final shape of these frameworks, one thing is already clear now: the implicit trade-offs that existed previously will need to be substituted by detailed explicit allocation and incentive mechanisms covering every single aspect of the electricity system.

A major challenge in this context will be the development of coherent, cost-reflective tariff systems allowing for sustainable business models at all levels of the value chain. Such tariff system will need to (a) balance provisions for long-term financing of investments with short-term markets for efficient short-term dispatch and (b) appropriately allocate risks, responsibilities and rewards between individuals, enterprises and public entities.

While there is widespread consensus about the depth of the disruption under way in the electricity sector, a new consensus paradigm is still some time away. Nevertheless, elements of exciting research begin to emerge in empirical as well as in normative analysis in both Europe and the United States. This conference organised by the Chaire European Electricity Markets (CEEM) aims at providing an overview of this new research and contributing to the progress towards new sustainable business models abetted by coherent and enabling regulatory frameworks.


PROGRAMME AND PRESENTATIONS

9h00-9h30 Reception of Participants

9h30-9h40 Welcome and Introduction
Jan Horst Keppler (Scientific Director, CEEM, Université Paris-Dauphine), The Future of Utilities and the Challenge of Creating a Sustainable European Power Sector

9h40-10h40 Keynote Presentations
Pablo Rodilla (IIT, Comillas), The Utility of the Future: Insights on New Market Designs and Regulation from the Study of the MIT Energy Initiative
Presentation

David Newbery (EPRG, Cambridge): Are Business Models Just a Form of Regulatory Arbitrage?
Presentation

10h40-12h15 Session 1: The Cost of the Transition – Moderator, David Newbery
Justus Haucap (DICE, Düsseldorf University), The Cost of the Energy Transition in Germany and Who Is Bearing It?
Presentation

11h10-11h40 Coffee Break at the Bar des Étudiants (2nd Floor)

Marius Buchmann (Jacobs University, Bremen), The Rise of Third Parties and the Fall of Incumbents Driven by Large-scale Integration of Renewable Energies: The Case of Germany
Presentation

12h15-12h45 Session 2 (Part I): Sustainable Business Models in the New Electricity World – Moderator, Jean-Michel Glachant (Florence School of Regulation)
Fabien Roques (CEEM and Compass Lexecon), Evolving Business Models for Utilities: Key Principles and Emerging Tendencies
Presentation

12h45-14h00 Lunch Break

14h00-15h45 Session 2 (Part II): Sustainable Business Models in the New Electricity World – Moderator, Jean-Michel Glachant (Florence School of Regulation)
Fabien Chene (Schneider Electric), New Business Models Around Storage and Energy Services
Presentation

Cyril Roger-Lacan (Tilia), The Case for the Integrated Energy Service Provider

Luc Poyer (Uniper France), From Old Utility to New Niche Player: Challenges and Options
Presentation

Julien Touati (Meridiam), How Investable Are New Business Models in the Electricity Sector?
Presentation

15h45-1800 Session 3: Market Designs, Tariffs and Infrastructures for the New Electricity World – Moderator, Dominique Finon (CIRED and CEEM)
Matti Supponen (European Commission, DG Energy), Clean Energy for All Europeans: Building Blocks for Electricity Markets Enabling New Business Models
Presentation

16h15-16h45 Coffee Break at the Bar des Étudiants (2nd Floor)

Laurens de Vries (Technical University, Delft), Consumer Market Design for Reliable and Clean Electricity
Presentation

Graham Weale (University of Bochum), A New Cost-reflective Tariff Structure for Sustainable Investment in the European Power Sector
Presentation


Julien Janes (Commission de Régulation de l’Énergie), Which Advanced Regulatory Regime for Prosumers?
Presentation

18h00-18h30 Concluding Roundtable
With Thomas Veyrenc (RTE), Patrice Bruel (EDF), Philippe Vassilopoulos (EPEX Spot), Antonio Haya (CELEST), Dominique Finon (CIRED and CEEM), Jan Horst Keppler (CEEM) and Fabien Roques (Compass Lexecon and CEEM).

18h30-19h00 Signing Ceremony for the New Convention of the Chaire European Electricity Markets (CEEM)
With Elyès Jouini (Université Paris-Dauphine), Laurent Batsch (Fondation Paris-Dauphine), Thomas Veyrenc (RTE), Patrice Bruel (EDF), Philippe Vassilopoulos (EPEX Spot), Antonio Haya (CELEST).

19h00-20h00 Reception at the Bar des Étudiants (2nd Floor)


For more information, please contact the Coordinator of the CEEM:
Fatoumata Diallo
fatoumata.diallo@fondation-dauphine.fr
Fondation partenariale Paris-Dauphine
Place du Maréchal de Lattre de Tassigny-75116 Paris Cedex
Tél. +33 (0)1 44 05 45 54

Partenaires

Contact

Chaire European Electricity Markets
Fondation Paris-Dauphine
Place du Maréchal de Lattre de Tassigny
75775 Paris Cedex 16

Steve Serafino, Coordinateur de la CEEM :
steve.serafino@dauphine.psl.eu
+33(1)44.05.45.54

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