Analysis highlights key drivers for the development of the energy system

This spring, the Norwegian Smartgrid Centre revised its strategy. THEMA facilitated this process and, as part of the work, analysed how energy sector trends are affecting the Centre’s activities. The conclusions are relevant for many actors within the energy industry.

The analysis provides an overview of the most important trends affecting the development of the energy system. These trends are:

  • Additional effort on climate, environmental and energy policy,
  • Rapid technological development and digitalisation, and
  • Economic development and restructuring.

Each trend is mirrored by developments within energy production, distribution and consumption. We also observe several cross-cutting developments which are important for the entire energy value chain. These include developments in market design, digitalisation and cyber security, flexibility and balancing, sector coupling and system integration.

There has been a high level of activity in both Norwegian and European climate and environmental policy recently, especially over the past year in the wake of the IPCC’s climate report. Some of the most significant processes that have been underway are the work on a Norwegian climate plan for 2030 and the EU’s Green Deal, which is also underpinned by, among other things, a separate strategy for hydrogen and offshore wind. In addition, several European countries have followed up the EU’s Green Deal with ambitious national strategies for decarbonising their energy systems.

Rapid technological development and digitalisation is the other key macro trend affecting the energy system. Further reductions in the cost of renewable technologies are leading to more widespread use of flexibility resources such as batteries and hydrogen, and intermittent power generation such as offshore wind and solar power. The introduction of renewable technologies makes the power system more complex, which in turn increases the need for digitalisation across the energy system. The environmental scan also points to a number of prioritised topics for research, development and innovation that will have an impact on the digital transformation of the energy system. The environmental scan also points to a number of prioritised topics for research, development and innovation that will have an impact on the digital transformation of the energy system.

The final macro trend our analyses point to is economic development and restructuring. Many countries have chosen to use the rescue packages associated with the corona crisis for green restructuring. This is being done through powerful measures to stimulate the economy that also contribute to green growth. In Norway, employment in the petroleum sector is expected to decline in the years ahead, and we need to rethink to create new jobs. There is a great opportunity for some of the reduced value creation to be recovered in the renewables industry. In connection with new, green industries and the electrification of existing industry, increasing demand for power is also expected. In many places, the increased demand will lead to a great need for grid capacity, even in areas with little grid today. In several areas, grid capacity has already become a bottleneck for electrification and the establishment of new green industries.

The environmental analysis shows that the energy and power system is already undergoing major changes as a result of the three key macro trends. The changes are extensive and are taking place at a rapid pace, and this development is expected to continue in the years ahead. In the power system, the changes are highly visible through the increase in both production and consumption of electricity. Another important consequence is an increasing need for flexibility through the use of, for example, batteries, hydrogen and consumer flexibility. The system will also be digitised, resulting in a number of new opportunities and challenges. There is reason to believe that there will be a need to think more holistically about the power system in the years to come.

The Smartgrid Centre is a national centre of expertise for smart grids. It is a member association for R&D institutions, companies, organisations and public enterprises in the smart grid area. The centre’s vision is to create one of Europe’s most powerful industrial and research alliances that promotes the development of a flexible and intelligent electrical energy system.

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