Creating different scenarios

The process to create different scenarios begins with the current situation. This starting point is analyzed numerically and from there different scenarios are derived and to this they are also compared. Some of the scenarios will be more likely to occur than others. This is important part of the scenario analyze to forecast the probability of certain events. The main scenarios are introduced in this chapter. In addition, several other outcomes are obtained as well to prevent “thinking inside the box”, since this 2x2 restricts available outcomes. These various scenarios and current situation are presented in written form and in addition to that, graphical explanation is provided also to sum up the outcomes. There are no right answers to create absolute scenarios, and even in the most accurate cases, the scenarios are only wild guesses based on theoretical and numerical data.

Roland Berger (2017, 12) identified nine crucial uncertainties related to political commitment. Those are closer integration of the European Union (EU) and its energy markets, accelerated opening of energy markets (also, removing barriers to entry EU), commitment to decentralized energy and reduction of fossil fuel by decreasing its’ support, improved legislation and incentives both in supply and demand side of decentralized energy, electro mobility legislation and incentives, revitalization of EU greenhouse gas emissions trading scheme, incorporation of external costs in the cost of energy by carbon credits, establishment of mechanisms to pay for stranded costs to move infrastructure to handle renewable sources better

and power grid development in individual countries. They also recognized four market evolution uncertainties, which are following; new business models and offerings from new and established players, costs of fossil fuels, performance and availability of energy storage and development of electro mobility. From these factors, Roland Berger (2017, 13-15) created 2x2 matrix to illustrate four different future scenarios, which are named as slow-moving market, fragmented evolution, market apathy and green revolution.

Figure 10. Scenarios for the future of decentralized energy systems. Source:

Roland Berger (2017)

This study considers, that Finland is among the rest of the Europe close to slow-moving market right now, which is the starting point of the scenario analysis. The assumption is, that taking the next step leads to situation where political commitment is low and market evolution is low. This study therefore has a starting point. A point where every other scenario is reflected to, and it is called as current situation. Key difference is the adoption of blockchain technology in the next step.

Roland Berger (2017, 14) defines slow-moving market as a scenario where decentralized energy remains negligible. In this scenario, decentralized energy will have to wait for better times, since capital is not flowing in and general interest is low. There is niche segment such as summer cottages in rural areas and with no connection to the grid or straightforward cities with strong implementation to decentralized energy, but it will not have the competitiveness to challenge other sources of energy.

Market apathy is a scenario with strong political support, but market evolution remains low. For reasons, like too cheap fossil fuel, lack of proper technologies or poor cost evaluation, the market is not interested in adopting decentralized energy modules. Political power will artificially improve the markets, but if the energy markets does not improve, its competitiveness will be dependent on the level of artificial support. Global or local economic shocks can trigger this system to collapse entirely. (Roland Berger, 2017, 14)

In fragmented evolution, where political commitment is low but market evolution is strong, competition between centralized and decentralized models are direct.

Therefore, the decentralized energy model has to be attractive to customers. Old industry will retaliate, and the degree of retaliation affect the level of penetration of the new business models. Without regulatory support, market-based mechanisms are hard to develop by stakeholders for smooth transition phase. If transformation process is slow, taking a proactive role as customer will be low since fixed costs are probably high. Therefore, decentralized energy systems have to create strong competitive advantage, or the prices of fossil fuels has to go up significantly.

Otherwise, the penetration speed will be slow. Decentralization will happen slowly

and it will be quite fragmented. However, sectors which are open to competition could flourish, such as electro mobility. In general, decentralized markets will suffer if markets are heavily regulated. (Roland Berger, 2017, 13-14)

Green revolution is the most desirable outcome since it has the market evolution with technological development met with strong political commitment. New ways to trade emissions or incorporation of external costs via carbon credits could enhance the possibilities created by decentralized energy. This addition in value could lead to accelerated development of smart grids and renewables. Legislation and incentives in electro mobility could stimulate manufacturers to switch from old petrol engines to electrical ones. Fast growth of these systems will lead to additional capital invested in, thus leading to higher research and development budgets. Cost base and competitiveness of decentralized energy systems will improve significantly with these additional inputs to manufacturing and research together with learning effects from growing scale. Very quick changes are expected thus these improvements with political commitment. Old, existing players will have lower exit barriers and the change is inevitable. If the barriers are easy enough to overcome, the environment would be suitable for rapid change without harming current stakeholders, thus benefitting everyone. (Roland Berger, 2017, 13)