Future shock: ESB powers towards transformation

ESB chief executive Pat O'Doherty believes the way we purchase and consume electricity is in for radical change with decarbonisation and new technologies transforming the market.

“The electricity sector is more than 90 years old and hasn’t experienced much change during that period. There has been quite a lot of change over the past 20 years in terms of market liberalisation and increased competition but something more fundamental is happening now,” he says.

The key driver is climate change: “This is the biggest challenge facing mankind at present. The government and the EU have set targets in terms of renewables to address decarbonisation. The other piece in the mix is technology which is beginning to enable a transformation in energy markets. “It is putting the customer more in control and we are seeing a move from passive consumption of electricity to a much more active role. The way we generate, distribute, use and control our use of electricity is all changing.”

The challenges facing organisations such as ESB are the move from a small number of large generating plants feeding into a one-way grid supplying passive customers to lots of smaller generating units feeding a smart grid that can both supply power to consumers and take it back from them. The organisation has to accommodate this while maintaining security of supply, delivering affordable electricity, while meeting environmental objectives.

“We have to transition from the old fossil fuel system to one that is affordable, clean and secure,” says O’Doherty. “The industry is moving from having a small number of big things to potentially a large number of small things. The grid is the glue that holds them all together.” This doesn’t mean the end for big generating stations like Moneypoint, however.

“Some people say there is no future in large-scale generating plant but our fundamental view is that no single technology will solve all the problems,” he says.

“The future will be a mix. There will still be a number of large stations and an increasing number of small ones all the way down to the level of the household.

“We are in a period of transition and existing plant will be needed to get us through it. We are likely to be deploying technologies in 50 years’ time that we can’t even imagine today. That puts innovation centre stage in what’s happening now.”

He believes ESB has an important role to play in that: “We can either sit back and wait for things to happen or be part of the future and seek to shape it. We have the skills and experience to do this.”

That future will see a fundamental change in the business model of electricity suppliers. No longer will it be a question of simply selling kilowatt hours: “By and large, the product we sell to consumers hasn’t really changed over the years. What we will have is a system where smart appliances are connected to the supplier and will be able to switch themselves on an off to avail of cheaper rates.

“Smart meters will be capable of being read every 15 minutes instead of every two months. There will be variable rate pricing at different times of the day. The technologies that will allow consumer take advantage of that will be available in the local hardware store - it’s going to be very disruptive.”

The electricity market is only part of the decarbonisation solution, O’Doherty points out.

“Electricity only accounts for 20 per cent of Ireland’s fossil fuel use. Transport and heat account for almost all the rest. If we clean up electricity and then apply it to those two areas we can leverage it to decarbonise our energy usage.”

Electric vehicles have a major part to play in that: "We are doing a lot of work with the vehicle manufacturers and with Europe on that area. We have also started a project looking at heat. We are investing a lot in the grid to make it smarter and more responsive. We need it to react automatically to changing demand patterns. Our grid is already among the top 20 in the world – we are ahead of countries like Germany, Italy, the US and the UK and we are doing a lot to make it ready for the future."

That investment critically important to the energy future that will see householders becoming generators as well as consumers.

“We have to be ready for the new concept of the prosumer,” says O’Doherty. “They might charge up their electric vehicle when energy is at its cheapest and then sell the stored electricity back to the grid if they are not going to drive it.

“They might also generate their own electricity from solar cells and use that to power their households and sell excess back to the grid. I wouldn’t be surprised if within a few years a third of our customers are generating their own electricity.”

“The holy grail in electricity is storage. Electricity can’t really be stored efficiently at present but the technology is improving all the time. This will see a shift in the business model from selling electricity to selling comfort and other solutions to customers.”

ESB is already preparing for this shift: “Innovation is at the core of what we are doing and we are collaborating with a range of different partners on areas like heating controls and industrial solar generation.

“What all this requires is capability and that’s about the people in the company. A wide range of competencies are required and we have excellent graduate recruitment and apprenticeship training programmes in place to make sure we have them. We are future- proofing and reshaping the organisation.

“ESB has been about building and managing really big things up until now; in future we will be about lots of small things and connecting them together. We have the skills and expertise to do that and we will play our role in shaping Ireland’s energy future.”