Scenarios for future energy markets

SCENARIOS FOR FUTURE ENERGY MARKETS 1

SCENARIOS FOR FUTURE ENERGY MARKETS P L AUSI BL E STO RY L IN E S FRO M T HE EF EU RES E A RCH P RO G R A M M E

Efficient Energy Use (EFEU) research program develops system level energy efficiency solutions and services for fluid handling systems and regional energy systems. EFEU consortium consists of 11 industrial partners and 5 research organizations. The budget of the program is 12 million euros. www.cleen.fi/en/efeu/ ISBN 978-952-5947-78-6

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Foreword Most people have, in their mind, a predominant idea of how the future will play out. That is the default future their thoughts will drift towards when they are allowed to drift freely. It attracts our thoughts because of our individual perspectives and way of thinking – things that tend not to change very often.

When planning or innovating for the future, the same default is set in our mind. And that means alternative futures are not.

The purpose of building scenarios is not to produce an accurate picture of what will happen. The purpose is to create inspiring yet plausible descriptions that are from peripheral perspectives. We tend to focus on things that seem certain, and not on uncertain ones. Peripheral scenarios provide novel contexts in which to consider the risks, benefits, and impact of decisions so that we would not be ruled by our default future views. After all, the default is merely one possible path and the one for which most people are already prepared. This means scenarios can shed light on highly uncertain issues, provoke novel understandings and insights related to complex problems, and show the logical chain of events by which the current state of the world is developing into some future state.

In the EFEU research programme, we have created three scenarios for future energy markets, in the hope of providing a common framework and context to facilitate dialogue, debate, and decision-making among actors in the energy sector. While reading, keep in your mind the question “what if this scenario occurred?”.

What would it mean for us and what should we do in that situation? It just might inspire you to look at the energy markets from a novel perspective, and help you to design strategies that can adapt to several possible futures.

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Contents Foreword 3 Key Messages

6

The Scenarios at a Glance

8

Three Storylines

11

Security – Decentralised Sustainable Energy Security

12

In what kind of world the new awakening of renewables started

12

Regulation boosting the market opening

12

13

“I am responsible for my energy production”

Decentralised renewable energy production an acceptable choice

14

Decentralised and centralised energy production in balance

14

Devices – 99 % Grid-Free

15

Business as usual and life as we know it

15

Waking up to the extreme climate

15

A new course

15

New tech – low and high

16

New communities and culture

16

Breaking off the grid

17

Planet of the gadgets

17

Values – Immaterialism and Self-fulfilment

18

Technological curves

18

Consequences of an immaterial mind-set

18

Cities have shown the way

19

Towards 2050

19

Work and people behind the scenarios

20

Contributors 22 References 22

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Key Messages The main driving forces that are seen to have a high impact and that have a high level of uncertainty are whether there will be global climate agreements, self-sufficiency in energy, energy scarcity and price, emphasis on bioenergy, and carbon neutral biomass.

Security scenario Climate change targeted policies are shaping development towards renewable energy and thus also towards decentralised production. In addition, the growing concern for energy security fosters the decentralisation of production.

However, centralised production is still implemented where reasonable. Decentralised energy production creates business potential in renewable energy services: equipment, management, and control of the systems. The role of centralised energy production exists, but it is diminishing. The meaning of local power grids is growing.

Devices scenario Strong evidence of climate change and its negative effects is needed to trigger a political drive. National energy legislation is increasingly based on global agreements or EU-level

decisions. When the political environment is suitable, smallscale local energy production can evolve into an easy option both technologically and financially. Large-scale production and nationwide electricity distribution will face competition from tax-subsidised local renewable energy production.

Instead of selling electricity and heat and their transfer, new markets emerge from selling equipment and services for small-scale local, from town scale down to building scale, energy systems.

Values scenario An increasing number of consumers producing energy, development of consumer-specific measurement tools, and more and more individuals willing to get accurate information on their resource flows encourage consumers to take a more active role in the production-consumption chain in the energy sector. Demand for better energy efficiency is achieved through systemic optimisation and integration of sub-entities. In large, individuals are increasingly becoming aware of and valuing their personal needs, and consequently making everyday choices leaning on personal self-fulfilment criteria.

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8 SCENARIOS FOR FUTURE ENERGY MARKETS

The Scenarios at a Glance Security The Security scenario describes a world where self-sufficiency of energy supply is high and optimal choices have been made between centralised and decentralised energy production.

Local and centralised energy production is in balance.

When it is reasonable to have centralised power and/or heat production it is there, but more and more the energy structure is decentralised.

The value of self-contained energy production is growing.

Renewable energy production shapes system development towards decentralised power and heat production.

More and more effort is put into energy security due to global conflicts, wars, terrorism, and natural disasters caused by the climate change.

Consumers are responsible for their energy production by buying renewable energy services or integrating themselves in the cooperation producing renewable energy.

New energy service business potential is needed. Individuals cannot operate the decentralised renewable energy production units and complex systems by themselves, but they need expert help.

Devices The Devices scenario describes a world where global agreements on environmental policies set the course for new technologies and environmentally friendly local production.

Centralised production decreases significantly and the national electricity grid almost ceases to be used.

Energy politics decision-making is controlled by international treaties.

Smart devices: small devices become energy independent and the more energy-intensive devices, machines, and houses use renewables smartly and efficiently.

The culture of consumerism gives way to a culture of valuing smart innovation and new communities.

High-tech countries and companies thrive.

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Figure 1. Scenario compass. (Yellow circles display some of the most significant factors in each scenario world.)

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Values The Values scenario describes a world where the price of energy is relatively high and consumers represent an active role in the energy sector’s production-consumption chain.

Development has been focused more and more on systemic views. ICT has had a key role in this integrative development, where different sub-systems are increasingly autonomous, interconnected, smart, and adaptive in their nature.

Energy efficiency is the most significant way to respond to the high price of energy and climate change.

Cities can today be considered as “innovation platforms” or drivers of change at large.

Through digitalisation and system tools, energy flows can be centrally managed in integrated operations centres to optimise supply, demand, and storage.

The recent years can be described as a period of increased personal awareness and self-fulfilment. Similarly, it can also be called a period of increased polarisation in opinions and life choices.

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Three Storylines Of the many possible ways that the future might play out, we have described three as the most useful to explore. The three stories paint a picture around small-scale energy production, environmental policy, immaterialism, and how they affect future energy production and use, and sociocultural development. Relating to each story, there are uncertain drivers that are believed to have a high impact on the future state. The scenarios and their drivers are:

• • •

Security: balanced local and centralised energy security Devices: global agreements and a grid-free world Values: high energy price and immaterial values

What follow next are the scenario storylines: three stories on how the future might play out if the related uncertain drivers were to take place, and an explanation of a world in which the drivers could materialise.

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SECURITY

Security –

Decentralised Sustainable Energy Security

This scenario describes a possible energy market future around 2030, in a world where self-sufficiency in energy supply is high and optimal choices have been made between centralised and decentralised energy production.

In what kind of world the new awakening of renewables started In the 2010s, European climate change policy was shaping technological development in energy towards renewables.

However, the market situation did not in every way support these climate targets, because fossil energy sources were still seen as beneficial. For instance, the fossil oil price was reducing due to shale oil production, and the emissions trading system was not working properly, meaning that it was still profitable to burn coal in power plants. Finnish national targets to increase renewable energy production were disputable, but still the business and markets around renewables were not developing as fast as, for instance, in Germany. Political decision-making was lacking an overall consensus regarding renewable energy. For instance, there was no state-level solar energy strategy, and regulation changed rapidly in Finland.

The renewable energy education system was also dispersed and inadequate, from which follows incompetence.

Although new ideas and pilots on new decentralised renewable energy production existed, like new energy-efficient housing areas using renewable energy in many ways, due to the attitudes and decisions in the 2010s, the whole renewable

energy system is not a system, but a collection of some single technologies and devices; for instance, the energy system design or optimisation is not implemented at regional level, and even inside a single house the different energy technology units are not integrated. There are lots of doubts and dismissive attitudes towards renewables, especially solar power.

At the same time, nuclear power is still seen as politically acceptable and built to meet the low-carbon energy production requirements in Finland. Society is more and more dependent on the electricity supply.

Regulation boosting the market opening As a legal force, the European Directive on near-zero emission buildings is reality in new buildings built from 2020 onwards.

This directive boosted the use of decentralised renewables in energy production. A personal CO2 tax also boosted development towards renewables. The increase of energy efficiency in buildings changed the district heat energy systems, because the diminishing heat load in buildings was often no longer economically feasible for traditional district heat systems.

This changed the business models of district heat companies towards energy services in distributed energy production.

Cooling is emerging as a new energy product in energyefficient houses under climate change, with warm summers.

The market situation is favourable to solar energy, because the price of solar panels was falling due to Chinese and other low-cost production capacity in the 2010s. Heat pump

SECURITY

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solutions were considered to be mainstream solutions at least in single houses. New hybrid renewable energy solutions, for instance solar heat integrated with ground source heat pumps, made the energy systems rather complex, and that is why the markets for the energy service business are increasing tremendously. New business models are also emerging. The product of the energy service business provider could be a total package of renewable energy, including design, equipment, building, and management of the system. In addition, the development of energy storage technologies is emerging and flourishing, creating new business opportunities.

“I am responsible for my energy production�

For ages, single detached houses and also some districts have been responsible for their heating energy production.

For instance, in the 1970s, a district could have its own heat production plant probably based on fossil oil. In the 2020s, this kind of production mode also starts to increase rapidly in power production. The time of decentralised energy production markets is thus truly ready to begin. Society is no longer seen to be dependent on centralised power production.

When new districts are built, the builder designs the energy production of a district tailored to this specific area and regulations. If the area is suitable for wind, heat pumps, or solar energy, they are chosen. The district can also decide to create an area-specific power and heat production plant (CHP) using, for instance, wood as an energy source. Biogas is also an option if found feasible in the area.

A low-temperature district heat network replaces the traditional district heat networks in new districts, because of the lowered heat load in near-zero energy buildings. Local district heat companies are operating the heat production, and cooling, in these grids, but cooperative instances are also found to operate these local power and heat production plants. Citizens or their representatives are also participating in these cooperatives. In that way, ordinary people become responsible for their own energy production locally, not necessarily producing their own energy, but taking responsibility for energy production by buying renewable energy services from these companies or cooperative instances, and in some cases also owning these instances. Due to a developed renewable energy education system, people are also aware of the prerequisites and technology for renewable energy solutions. For instance, if wood chips are used, this needs to be considered in design, and a low-temperature district heat grid needs control of bacteria, and so on.

Political decision-makers understand the meaning of decentralised renewable energy production and answer this decentralised energy production boom by boosting market creation in various ways. New actors are not necessarily needed in new renewable energy markets, but old actors are changing their business models and buying small start-ups. New business actors also emerge into the markets, providing competent consultation, technological equipment, and management services for decentralised renewable energy solutions.

The export opportunities for these skills and know-how are huge, not only in developed countries, but also in developing countries.

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SECURITY

Decentralised renewable energy production an acceptable choice Decentralised renewable energy production is finally accepted by all decision-makers at the beginning of 2020. Decentralised renewable energy becomes an essential part of the city design processes, which is important because most people live in the cities. Comprehensive city plans are made at all levels: whole city, city area, district, and single houses, concerning renewable energy choices, for decentralised building-specific choices (both heat and power) as well as centralised (district heat and national grid power) and semi-centralised solutions (low heat grids and city-areaspecific CHP and other kinds of heat and power plants, e.g. solar power plants). New methods that help to calculate the total energy efficiency are developed and working well.

Energy efficiency is calculated at regional level, not just at single building level. The methods are focused on energy and energy efficiency, and the repair of old buildings, not just new buildings.

Finland is still a nuclear power country, but numerous decentralised energy-producing units complement the energy production system. It becomes common to find houses producing heat and power consumed in the building, but also feeding some extra power into the national power grid, if integrated into the grid and found to be profitable.

In practice, however, the prerequisites for integration into the power grid are such that it is not profitable to join the national grid. The energy production system develops to be even more diverse than the previous system: local bioCHP units, as well

as other biorefineries, producing energy from multiple sources e.g. wind, waste water, solar and heat pumps. All these are considered acceptable and wise solutions. In many situations, the various options are also integrated, for example solar and heat pump systems, and back-up systems are also created.

Local energy networks can offer heat, cooling, electricity, or gas. A new business area is also emerging in mobile energy production units and applying IoT technology.

Power production is also seen as important for increasing the capacity of the electrical transport system. New SMEs offer energy services for consumers. Energy services include equipment, installations, operation, management, and adjustment. The increasing need to control energy consumption also creates a need for personal energy consumption control systems. This is linked to the personal CO2 production tax system. In spring 2028, Kauppalehti writes the headline “Finnish business success: New service business from renewable energy and energy-efficiency solutions�.

Decentralised and centralised energy production in balance In the beginning of 2030, the Finnish energy production system is balanced among decentralised and centralised carbon-free and renewable, mainly domestic energy sources. The system is mainly self-contained, creating lively business ecosystems and offering well-being to Finnish citizens. Energy security is also improved, because the power network is dispersed into interconnected grids instead of one national network, which is more sensitive to a large network outage. However, the nuclear power production units are offering energy security alongside distributed energy production units, and also creating export business for Finland by selling power abroad.

Devices –

99 % Grid-Free

This scenario describes a possible future from an energy production and consumption perspective in a world where global agreements set local energy politics, devices become energy independent, and large-scale electricity production and the electricity grid lose their importance. Global agreements on environmental policies set the course and new technologies for environmentally friendly local production emerge and are embraced. The key initiating event for the scenario is strong agreement and commitment to decisions to reduce climate change at the Paris conference.

Business as usual and life as we know it Big Power Ltd. operates a fleet of power plants all over Europe, including both conventional and nuclear plants. Their plans for expansion into renewable energy have been dragging due to uncertain economic viability and technical issues. However, the business is doing well. In Finland, the community of Lakeview is one of Big Power’s many customers. Besides electricity, the town centre has a coal-burning district heating system. In addition to farming, the people make their living from small-scale industry, including furniture, machine parts, and a saw mill.

Waking up to the extreme climate During the summer of 2015, California is hit by a severe drought, leading to strict rationing of water. India and neighbouring countries, on the other hand, have to deal with tens of millions of refugees from areas flooded due to extreme rainfall.

Climate change and the part mankind plays in it has mostly been an accepted fact, but these coinciding events create an atmosphere of urgency to react. The tone of voice in political speeches changes and the negotiations at the 2015 Paris climate conference have a sense of working for a common cause. Agreements are made and goals are set, with all major stakeholders involved. Implementation on a large scale is to start in 2020.

A new course The global agreements set off new legislation within EU. Local laws and regulations give way to more centralised decisionmaking and unified practices. In gradual steps, the EU is to have common legislation regarding environmental and energy issues by 2030. Strict limits and economic incentives are to be used to control GHG emissions. European industry faces a quickly changing business environment. Big Power finds itself in a coalition, lobbying for less strict regulation to protect their long-term investments. After a short transition period, the rising price of electricity and fuel costs to transport lumber force the saw mill in Lakeview to close its business.

GHG emissions are reduced according to the international climate change agreement, which, together with an economic downturn, is causing a surplus of allowances in the carbon market. To enhance GHG emissions reduction, the EU sets a market stability reserve and reduces further the allowances in the emissions trading system. However, the new legislation is not a hindrance on all fronts. As biofuels are declared carbon neutral, the reduced uncertainty leads to investments in research and production capacity. While fossil fuels are becoming more expensive, competitive alternatives are introduced into the market.

DEVICES

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DEVICES

New tech – low and high

New communities and culture

The business boom in ground-source heat pumps begins in the Nordic countries in late 2010s. First, the low population density areas take advantage of the possibility for shallow placement of pipes, and in the mid-2020s most new and renovated buildings in cities have 200-300-metre deep energy wells providing a source for heating and a sink for cooling.

Networked smart control systems using electricity market, weather, and other data, along with predictive models that adapt to building-specific need patterns and regional peak load regulation, bring heat pump technology into the forefront of high tech.

Local solutions using renewable energy sources are becoming widespread, with local ownership and commercial services for maintenance and operation. As the energy production in Lakeview became locally owned by the members of the community, a new sense of connectedness emerged. Being involved in the transition process, and now as owners of the shared power system, people see themselves as living with their neighbours instead of living next to their neighbours.

The change has been most significant to the “Info Immigrants” who prefer to live away from cities and telecommute to virtual offices in server rooms or automated factories around the world. Not having day-to-day working-life ties in the community had, at first, left them somewhat as outsiders.

Regardless of where people live, telecommuting and remote operation is typical, and schools also have telecommuting students and even teachers.

The Tampere-based NewTech Company starts out as a producer of home automation systems. The demand for solutions to improve both comfort and cost efficiency grows through the 2020s as more precision and optimisation are demanded from heating, air conditioning, water use, and other building systems. Technologies that made mobile electronics energy independent, by enabling them to harvest power from their surroundings, find their way into sensors and actuators in automation. Building- and district-scale CHP systems and related patents, especially for less densely populated areas, are what make NewTech Company a success.

Finland is finding a new economic footing in innovation, and with focused government-supported research, patents become a significant export product. Most other developed countries are also benefitting from the early investments and head-start in the new high-tech competition. It still takes Finland until 2030 to be firmly back in the triple-A group.

The culture of energy efficiency as a status value emerges from the energy-smart technologies. This includes fuel-cell-powered sports cars, home automation, and personal electronics - along with certificates of the energy and resources used for their production. A whole new level of technology and product development is reached with this new willingness to pay. The “Warm Embrace of Mother Earth” label is a must have for all new houses using ground-source heat pumps. Encouraged by tax incentives on the use of recycled materials, many companies aim to produce “100% old” devices. The global energy smart fashion trend, peaking in the 2030s along with stricter legislation regarding fossil fuels, is a major driver of the development of the infrastructure towards a hydrogen, synthetic gas, and biofuels economy.

DEVICES

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Breaking off the grid

Planet of the gadgets

As more and more buildings and districts produce their energy locally, using mostly sun and wind, less and less capacity is required from the power grid. The large-scale energy production is mostly used for nearby heavy industry or the production of hydrogen, synthetic gas, and biofuels.

Since 2035, Lakeview has only had a small capacity back-up connection to the national power grid – a leftover of the mostly unmaintained old grid. Wind and sun are balanced with biowaste-based fuel from surrounding farms. The sawmill has been reopened and is a key energy producer, utilising its own waste material and nearby sources. Individual buildings that are not part of the district energy distribution grid get their extra energy delivered as biofuel for the micro-CHP systems, along with groceries and other goods ordered online. The price of electricity is falling due to economies of scale in the emerging energy-producing technologies, new energy-efficient technologies, and reducing demand for electricity from the national power grid.

Most small electric devices never need to be recharged. Smallscale energy production technologies have changed the structure of the energy infrastructure. Buildings are mostly independent of outside energy and even factories use little outside electricity. Fashion trends in energy-smart devices, and systems from personal electronics to sports cars and homes, fuel new innovations, cultures, and communities.

Fission-based nuclear power is abandoned and the last plants in Europe are closed by 2050, and the last ones in Asia by 2070. Fusion finally becomes an economically efficient option, though not for generation of electricity but for hydrogen. By 2050, hydrogen and synthetic gas have become standard for transport. Practically all ground vehicles have fuel cells. The long life-span of ships slows down the transition in sea traffic.

Big Power has a joint venture with several other companies to operate a fusion power plant satisfying 20% of the Nordic countries’ need for hydrogen.

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VALUES

Values –

Immaterialism and Self-fulfilment

Global energy policies have barely changed during last decades and, consequently, have contributed to an increase in energy prices. There is still a lack of a global climate agreement, basically due to different national and regional interests prevailing. Consumption has increased steadily, creating pressure to increase energy production. At the same time, oil and natural gas resources have decreased, and most new oil fields are offshore or smaller than in the past, making extraction more difficult (cf. Worldwatch, 2015). Demand for oil and natural gas has held its position, and development in the utilisation of substitute energy and renewable energy has not been able to replace the market needs – despite the technological development and growth of market share. Simultaneously, immaterial values have gained increasing attention in different forms and levels of society: individuals make their everyday choices as consumers or employees, leaning on personal self-fulfilment criteria, and organisations build their competitiveness more and more on immaterial, dynamic capital.

Technological curves Energy efficiency has been the most significant way to respond to the high price of energy and climate change in later decades. Advances have also been made in developing technologies and solutions to improve the capacity to store energy, but there, the larger leap is still to come. Renewables are in a phase where they are taking their place as an essential source of energy.

Broadly, technological development has been focused more and more on systemic views. ICT has had a key role in this integrative development, where different sub-systems are

increasingly autonomous, interconnected, smart, and adaptive in their nature. As an outcome, production and consumption can be better balanced and energy savings and efficiency achieved through, for example, system optimisation, utilisation of big/open data, and system learning

Consequences of an immaterial mind-set Immaterialism has gained more emphasis in steering technological, economic, and social development. Maybe the most influential change in progress is confronted when considering the behavioural aspects, reflections on changes in deeper structures of culture. In more concrete terms, individuals are increasingly becoming aware of and valuing their personal needs – despite (or dependent on) fewer economic resources being in use. When making well-targeted purchase decisions, there is lot of personal data available online. This is supported by user-experiences and price and quality assessments. Digital services as tools, joint ownership, and renting as a way of consumption have a more significant role as individuals want to spent their time in the most beneficial way. Meanwhile, working life has turned towards more scattered forms, consisting of various simultaneous tasks of unequal length.

This is enabled by strong investment in communication infrastructure development (including free wi-fi everywhere), remote working tools, changes in management practices, and structural elements supporting entrepreneurship – all enabling individuals to act in a more self-fulfilling manner. In addition, IPRs have a more and more significant role from a legislative point of view.

VALUES

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Cities have shown the way In 2015, cities represented approximately three quarters of world energy consumption and 80% of CO2 emissions. Today, cities are inhabited by more than half the world's population, and due to a still continuing urbanisation trend, the population in cities is estimated to grow up to 75% by 2050 (cf.

Guardian, 2013). The last decade has seen significant progress in making cities more manageable entities and making them more resource effective consequently. With the increased allocations to the development of urban environments, cities can today be considered as “innovation platforms” or drivers of change at large.

In particular, so-called integrated operations centres have changed the logic of managing cities. Many optimisation benefits are achieved through increased interoperability between buildings, homes, and transportation. Through digitalisation and system tools, energy flows can now be centrally managed to optimise supply, demand, and storage.

There, especially sensors and smart grid technologies have played a key role. Simultaneously, integrated operations centres have achieved a strengthening significance in working in an informant and facilitator role in energy issues. This covers increased co-operation with a variety of stakeholders outside their operative key areas, such as educational and different civic organisations. Regarding education, approaches to sustainability have become more and more relevant in different substance areas and levels of education.

At the same time as the increased number of people living in cities, there is a counter-trend of people advocating for rural living. In both areas, new kinds of sub-communities have emerged, united by common values and life-styles. Many of these sub-societies rely on co-ownership, and almost all of them contain virtual elements, where information is shared and developed openly.

Towards 2050 System thinking has increasingly gained attention in steering development during the last fifteen years. For the energy sector, it has most of all been an era of improved energy efficiency, but also an era of achieved progress in balancing

production and consumption, an era of increased consumer involvement in the energy field processes, an era when systemic solutions and new kind of area energy operator has emerged, and an era when cyber-safety issues have been in focus. However, it has also been a period of time when energy prices have stayed relatively high, and this is to remain the case until the benefits of scale for the utilisation of renewables take the next leap in their development. Most of all, this would require a political, global consensus to occur – a discussion that has been ongoing for many decades.

Finally, consumers represent an active role in the production-consumption chain in the energy sector nowadays.

This is due to several development paths, such as an increased number of consumers producing energy, consumer-specific measurement tools being developed, and more and more individuals being willing to get accurate information on their resource flows. As an example of our circular economy, information on individual resource flows is combined with personal footprints and often shared in virtual societies.

In addition, systemic energy efficiency has also been a sales argument with greater relevance among consumers - besides its apparent significance in B-to-B markets today. Due to the prevailing trend in immaterialism, price has not been the only way of valuing, for example, digital services, however.

Rather, today’s consumers need to experience their choices with a larger significance related to their personal values and life-styles. Modern consumers also want to spend their time in a very targeted and efficient way, in a way that increases their awareness of themselves, and in a way that meets personal needs.

However, as the recent years can be described as a period of increased personal awareness and self-fulfilment, it can also be called a period of increased polarisation in opinions and life choices. As an example, there is a large number of people living in cities and strongly committed to this life-style, but at the same time, there is a smaller number of people living in the countryside, but as committed to this way of living. The polarisation largely appears in a society as the “core” of different reference groups is more focused and crystallised. It has led, in turn, to an increase in active interaction on a wide variety of matters, even conflicts.

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Work and people behind the scenarios The work utilised parts of a methodology that is often called GBN scenarios. The aim was to sketch such futures that are both ultimately relevant and also intriguing. The GBN scenarios or macro scenarios works well for this purpose as they help to identify critical factors with a high impact on the focal issue. More importantly, they help to sketch alternative scenarios that combine two crucial factors as axes in a scenario matrix. The GBN scenarios have been widely used as a tool for strategic planning.

The EFEU project decided to use the methodology to paint a larger picture. The purpose was to see what kind of role energy efficiency has in alternative futures, which fold out based on different developments. Understanding the systemic context, including political and societal factors, was seen as valuable even if there were scenarios where energy efficiency does not have such a strong role.

In the EFEU project context, only parts of the methodology were used. We focused on identifying key factors and driving forces that were ranked by importance and uncertainty.

Altogether, twenty-six factors were listed and then ranked into an impact-uncertainty matrix, as in Figure 2. Usually in macro scenario projects, only the two drivers with the most votes are used as variables in forming scenario skeletons, as the plan is to produce only four scenarios in one matrix. In this case, the

plan was to test several matrices to find out which ones truly produce exciting and even surprising results.

The dimensions with medium or high impact and uncertainty were selected for the next phase, where they were combined to build matrices. Altogether, six matrices were built and the scenarios were fleshed out with a few bullet points. Three of these matrices were then selected to form a skeleton for the scenarios:

a)

b)

c)

(De)centralised energy production vs. self-sufficiency – security Global climate agreement vs. electricity grid – devices (Im)materialism vs. energy price – values

To identify factors that play a crucial role in the scenarios, we utilised the PESTEL analysis. This is a macro environmental framework used to understand the impact of external factors on an organisation, or in our case, a market. The analysis includes six factors, which are construed: political, economic, social, technological, environmental, and legal. Teams of three to four people were then formed to lead the writing of each scenario.

High

SCENARIOS FOR FUTURE ENERGY MARKETS 21

Binding targets on energy efficiency

Medium

Impact

Centralised vs. distributed energy production Immigration to Europe 3D printing in homes in grand scale Household as the unit vs. village

A m egacity in Europe vs. evenly distributed urbanization Centralized leadership vs.

Individual freedom Gender

Carbon taxes for imported products Personal CO2 quota

equality

Low

Sectors in synergy vs. silos

Global popu-­‐ Strong centralized EU lation growth vs. local autonomy Emphasis on Materialism vs. bioenergy Self-­‐sufficiency Focus on immaterialism energy issues in energy Positive economy in EU Biomass: carbon Energy produced and neutral vs. not Industrial stored in devices Energy scarcity: Global climate manufacturing in CCS implemented expensive vs. free agreement EU vs. no in EU in large scale

Low

Medium

Uncertainty Figure 2. Impact-uncertainty matrix.

High

22 SCENARIOS FOR FUTURE ENERGY MARKETS

Contributors Many committed professionals joined the work in the hope that these scenarios might encourage novel dialogue: dialogue that would challenge the way we currently look at the business potential of energy markets. The contributors to this work are:

• Nina Wessberg, Senior Scientist at VTT in the area of foresight and

socio-technical change • Marja Englund, Manager, External R&D Networks at Fortum • Mari Tuomaala, CTO at Gasum Oy • Jukka Ranta, Research Scientist at VTT in the area of system dynamics and simulation • Matti Visuri, Head of Product Development at Fortum Power Solutions • Hannu Väänänen, Market Manager, Carbon Free Energies at ABB • Juha Hakala, Research Scientist at VTT in the area of process engineering

and sustainability • Jouko Myllyoja, Senior Scientist at VTT in the area of foresight and

socio-technical change • Jero Ahola, Professor at LUT in the field of energy efficiency in electrical systems • Timo Laukkanen, Laboratory Manager at Aalto in the field of energy systems and

energy efficiency • Juha Leppävuori, Senior Scientist at VTT in the area of process engineering

and sustainability • Joona Tuovinen, Research Scientist at VTT in the area of business and technology management • Jussi Manninen, Development Manager, Strategic Programme for the Forest

Sector at Ministry

of Employment and the Economy • Tiina Koljonen, Research Team Leader at VTT in the area of energy systems • Riitta Nieminen-Sundell, Senior Scientist at VTT in the area of innovation policy research • Tapani Ryynänen, Senior Scientist at VTT in the area of business ecosystem development • Professionals working on the EFEU research programme

References The Guardian (2013). Smart cities: innovation in energy will drive sustainable cities. Online at: http://www.theguardian.com/sustainable-business/smart-cities-innovation-energy-sustainable Worldwatch (2015). Energy Agency Predicts High Prices in Future. Online at: http://www.worldwatch. org/node/5936

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24 SCENARIOS FOR FUTURE ENERGY MARKETS

Solution Architect for Global Bioeconomy & Cleantech Opportunities