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

Ed: This article predates November 2019, when ÅF and Pöyry came together as AFRY.

Pöyry has 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?

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.

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