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26 Jun 2019

How falling technology costs and retail tariffs will shape the electricity system

Pöyry recently carried out a major multi-client study to investigate how the rapidly falling costs of renewables and batteries could transform the power sector.

The Tipping Points study focuses on how retail customers – in particular residential and commercial – could shape the future of the energy system with behind-the-meter generation, and how retail tariffs may alter this transformation.

Key questions we looked to answer included:

  • How could the structure of retail bills affect technology roll-out, and the overall cost of decarbonisation?
  • How rapid could residential and commercial take-up of behind-the-meter solar and batteries be?
  • Will falling renewable and battery costs lead to merchant build (without subsidy)?
  • How important will RES-on-RES competition be?
  • Will future price volatility increase, or decrease?

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In the study we show how radically the energy system will be evolving over the next few years. Key recommendations and conclusions covered both the large-scale ‘centralised’ system, as well as the retail sector and how consumer behaviour will alter in the future:

  • RES-on-RES competition is just starting, and the future power price will be highly influenced by the levelised cost of renewables.
  • European markets may diverge in prices and generation mix, rather than converge, due to the influence of renewables, tariffs and heating.
  • Solar ‘behind the meter’ could spur uneconomic build without tariff reform.
  • Variable ‘per kWh’ retail charges can lead to expensive decarbonisation.
  • Retail pricing reform is necessary in most European countries.

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To find out more, check out the Tipping Points summary.

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Contact information

James Cox
Director
Michel Martin
Senior Principal