European countries, and Spain in particular, have historically had a great degree of dependency on fossil fuels. In 2013, 72% of the Spanish energy consumption was covered by fossil fuels. In order to reduce this dependence of foreign energy and decrease the impact of energy consumption on the environment, European countries focused on the environmental sustainability target of the energy policy trilemma. Green energy policies gave place to the first disruption of the electric system. In Spain, renewable generation (excluding hydro) grew from less than 3% of the electricity mix in 2000 to over 26% in 2014. Accordingly, power prices for domestic consumers increased form below 11 ct€/kWh in 2003 to almost 23ct€/kWh in 2013. As a consequence, affordability of renewable support was increasingly called into question which marked the beginning of the end of this first disruption, as European countries started to reduce renewable subsidies.
Currently, the second disruption is about to come. This time, it will not only be driven by green energy policies but also by several technological and social drivers:
• Green energy policies: they have been traditionally the main driver for renewable energy expansion, but affordability is increasingly questioned and they are being reduced. Nevertheless, they are still in place to meet with the 20-20-20 European targets
• Competitiveness of renewable technologies: solar PV´s LCOE is already in the range of 0.08-0.14 €/kWh and grid parity is already being reached in the south of Spain. Onshore wind is already competitive with conventional generation in locations with good wind characteristics, with LCOE is in the range of 0.05-0.11 €/kWh. There are other less mature technologies that are gradually reducing their LCOE, such as offshore wind, CSP and ocean energy
• Competitiveness of storage technologies: there is abundant innovation in this field and some promising technologies are appearing which could solve the main inconvenient of renewable technologies: intermittency. For instance, EOS energy storage has developed a zinc hybrid cathode battery with a LCOE of $0.12/kWh and Isentropic offers a PHES solution with a LCOE of $0.05/kWh
• Other technology development: smart grids, HVDC grids and more efficient technology, combined with increasing environmental consciousness, are giving place to electrification of the energy consumption and the adoption of additional energy efficiency measures
This disruption will affect the business model and revenues of electric utilities. For instance, renewable generation expansion could reduce the utilization factors of CCGT power plants below 7.7% by 2030; distributed generation could decrease system electricity demand in 1,900 million €; energy efficiency measures could reduce energy generation in 2,350 million €; and electrification has the potential to increase consumed electricity in 1,630 million € if leveraged correctly. As a consequence, utilities will need to adapt to change, in order to reduce its impact on their P&L.
Finally, two cases have been analyzed. First, the increasing dilemma of renewable affordability and technology progress has been studied, based on UK´s offshore wind recent bids. The UK has moved to a competitive allocation process which is forcing to deploy best practices and techniques in the renewable industry. This way, they have managed to reduce the economic impact of renewable support and it is a good reference for other countries of how renewables should be subsidized. Second, the impact of distributed generation deployment on Spanish utilities has been modelled. Grid parity will be gradually reached in increasingly more Spanish regions, but there are some barriers that will slow down a rapid expansion. It has the potential to cover up to a 6% of total electricity consumption by 2020.