Flexibility: The new frontier for Utility-Industry collaboration
The shift in Utility and Industrial roles amid global disruptions
Mark began by outlining three major shifts that have challenged the traditional risk-management role of utilities:
- COVID-19 pandemic: The drop in industrial power demand, paired with rising consumer needs, prompted a reassessment of volume risk management. Utilities’ approaches had to adapt as consumption patterns shifted.
- Ukraine crisis: Rising energy prices and supply volatility saw B2B suppliers struggle to stay afloat, with some failing due to insufficient collateralization. Many utilities tried to pass these risks onto industrial clients through stricter contracts.
- Renewable energy surge: Significant growth in solar PV and other renewables is increasing the number of negative-price hours. Utilities are grappling with sourcing and shaping energy contracts as their industrial clients add on-site generation and storage.
This complex backdrop has fueled skepticism from corporates, who now increasingly seek (pro-)active control over their energy procurement.
The rise of PPAs as a stability tool
As Mark noted, PPAs have become an essential tool for corporates aiming to lock in stable energy pricing while advancing their decarbonization agendas. For energy-intensive industries such as steel and cement, PPAs offer a means to stabilize energy costs amid volatile market conditions while also contributing to their renewable energy goals.
While PPAs can be highly effective for companies with the resources to build in-house energy expertise, this model may not be accessible to all. For smaller firms, PPAs may be less feasible due to limited resources for managing complex contracts or balancing on-site renewable installations. This reality underscores the need for innovative procurement options tailored to different company profiles.
Demand-side flexibility as a competitive advantage
In regions facing grid constraints, demand-side flexibility offers a valuable alternative for securing affordable, reliable energy. Companies that can adjust their demand or have storage solutions in place can help stabilize the grid, an increasingly important aspect as Europe’s energy market becomes more decentralized.
This flexibility allows companies to shift energy use based on peak times or renewable generation availability, leading to significant cost savings and enhanced energy security. Industrial players with scalable flexibility strategies—such as demand-responsive processes or on-site storage—are in a better position to navigate the challenges of fluctuating renewable supply, and to build some demand power.
Opportunities for renewed partnerships between utilities and industry
The evolving landscape presents a renewed opportunity for collaboration between utilities and industrial customers. Mark pointed out that while some companies have the scale to bring energy procurement expertise in-house, others prefer focusing on core production activities. For these companies, utilities can bring value through integrated data analytics and demand-shaping services, which enable more informed, cost-effective procurement decisions.
As renewables introduce intermittent power sources and flexibility into the market, industrial consumers benefit from utility expertise in optimizing and balancing these resources. But challenges remain, especially for utilities adjusting to increased competition from agile energy startups and adapting legacy infrastructure to meet evolving demand. By understanding and managing customer demand profiles in real-time, utilities can better manage portfolio risks and bring added value to industrial customers through shared savings.
Modular solutions for diverse needs in the industrial sector
Mark emphasized the importance of modularity in utility offerings, especially for the commercial and industrial (C&I) sector. Unlike residential consumers, industrial clients often need tailored approaches that integrate existing assets, procurement choices, and renewable energy contracts. As industrial companies vary widely in their energy usage, on-site generation capabilities, and storage capacities, utilities that can offer modular, flexible solutions will find themselves at an advantage. Such solutions could include a combination of on-site asset management, data analytics, and demand forecasting tools that adapt to specific operational requirements.
Regional perspectives: where flexibility is most valuable
The demand for industrial flexibility varies across regions. In places like the Netherlands, Belgium, and the UK, where grid constraints and renewable energy growth are highest, industrial flexibility and behind-the-meter solutions offer immediate benefits. Nordic countries with abundant hydro resources may experience fewer grid pressures but can still capitalize on demand-side flexibility. In countries where renewable energy integration challenges create opportunities, utilities could take a proactive role by helping companies balance on-site generation, storage, and energy consumption.
Future outlook: Utilities as risk managers and innovation enablers
Mark concludes by acknowledging the potential for utilities to reclaim their role as essential partners in the energy transition. By combining sophisticated data management, demand-response expertise, and flexible contracting options, utilities can assist companies in navigating the dual challenges of cost management and decarbonization. By working collaboratively, both utilities and industries can develop sustainable, long-term strategies that stabilize energy costs, ensure reliability, and advance green initiatives.