Trends in the energy sector 2024

Active strategizing and planning for the next year is in full flow. Participants of the “Trends 2024” business forum organized by the Vinnytsia chapter of the Business People Club had the opportunity to align their business vectors with trends in various industries. At the event, Ivan Vekirchyk, co-founder of KNESS,  told entrepreneurs about European trends in the energy sector and new business models that will develop renewable energy sources and, at the same time, create opportunities for reliable electricity supply and business development.

Sharing the key takeaways from our speaker’s speech: 

Introducing the EU’s Fourth Energy Package

Ukraine is consistently moving towards the European Union and integrating its own grid with ENTSO-E. We are currently at the stage of implementing the EU’s 4th Energy Package, one of Ukraine’s guidelines for restoring and ensuring reconstruction based on the principles of energy efficiency and decarbonization. The energy package is called “Clean Energy for All Europeans”, which, among other things, is aimed at developing renewable sources that can be directly located near consumers. And here, we must pay tribute to the lawmakers because, along with the implementation of the energy package, Law of Ukraine No. 3220-IX was also adopted. Thanks to this, all bylaws will be adopted by the end of the year, which will create a legislative and regulatory opportunity to implement RES models for consumers. By the way, KNESS experts, together with industry colleagues, are involved in joint discussions and participate in the development of these important bylaws.

Main business models that will accelerate RES development

• Active consumer + renewable energy sources

An active consumer also includes a business that has the right to install a distributed generation facility, such as a solar or small-scale wind farm, and to supply electricity to the external grid within the permitted connection capacity. This business model will allow selling electricity to external power grids at a market price.

The advantages of this business model are uninterrupted power supply and saving of own funds. Since the use of electricity from the company’s own power plant reduces consumption from the external grid, which means that the company saves costs for purchasing electricity from outside. Also, during hours when the volume of electricity output is higher than the volume of electricity supply, to sell excess electricity to the energy supply company at a market price.

• Active consumer + energy storage system

Under this business model, an active consumer, including a company, can install an energy storage system. This will allow the company to maintain its operation during power outages, as well as to directly provide ancillary services to the transmission system operator to maintain or regulate the frequency and receive additional funds for this. The advantages of this business model are the same as the previous one: reliability of electricity supply and additional funds for providing ancillary services to the distribution system operator.

• The aggregator model as a tool for the effective operation of the first two business models

An aggregator is an entity that will combine distributed low-capacity power plants (solar and wind power plants and storage facilities). In other words, the aggregator will manage the capacity of producers/consumers/operators of energy storage facilities to provide ancillary services and/or balancing services.  The aggregator is an important link in dispatching, as it will manage the capacity of distributed facilities: consumption, production, and energy storage. For market participants, this provides an opportunity to generate additional income, and for the transmission system operator, it means more balancing capacities and simplification of the dispatch management structure.

• Electricity origin guarantees from RES

A Guarantee of Origin (GO) for electricity produced from RES is an electronic document generated on the basis of information from the register of origin guarantees of electricity produced from RES, which confirms that a certain amount of electricity is produced from RES, confirms its environmental value and certifies the rights associated with the positive effect of its production. One electricity origin guarantee from renewable sources is issued for the amount of 1 MWh supplied to the grid or produced and used for own consumption. Why do we need to confirm the origin of electricity at all? First, there is an increasing demand for electricity from renewable energy sources from consumers, especially industrial exporters, due to the introduction of the carbon border adjustment mechanism (CBAM). Secondly, Ukraine’s support for the EU’s green course towards achieving climate neutrality goals, in particular in terms of decarbonizing the economy, requires effective steps. Thirdly, the need to abandon cross-subsidization, which is essentially a requirement of the EU. The introduction of the GO is an effective tool for decarbonizing the economy, attracting new investments, potentially reducing debt in the electricity market, reducing the financial burden on industrial exporters, and developing renewable energy in general.

“Transformational processes in the energy sector are aimed at strengthening the resilience of Ukraine’s energy system and decarbonizing the industry. Although the result of innovations will not be immediate, the first powerful steps have already been taken — we have outlined business models that, among other things, will promote the development of renewable energy sources and, at the same time, work to improve the resilience and reliability of the power system,” summarized Ivan Vekirchyk.