What lies in the Future of Utilities?  

1. The AI-Energy Paradox

Artificial intelligence is increasingly seen as essential for unlocking the potential of the power system, with many stakeholders placing high – sometimes overly optimistic -expectations on its ability to solve complex operational challenges. However, AI itself is energy-intensive, adding further strain to an already constrained power system. 

This raises critical questions:  

• How will the system meet AI’s growing energy demands while simultaneously relying on AI to address its existing challenges?  

• How will AI’s increasing energy consumption impact decarbonisation and broader sustainability goals?  

There is also growing interest in co-location, particularly the integration of Battery Energy Storage Systems (BESS) and gas/hydrogen-ready engines, to support self-consumption and grid services. 

2. BESS: Momentum vs. reality 

Battery Energy Storage Systems are becoming central to balancing, congestion, congestion management, and arbitrage, which has led to significant optimism – such as over 500 GW of connection requests in Germany alone.  

However, there are several headwinds:  

• Grid connection remains a major bottleneck, with a shift from first-come-first-served to maturity-based queues 

• Regulatory uncertainty looms, particularly around initiatives like Redispatch 2.0, Flexibility Contracts/Arrangements (FCAs), and complex tariffs 

• There is a risk of market oversaturation in some markets and of potentially undermining the value proposition for customers pursuing self-consumption. 

These factors suggest that now is the time for a more realism about BESS’s role. 

3. The unclear value proposition of flexibility  

A recurring theme is the question of flexibility: “What’s in it for me?” This concern is raised by Generation Companies (GenCos), utilities representing residential customers, and owners of small assets alike. Flexibility still lacks a clear definition and end goal.  

Key friction points include: 

• Inadequate- or often non-existent – compensation and incentives for those providing flexibility services.  

• For residential flexibility to succeed, participation must be simple, seamless, and supported by fairer value-sharing models. 

There’s an opportunity here for energy retailers: they could stand out by offering flexibility to their clients.  

4. Europe has a flexibility problem, not a congestion problem

The narrative needs to shift: Europe’s core issue is not congestion, but rather under-activated flexible capacity. Addressing this challenge is critical for the future of the energy system. 

5. What makes AI projects succeed 

Many AI pilot projects fail due to unclear objectives, a lack of internal ownership, and poor integration into existing processes and workflows. Too often, the approach is “AI looking for a use case” rather than the other way around.  

Successful projects tend to follow a clear pattern: they start with low-hanging fruit, build a realistic roadmap for gradual implementation, and focus just as much on organisational and process changes as on the technology itself.  

Another key success factor is having a proper data foundation: when the data can be trusted, then AI can really be of added value. As one participant put it: “Machine Learning models live where the data already has trust.” 

More about digital transformation in the energy context?  

As ever, it’s just as much about the people as technologies. If you want to learn more about how we approach project like these, check out our guide on Digital Transformation in the energy context.   Or simply reach out to Hazem or Martin to discuss your situation. We’re here for you!

Our experts created a guide for digital transformation in the energy context. It highlights Magnus Energy’s unique integrated approach between strategy, IT, processes, and people. Supporting you to turn vision into lasting impact.

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Or simply reach out to Hazem or Martin to discuss your situation. We’re here for you!