Public Authorities & Institutions

On September 25, 2015, as part of a new sustainable development agenda, the United Nations Assembly formally adopted a set of 17 Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure prosperity for all.

A few months later, 196 parties signed the Paris Agreement—the first legally binding global climate change agreement, adopted in December 2015—which established the goal of limiting global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. This goal was kept alive at COP26 and is reinforced by the European Green Deal, which commits the EU to reach climate neutrality by 2050 and sets an intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.

In this context, we note that the energy landscape is undergoing rapid transformation as decarbonization objectives are spurring rapid recalibration of environmental, governmental and political agendas. And the solutions needed are all-encompassing. Decarbonization at the scale necessary to achieve Net Zero not only involves new types of energy generation, but also affects the related infrastructure and the way it is stored and consumed. Leaps in the level of planning and cooperation will be required to meet challenges such as decentralization and intermittency.

Additionally, access to reliable and sustainable energy needs to be affordable. This puts the onus on public authorities and institutions to revise their regulatory framework, adapt market rules and system planning to support innovation and efficient consumption, production and investment decisions.

What Challenges Are Public Authorities and Institutions Facing Today?

Honoring the Paris Agreement and providing their populations access to affordable, reliable, sustainable and modern energy is a key international priority supported by SDG 7 (Affordable and Clean Energy). Since electricity is the crucial energy carrier, meeting this priority requires public authorities and institutions to tackle several challenges inherent to the decarbonization of power systems in particular. We list some critical ones here:

Key Challenge 1: Decentralization and Intermittency

Countries around the world have diverse sources of renewable energies, but legacy power systems are not always equipped or designed to integrate them. Among the many complexities and challenges to overcome as we accelerate the sustainability transition, and amid the still much-needed electricity access for all, designing future proof power systems entails a shift: the traditional, centralized model of electricity generation, transmission and distribution must include decentralization with intermittent renewable electricity sources and an increasing number of prosumers connecting.

This entails a whole range of economic and technical challenges: multiple, intermittent energy streams can impact grid stability; real-time management will require an expansion of digital tools; regulation and power market design need to support the efficient integration of renewable energy; and to recognize the more active role consumers and prosumers can play, etc.

Key Challenge 2: Sector Coupling

With the need to decarbonize the energy system, renewable energy sources will more and more replace fossil fuels, via transformation into electricity, heat or molecules depending on the application.

This requires coordinated planning and operation across various energy carriers (electricity, green gases and liquids, etc.), networks (electricity, gas, heat) and final consumption sectors (heating and cooling, industrial processes, mobility).

Key Challenge 3: Climate Resilience – Managing the Unpreventable

Since the 1980s, the number of recorded natural disasters has increased worldwide. The energy sector is particularly vulnerable as infrastructure rarely resists natural disasters and customers can lose electricity for long periods of time.

Given the potentially large-scale damage and losses caused by extreme and by nature unpredictable climate events, it is essential for public authorities and private entities alike to invest in climate resilience planning to bolster the ability to resist and recover from them. However, as these events are unpredictable in severity and timing, future-proofed policy decisions are key to unlock necessary investments and complex risks accounting.

7.6%

cuts to global emissions needed each year to reach Paris Agreement target

70%

of new electricity generation capacity worldwide is from renewable sources

759M

people lack access to electricity, 3 out of 4 live in sub-Saharan Africa

$210B

worth of losses worldwide from natural disasters in 2020

What Should Public Authorities and Institutions Be Thinking About?

The road to decarbonization presents massive challenges to public authorities and institutions. Having an informed awareness of relevant risks and the tools to develop an actionable energy strategy will bolster resource efficiency and flexibility for a sustainable future. From regulators to financial institutions, organizations turn to ENGIE Impact to navigate the complex technical, policy, regulatory and market design challenges of sustainable energy systems.

1. Develop Affordable, Reliable and Modern Energy Services

Worldwide leaders understand they cannot address global development concerns without a paradigm shift in their electrification strategy. By creating roadmaps and investment plans for Regional and National Electrification Strategies, public authorities and institutions will ensure optimal electrification results within the available financial framework.

2. Facilitate the Path to Decarbonization and Greater Power System Flexibility

Decision-makers need to comprehend what it takes to achieve decarbonization targets and translate findings into a path forward.

Armed with market intelligence, the latest data gathering and modeling tools, we help authorities and institutions identify the potential for capacity expansion, renewable energy generation and integration, while articulating the economics of decentralized energy systems. This entails deep techno-economic analyses of the different facets of such a system (new types of demand and generation, transmission (including HVDC/High Voltage Direct Current), distribution, storage and sector coupling).

3. Set Incentives for Efficient Decision-Making

Markets can support efficient investment, production and consumption decisions as well as innovation if well designed. In the event they are not, the public authorities intervene to correct market failures or simply replace the market. This regulation can take several forms such as taxes or subsidies to address negative or positive externalities, competition policy and market surveillance, the regulation of natural monopolies (grids) or network tariff design.

We have experience in providing advisory services on a wide range of market design and regulatory economics topics. This includes aspects related to the traditional markets at the wholesale level (energy trading, congestion management, capacity remuneration mechanisms, RES support mechanisms, etc.) and increasingly at the local level (flexibility markets, energy communities, consumer-centricity, etc.). Our advice relies on a thorough understanding of the economic theory, country-specific knowledge, stakeholder interviews and quantitative analysis.

4. Consider Digitalization as a Lever for Decarbonization

Decentralized power systems will require accurate predictive modeling and more intensive real-time distribution management. We view the availability of (big) data, smart meters and computational resources as a lever for power systems analysis, grid modernization, climate resilience and energy market adaptation.

Practical applications of digitalization include simulations of power networks to pinpoint assets at risk, data-driven forecasts and feasibility analyses to optimize resource allocation and consumption.

Provided with the right modeling tools and advanced analytics, organizations will understand how to implement and operate advantageous infrastructures for long-lasting power systems that will generate the greatest impact at the lowest cost.

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