Europe's Power Surplus: A Wasted Opportunity?

Why we can’t quit fossil fuels despite the planet’s suffering

Kyoto Group CEO Camilla Nilsson shakes her head. She says the situation is not unique to the UK. The same is true in other European countries. In Spain, curtailment is challenging the country's transition away from fossil fuels, with 1 TWh of renewable energy expected to be curtailed in 2024, at the cost of more than EUR 1 billion.

- We're still at the beginning of the energy transition, says Camilla Nilsson. - But the problem of shutting down renewable energy production is a growing one. In Spain, where they have invested heavily in renewable energy production, the consequences are becoming apparent. Investment in renewable energy stops because the producers are not paid enough for the electricity they produce. There's just too much of it, at the wrong time. 

Renewable energy is like fresh produce. The sun shines when it shines and the wind blows when it blows. That may not be when you need the energy they produce.

- The Spanish are in a situation where the trigger point for investment isn't met. The risk, of course, is that the overall production of renewable energy will slow down. 

The problem is that even though we are seeing a significant increase in renewable energy production, the world is not ready for the amount of energy coming from wind and solar. It's just too much for the old grids to handle. And we have no place to store it. 
In other words: We haven't found a holistic way to decouple the time when energy is produced from the time when it needs to be used. 
That's one reason why fossil fuels are our backhand solution: It's reliable. Another reason is how affordable it has been to use fossil fuels.

- Gas has been incredibly cheap and incredibly efficient, says Camilla Nilsson. - The only disadvantage of gas is that it destroys the planet. Up until this point in history, we haven't really thought about it. We haven't even considered it a problem.

Russia’s invasion triggered cost crisis, not climate concerns

That sounds a little strange, considering the number of climate scientists who have been trying to wake us all up for years. On World Environment Day this summer, UN Secretary-General António Guterres said: “This is an all-in moment … In the case of climate, we are not the dinosaurs. We are the meteor. We are not only in danger. We are the danger … We’re playing Russian roulette with our planet. We need an exit ramp off the highway to climate hell”. 

Camilla Nilsson says that's an interesting thing about us humans: To really understand a crisis, we seem to need to feel it ourselves. 

Interestingly, it wasn't European countries' worries about the future of the planet that caused a massive panic in the energy sector two years ago. It was Russia's invasion of Ukraine. 

- Gas prices immediately shot through the roof, says Camilla Nilsson. - The industry panicked. Suddenly everyone was talking about decarbonizing the industry - and everything else. We understood that we had to get away from our deep dependence on Russian fossil fuels. The interesting thing was that it didn't happen because everyone suddenly understood the dire situation of the planet. No, it happened because gas became expensive overnight. In other words: When we start feeling the pain, the energy transition will happen.

Politicians must make tough energy choices

Fortunately, we don't "need" another war. But to get industry's participation, it's not enough to wait, and it's not enough to threaten with more and more stringent carbon emissions reporting requirements, we need politicians who have the courage to propose things that will initially cause pain - and help industry get through it. 

- Everyone is pointing at politicians, says Camilla Nilsson, shaking her head. - It almost feels useless to say it. But at the end of the day, the politicians are responsible. For creating incentives for the industry, regulations and laws that make it possible to create and open up the electricity system to new technologies and new products, such as flexibility tools like demand response. But most politicians don't have the guts to do that.

- Why not?

- If they propose something that will inflict pain on the society, they risk losing voters. We need politicians who dare to say that this will hurt temporarily. The world needs that. Before we can all feel better, we have to go through some pain. Maybe the pain will pass quickly, or maybe it will take some time, but we have to go through it. Together. If they inflict the pain, we will come with the solution. After all, we provide a commercially viable technology. 

Camilla Nilsson points out that a lot of renewable energy producers around the globe have actually jumped on board, the energy transition IS happening. Last year, nearly 75 % of all new power capacity installed was solar and wind.

- But then we come to the somewhat sad conclusion that we see today: A lot of the energy produced is not used. We can't use it when we need it, and when we need it, there isn't enough. Listening to the UN and its experts leaves us in no doubt: The situation is getting worse. If we zoom in on Europe, we see that the transition must make financial sense for the producers and users of energy. And that is the challenge.

- Doesn't that sound very discouraging? 

- No, the transition is happening. It's too late to stop that. But we have a bumpy road ahead of us.

- Perhaps it's not surprising that some industry leaders are hesitant?

- Correct, industry leaders like to be innovative, but nobody wants to be first. Everyone says that they are willing to share the risk, but seemingly only when there's no more risk to share.

Energy storage solutions are about heat, not just electricity

So how do we resolve the paradox we're in? How do we encourage the continued production of renewable energy and move away from the devastating use of fossil fuels, while at the same time not shutting down or wasting that same production because we cannot handle the amount that is actually being produced? 

In short, we need thermal energy storage. We need better ways to manage and utilise the renewable energy we produce. We need industry to get on board and actively participate in the collective effort to make the green transition happen. If we don't, we're going to continue down the road that the UN Secretary General was talking about. 

But when you hear the word "battery", you probably think of your iPhone. Or the electric car currently parked in your driveway. Lithium batteries are used to store electricity. It's easy to conclude that simply having enough lithium batteries would solve the energy storage challenge.

But most industries don't need that much electricity for their manufacturing processes. They may need it to power lights in factories, but the real energy demand comes from industrial process heat, often in the form of steam; to dry, clean, distil, treat, shape and form products. Steam is used to make just about anything you can think of.

The food packaging we reach for in our stores. The paper we write on. The boxes we stuff our belongings into when we move. The medicine that we use when we are sick. The screen you're reading on right now.

The problem is that 90% of all industrial heat is produced with fossil fuels. Again: We're up to our eyeballs in fossil fuel addiction. 

But wait a minute. There's a way out.

- Using thermal batteries with a smart energy management system makes it much cheaper to store renewable energy. The only difference is that we store it as heat instead of electricity, says Camilla Nilsson, which is the only sensible thing to do when the energy demand is heat.

It costs a steep €150-200 to store one MWhe of electricity. That's what Elon Musk and Tesla offer with their Megapack. Storing energy as heat costs around a low €25/MWht.

- Wow, that's a fraction of the cost?

- It is indeed. I suggest Elon Musk take a look at this calculation. Especially as ⅔ of the energy demand from the industry is heat. It does not make sense to store that as electricity. Thermal batteries are for the industry what the lithium-ion batteries are for EVs, but at a fraction of the cost.

- This sounds like something every industrial owner would be interested in? 

- Yes, but many are unaware of this opportunity. Industry needs to be empowered to play an active role in the energy transition by capturing energy when the grid is oversupplied. This not only ensures a stable energy supply for themselves but also offers the potential to earn revenue by providing grid flexibility. 

Industry can profit from supporting the grid with new tech

New technology and new, cheaper energy storage options will empower the industry. The only way forward is to give industry a thermal battery and the ability to meet the demands of the grid directly on their side of the table. 

- This is what we call industrial demand response, says Camilla Nilsson. - It will allow industry to act, to respond to the demands of the grid while ensuring its own energy needs are met. It's also a new way of getting paid.

It's quite simple: We have too much wind. If only we had somewhere to store the energy we harvest when the wind blows, a lot of dominoes would fall. Industry could get the cheapest kilowatts. Sometimes they could even be paid to take them when prices are negative. And later sell kilowatts back to the grid. 

- And not only that, says Camilla Nilsson. - They could participate in flexibility markets and sell their storage capacity back to the grid. 

- All this from a simple battery?

- You know, the smartest solution is often the simplest. The revenue stacking capabilities of a single thermal battery are quite profitable. This is exactly why policymakers should work to incentivise industrial demand response. Or, put more simply, why they should support factories that buy batteries. 

To give just a few examples of such policies, they could include tax deductions for industrial companies that provide demand response from their side, low-interest loan mechanisms for the purchase of energy storage systems, contracts for difference with a feed-in tariff covered by the government if the system includes renewables plus energy storage, and finally investment tax credits or even tax deductions for storage.

While no single policy will work for all countries, the implementation of policies would have a huge knock-on effect, says Camilla. 

- It would allow politicians to achieve other important goals much, much faster. Energy efficiency. Cutting emissions. Other energy investments would all improve if this one thing changed. It's in their interest, it's in the industry's interest - and it will inevitably benefit each and every one of us.

And it's possible now. If industry can charge its thermal batteries when there's a lot of energy in the grid, and wait to charge when there's less energy, it can contribute to a larger organism, a breathing grid.

- Electricity is on the move, says Camilla Nilsson. - We're seeing a transition to a world where energy is moving from a centralised energy system to a more decentralised energy system. From the few to the many.

- It makes sense. Everyone has to play their part to make the whole energy transition happen?

- Absolutely. This is where technology comes in. These small units need to communicate with each other. It's also an exciting development from a geopolitical point of view. If you have lots of small sources of wind and solar, and an industry that can adapt to what they produce, oil will become obsolete as a tool of power between countries. It will also cease to be a cause of conflict because everyone will be producing their own energy, says Camilla Nilsson.

Her thoughts echo the world's growing sense that a transformative shift is already underway.

- There are some bright spots in the chaotic world we find ourselves in. Energy as a tool of power will disappear. It will be produced locally, and very soon! Do you hear me, politicians?

3 reasons why Europe needs industrial demand response:

Renewable energy without storage is a waste

We have been good at producing renewable energy, but we have forgotten that it needs to be stored. Any investment in renewable energy must include measures for storage. Without it, we will never achieve full decarbonization of society

Local storage fixes grid congestion 

We can’t build our way out of grid congestion. Demand for electricity is and will be too high and renewable energy is always too variable. Local storage is the only way to deal with load shifting and peak shaving. 

Industrial demand response will cut emissions faster

When industry contributes to grid capacity, more polluters can electrify and cut emissions as grid congestion becomes less of a problem. Better traffic management on the grid leads to a faster green transition.

3 ways industrial demand response is a game-changer for profitability:

Make money by selling energy twice

That’s right. With industrial demand response and the integration of a battery system, your business can optimise energy use—buying electricity when prices are low, storing it, and reducing demand when prices rise. This way, you not only save costs but also support grid stability. We call it industrial demand response, and it's shaping the future of energy.

Get paid to balance the grid

Holding back on energy use when the grid needs you to, means you’re getting paid for your part in the grand scheme of stabilising the grid. By participating in flexibility markets with a battery, you can offer replacement capacity multiple times from a single asset, maximizing your earnings through efficient utilization.

Generate income just by being prepared

Being on standby, ready to provide energy during peak demand periods, even if you’re not called upon. That’s essentially payment for being ready to meet potential energy demand—like getting paid to keep your engines warmed up, just in case.

Know an industry leader who needs to rethink their energy strategy?

If you know someone in the industry who hasn’t yet realised the importance of smarter energy management, now is the time to make them aware. Share this article with them and start the conversation. The future of energy depends on leaders who are ready to embrace new technologies and strategies that will drive the green transition forward.

Let’s make sure they’re equipped to lead the change. And if that industry leader happens to be you, we’re eager to hear from you!