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Conference – Paris, April 5 2012: A view of the European energymarkets (Middle East events, Fukushima accident and economic downturn are impacting the energy markets in terms of security of supply and energy mix).Plus a focus on sustainability issues and solutions to improve Utilities’performance
Citation preview
| Energy, Utilities & Chemicals Global Sector
Paris – April 5th, 2012
European Energy Challenges Colette Lewiner and Philippe David
| Energy, Utilities & Chemicals Global Sector
An overview of the European energy markets
Recent events are impacting the energy markets
• Middle-East political tensions
• Fukushima accident consequences
• Economic downturn
They are changing the electricity security of supply
Present and future energy mix is evolving
How to reach the sustainability objectives?
How to improve Utilities companies performance?
Conclusion
2
| Energy, Utilities & Chemicals Global Sector
Others
12%
7%Other EU
5%6%
14%
13%
10%7%
4%
22%
Total Iranian oil exports
2.3 m bl/d
The rising political tensions in Iran are particularly worrying
for global oil supply
3
Iran’s oil exports (Jan to June 2011) After China, the EU is the largest importer of Iranian oil
(about 20%)
In response to the Iran’s nuclear program negotiations
failure, the US and Europe decided sanctions against Iran,
who, in return, threatened to close the Strait of Hormuz:
• Strengthening of the US military presence in the Gulf
• Oil embargo from the EU (due to start in July) which should
hit 450,000 to 550,000 barrels a day of Iranian oil exports
But Iran banned crude oil supply to France, the UK and
the EU right away
In addition, Japan, South Korea, Taiwan and India could
reduce their purchases (up to 250,000 bl/d). In total,
between 25% and 35% of Iran’s oil exports could be
impacted
However, Saudi Arabia is increasing significantly its
production to curb price
Sourc
e: F
inancia
l T
imes
Sourc
e: F
inancia
l T
imes
35%
of all seaborne traded oil
20%
of oil traded worldwide
14 crude oil tankers
Almost 17 million barrels
Average daily oil flow
through the Strait of
Hormuz (2011)
% of each country’s total oil imports Jan to June 2011
China
11%
South Africa
25%
Turkey
51%
South Korea
10%
India
11%
Japan
10%
13%
Italy
13%
Primary factors driving demand are economic growth and increased
requirements in the developing world Iran political situations may place global
production and transportation at risk
Spain
| Energy, Utilities & Chemicals Global Sector
Oil prices in European currencies are at their highest
Oil prices forecasts uncertainty is increased by
speculation: each barrel traded on the physical
market is traded 35 times on the financial markets
There is some consumption/price elasticity
High present oil prices are linked to tensions in
Middle East and Iran
In Euros, the crude oil spot price is at its highest
There is currently a $20 spread between WTI and Brent,
a the consequence of a localized logistic phenomenon
at Cushing, Oklahoma, where WTI is priced
President Obama is supporting a new pipeline
(Keystone XL)
4
High oil prices impact economic growth (EU’s oil import costs up 44% in 2011 compared to 2010 and net oil import bill estimated to account for 2.8% EU’s GDP in
2012 compared to 1.7% from 2000 to 2010) and trade exchanges balance
Oil prices
Source: Focus Gaz, February 17, 2012
130
120
110
100
90
80
70
Apr 2011 Mar 2012 Aug 2011 Dec 2011
Brent
WTI
Crude oil spot – Brent vs. WTI
Source: Ycharts Source: France inflation
Crude oil spot – Brent in US dollars and in Euros
124.38
105.68
| Energy, Utilities & Chemicals Global Sector
Long-term contracts price Spot price
Gas is not a global market. Very different regional pricing systems
US spot prices could go up on the mid-term triggered by the new EPA
(Environment Protection Agency) regulation on air pollution (Cross State Air
Pollution Rule) that could lead to 20% of US coal-fired plants phase-out and their
replacement by gas
Beginning of 2012, Gazprom has agreed to reduce by 10% the price of its
long-term contracts to Europe
5
US spot gas prices are only one third of long-term European gas prices. For how long?
Source: Focus Gaz January 2012
Source: Gas Exchanges web sites, SG Commodities Research, BMWI – Capgemini analysis, EEMO13
Gas spot prices Gas prices evolution
In €/MWh ($4.4/MBtu=€10.6 /MWh)
Europe versus US gas prices 0
20
40
60
80
100
0
10
20
30
40
50
Bre
nt p
rice
[€/b
l]
Ga
s p
rice
s [€
/MW
h]
DE - Import price NL - TTF
BE - Zeebrugge UK - NBP
DE - NCG FR - PEG Nord
Brent month ahead
| Energy, Utilities & Chemicals Global Sector
0 50,000 100,000 150,000 200,000 250,000
Switzerland
Brazil
Czech Republic
Finland
Spain
Sweden
Turkey
Vietnam
South Africa
Germany
Saudi Arabia
UAE
Canada
Ukraine
United Kingdom
South Korea
France
Japan
India
Russia
USA
China MWe
Operable
Under construction
Planned
Proposed
Post-Fukushima nuclear reactors’ market: new builds mainly
in Asia, Russia and Middle East
Worldwide, 434 reactors are in operation, 61 under construction and 495 planned or proposed (February 2012, World Nuclear Association)
6
Source: World Nuclear Association
The vast majority of new constructions and existing plants in operation should continue with some delays
and more safety focus. The IEA* forecasts that nuclear output will rise by
more than 70% over the period to 2035
Overview of existing nuclear plants and project capacities (as of February 2012) The final number of planned or proposed
reactors is difficult to assess. However, two
points are clear:
• Provided reactors are run safely, the
consequences of the Fukushima accident
should be less important than viewed just after
the accident
• The proportion of new, safer “Generation 3
reactor” builds will increase
It is worthwhile mentioning that:
• TVA in the US has decided to complete
Bellefonte 1 reactor, that the Nuclear Regulatory
Commission has certified the design of
Westinghouse Electric Co.'s AP1000 reactor
and that Southern Company is building 2 new
nuclear plants in Vogtle, Georgia
• Finland announced a new build, the first
announcement of a new site anywhere in the
world since the Fukushima accident
• Russian Rosenergoatom has received a license
for building the Kaliningrad plant
• No.1 nuclear unit in Zhejiang Sanmen (China)
has restarted the infrastructure construction
project
*IEA: International Energy Agency, World Energy Outlook 2011
| Energy, Utilities & Chemicals Global Sector
3,294
5,336
3,136
5,010
3,265
5,363
3,177
4,880
Electricity Gas
2008 2009 2010 2011
-4.7%+4.1%
-6.1% +7.0%
-2.7%
-8-9%
-2% -3%-1%
-3%-2%
0% -4%0%
1%
-2%
-5%
-10%-8%
-10%
-7%
-16%
-12%
-4%-6%
-2%-4%
-12%-14%
-22%
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
Electricity
Gas
There is some elasticity between the economic situation and
the energy consumption
In 2009, electricity and gas consumption dropped in Europe (-4.7% and -6.1% respectively) due to the crisis, in 2010,
they increased again (+4.1% and +7.0%) thanks to the economic recovery and colder than average winter
temperatures. Wholesale electricity and gas prices followed the same trend.
In 2011, European electricity and gas consumption decreased respectively by 2.7%* and 8-9%**, mainly due to a
mild weather. In France, electricity consumption decreased by 6.8% (weather-adjusted: +0.8%) and gas
consumption by 13.4% (weather-adjusted: -1.9%).
7
Source: ENTSO-E, BP – Capgemini analysis, EEMO13
Evolution of electricity and gas consumption (M/M-12) non-weather-adjusted
Source: SG Energy Pulse – Capgemini analysis, EEMO13
A second economic slowdown would impact negatively the energy consumption and prices
EU electricity and gas consumption
(non-weather-adjusted)
* Société Générale Energy Pulse (Focus group representing 63% of European electricity consumption) **Cedigaz provisional figure
| Energy, Utilities & Chemicals Global Sector
An overview of the European energy markets
Recent events are impacting the energy markets
• Middle-East political tensions
• Fukushima accident consequences
• Economic downturn
They are changing the electricity security of supply
Present and future energy mix is evolving
How to reach the sustainability objectives?
How to improve Utilities companies performance?
Conclusion
8
| Energy, Utilities & Chemicals Global Sector
Electrical peak loads are increasing year-on-year threatening
security of supply
Sourc
e: E
NT
SO
-E –
Capgem
ini analy
sis
, E
EM
O13
&
&
&
&
&
(&
&
&
&&
& (& & &
& &&
& & &
( & & &
9.1%
3.6%
2.1%
3.9%
1.5%
-0.1%2.2%
0.1%
0.1%
1.6%5.8% 0.3% -1.4%
9.3% 6.8% 6.6%
0.2% 10.3%0.1%
2.1% 10.2% 9.3%
-23.6% 7.9% 3.0% 1.9% 1.5%
&
&
&
&
&
&
& &
&
(
&
&
&
& & &&
&&
& & &
( & ( & &
9.5%
4.7%
8.8%
0.1%
2.6%
6.2%3.2% 9.3%
1.0%
-0.6%1.7%
4.8%
3.6%
1.1% 2.0% 2.6%1.0%
0.3%1.1% 1.1% 4.1% 5.1%
-0.4% 1.8% -1.3% 4.9% 6.8%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
DE FR IT ES UK SE PL NO NL AT BE CH FI CZ PT RO DK GR BG HU IE SK LT SI LV EE LU
Tota
l genera
tion c
apacity
and p
eak lo
ad [
MW
]
CO2 emitting generation capacityNon-CO2 emitting generation capacityPeak load 2010Total generation capacity evolution 2010 vs. 2009 (notified if below or above +/-3%: +3.4%)Peak load evolution 2010 vs. 2009 (notified if below or above +/-3%: +3.4%)
Total installed capacity for Europe in 2010: 882,712 MW(+3.7% compared to 2009)
Peak load, generation capacity and electricity mix (2010)
Nine countries registered an all-time high peak loads in 2010 due to cold temperatures. During the cold wave early 2012, France and Poland recorded all time record electricity
demands and Germany has activated its reserve coal power plants
9
Peak load 2012: 102,100 MW
Peak load 2012: 25,844 MW
| Energy, Utilities & Chemicals Global Sector
France recorded a new peak load on February 8, 2012 due to
the cold spell
10
A holistic approach to manage the peak load needs to be implemented. It should encompass: • Generation capacities
• Demand response: tariffs or other types of demand response programs • Incentives to build peak generation capacities
• Grids reinforcement • Incentives for energy savings
Oil-fired + peak
capacities5%
Coal5%
Gas3%
Nuclear58%
Wind2%
Hydro13%
Others6%
Imports8%
Source: RTE
Generation mix on February 8, 2012 at 19:00 The French electricity peak load reached 102,100 MW at 19:00
• Nuclear plants’ availability largely contributed: 59,165 MW (55 reactors out of
the 58 were in operation)
• France imported 7,845 MW from all its neighboring countries (max 9,000 MW)
• On EPEX Spot, day-ahead electricity prices jumped to €1,938/MWh
• RTE activated it EcoWatt demand response program in Brittany and PACA regions
which resulted in a consumption reduction of respectively 2% and 3%
• EnergyPool curtailed 20 MW of industrial consumption which have been used for
Brittany region
In 2011, net new generation capacities have been added:
• 850 MW of CCGT
• 1,250 MW of renewable energies
• 450 MW of fossil-fired plant have been decommissioned
New housing heating gas is regaining market share: close to 60% compared
to less than 40% for electricity in 2011 (2008 electrical heating market share was
70%). This has decreased the potential electricity demand at peak hours by
450 MW
But tariff-related demand response capacities have decreased from 6,000
MW in 2004 to 3,000 MW in 2011
| Energy, Utilities & Chemicals Global Sector
Infrastructure investments needs are very large
Investment needs increases result from:
• Generation plants’ construction to replace
old plants, nuclear reactors potential phase-out
and safety improvement
• Electricity and gas grids reinforcement to
improve security of supply, accommodate
decentralized and renewable generation,
transform present grids to smarter ones and to
accommodate the electricity consumption
increase
11
Source: European Commission
In order to incentivize the Utilities, regulation changes are needed
Total investment needs in the electricity and gas sector between 2010-20: over 1 trillion €*
Power generation: ~ 500 bn Transmission and distribution: ~ 600 bn
RES: ~ 310 – 370 bn Distribution: ~ 400 bn
Transmission: ~ 200 bn
Electricity: ~ 140 bn (interconnectors: 70, offshore
grid: 30; smart grid installations in transmission: 40)
Gas: ~ 70 bn (import pipes, interconnectors, reverse flows, storages, LNG)
Out of which ~100 bn gap (not covered by market
under existing regulatory conditions)
On October 19, 2011, the EU has adopted a plan to boost European networks (to be effective by 2014). €9.1 billion to be invested in trans-
European energy infrastructure
* EU estimation before Fukushima accident. This estimation does not include: • €250 billion German investments linked to nuclear phase-out (estimation by KfW, the German
state-owned investment bank) • €16.4 billion linked to the immediate nuclear phase-out (estimation from EWI, GWS and Prognos)
• Other investments needs linked to Fukushima accident consequences
0%
5%
10%
15%
20%
25%
1990 1995 2000 2005 2010
Utilities CAPEX to revenues ratio is decreasing
Source: SG Global Research, company data – Capgemini analysis, EEMO13
| Energy, Utilities & Chemicals Global Sector
An overview of the European energy markets
Recent events are impacting the energy markets
• Middle-East political tensions
• Fukushima accident consequences
• Economic downturn
They are changing the electricity security of supply
Present and future energy mix is evolving
How to reach the sustainability objectives?
How to improve Utilities companies performance?
Conclusion
12
| Energy, Utilities & Chemicals Global Sector
The Fukushima accident has triggered a debate on the
present and future energy mix
Energy mix should evolve towards
more gas, renewables and coal (in
certain countries)
The main cause for gas progression
is power plants’ consumption
In the new IEA GAS* scenario, gas
share of primary energy consumption
reaches 25% in 2035 at a global
level (more than coal, slightly less than
oil) but leads to a +3.5°C global
temperature increase (compared to
the +2°C objective)
The IEA** has examined a Low
Nuclear Scenario (no new nuclear
plant is built in OECD countries, non-
OECD countries build only half of the
projected nuclear plants and the
operating lifespan of existing nuclear
plants is limited to 45 years) which
consequences would be to:
13
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
BE BG CH CZ DE ES FI FR UK HU IT LT NL PL RO SE SI SK
Solar + Biomass
Wind
Hydro
Other fossil
Gas
Lignite + Coal
Nuclear
2010 mix: lef t-hand side bar
2025 mix: right-hand side bar
2010 and 2025 electricity mix (as of June 2011)
The energy mix evolution could result in: • Higher costs (renewables development)
• Higher temperature increase (more fossil fuels) • Lower energy independency
Source: ENTSO-E – Capgemini analysis and estimations, EEMO13
• Put additional upward pressure on energy prices
• Raise additional concerns about energy security
• Make it harder and more expensive to combat climate change
*GAS: Golden Age of Gas, International Energy Agency **World Energy Outlook 2011, IEA
| Energy, Utilities & Chemicals Global Sector
39 4249.5 49.5 54.45 56.95 57.5
35
554.95
2.5 0.5
43
75
0
10
20
30
40
50
60
70
80€/MWh
Current electricity generation costs vary significantly from
one source to another
14
Source: Energies 2050
30-40 33-50
Hydro electricity
Current nuclear
Coal-fired plant
Gas-fired plant
On-shore wind
Off-shore wind
Biomass plant
Solar photovotaic
Around 70 with
1t of CO2 at €20
Around 100 with 1t of CO2
at €50
50-60 depending on
coal price
Around 80 with
1t of CO2 at €20
Around 90 with
1t of CO2 at €50
70 80
150-200
Very variable
100-150
240-400
Net electricity generation
in 2010
Compared costs of
generating electricity in
France in 2010 (€/MWh)
Electricity generation costs depend on:
• Discount rate, especially for high CAPEX technologies such
as nuclear, wind or solar energy
• Commodity and CO2 certificates prices (gas or coal prices
for fossil-fueled plants)
• Load factor
• Technology improvements and breakthroughs
• Externalities
Despite potential increase of safety CAPEX and OPEX and back-end costs
(decommissioning, final disposal) existing nuclear plants remain
competitive
Champsaur
ARENH French Court of Auditors
2010
Lifetime extension 2011-25
Decommissioning Radioactive waste management
Full cost
Energies 2050
Historical nuclear 2030
New nuclear 2030
Nuclear generation costs estimation* in France
* Estimation methodologies are different Source: Les coûts de la filière nucléaire, January 2012 and Energies 2050, February 2012 – Capgemini analysis
Recent studies have focused on nuclear energy
costs
| Energy, Utilities & Chemicals Global Sector
Extensive analysis have been carried out on the nuclear
generation costs and energy mix scenarios in France
15
The Energies 2050 commission examined four existing energy scenarios:
1. Lifespan extension of existing reactors: all existing nuclear reactors lifetime is extended to 60
years providing the nuclear safety authority (ASN) allows it
2. Quicker adoption of 3rd generation nuclear reactors: replacement of all existing nuclear reactors
by 3rd generation reactors (EPR) as soon as they reach their 40 years lifetime, which implies to build
at least 2 EPR reactors per year during 10 years (from 2020 to 2030)
3. Progressive reduction of nuclear energy in the mix: all existing nuclear reactors are
decommissioned when reaching their 40 years lifetime and 1 on 2 reactors is replaced by a 3rd
generation reactor (EPR), which leads to a 40-60% nuclear energy share by 2030
4. a. Nuclear phase out (more fossil fuel energy): all existing nuclear reactors are decommissioned
when reaching their 40 years lifetime and are replaced by fossil fueled plants
4. b. Nuclear phase out (more RES): all existing nuclear reactors are decommissioned when reaching
their 40 years lifetime and are replaced by renewable energy plants
50 60 70 80 90 100 110
Nuclear phase out (more RES)
Nuclear phase out (more fossil fuel energy)
Progressive reduction of nuclear energy in the mix
Quicker adoption of 3rd generation nuclear reactors
Lifespan extension of existing nuclear reactors
Source: Energies 2050, February 2012 – Capgemini analysis
Assumptions in the different scenarios by 2030
Energies 2050 commission recommends
extending nuclear reactors
lifespan
1
2
3
4a
4b
~25 MtCO2/y
~25 MtCO2/y
30-50 MtCO2/y
~120 MtCO2/y
~45 MtCO2/y
Stable
Not able to measure
- 100,000 to 150,000 jobs
- 200,000 jobs
Stable
Stable
Energy sources diversification but increase of fossil fuel imports
Increase of fossil fuel imports
Potential issues on grid security
Electricity generation costs (€/MWh w/o taxes) CO2 emissions Employment Energy security
Scenarios methodology
could be improved on:
• Energy consumption
• Renewable energies grid
impact
• Ability to finance large
investments
| Energy, Utilities & Chemicals Global Sector
Union Française de l’Electricité has modeled 3 energy mix
scenarios by 2030, similar to the Energies 2050 commission
scenarios
16
Installed capacity in the different scenario (GW)
Source: UFE
Three scenarios developed by UFE:
• Nuclear production at 70%: nuclear plants lifetime extension and
commissioning of 2 EPR, 2020 renewables objectives met
• Nuclear production at 50%: nuclear energy share is reduced to 50%, the
development of renewables is higher than in the first scenario, the
additional energy need is provided by thermal plants production
• Nuclear production at 20%: all nuclear plants are shut down after 40
years of operation, renewable energies development is pushed at its
maximum level, the additional energy need is provided by thermal plants
production
There are some similarities with Energies 2050 scenarios:
• Nuclear production at 70% scenario (UFE) corresponds to the Lifespan
extension of existing reactors scenario (Energies 2050)
• Nuclear production at 50% scenario (UFE) corresponds to the
Progressive reduction of nuclear energy in the mix scenario (Energies
2050)
• Nuclear production at 20% (UFE) corresponds to the Nuclear phase out
(more RES) scenario (Energies 2050)
The “50% nuclear” and “20% nuclear” scenarios are the most unfavorable from an economic,
environmental and social perspective, consistent with the Energies 2050 conclusions
| Energy, Utilities & Chemicals Global Sector
In all scenarios, end-users electricity prices and investments
are bound to increase
17
Evolution of residential electricity prices
in the different scenario (€/MWh)
Source: UFE
Investments in the different scenario (billion €)
Source: UFE
The final price to end-customers is a combination of:
• Energy generation: 40%
• Transmission and distribution: 33%
• Taxes: 27%
Final price to consumers is higher in nuclear phase-
out scenarios
The CSPE should increase three-fold in the UFE “20% nuclear” scenario
Investments required over the period 2010-2030 are
evaluated on the basis of:
• The extension and development of generating capacities
• The transmission and distribution networks
• Interconnectors
• And investments in Demand Side Management (DSM)
| Energy, Utilities & Chemicals Global Sector
An overview of the European energy markets
Recent events are impacting the energy markets
• Middle-East political tensions
• Fukushima accident consequences
• Economic downturn
They are changing the electricity security of supply
Present and future energy mix is evolving
How to reach the sustainability objectives?
How to improve Utilities companies performance?
Conclusion
18
| Energy, Utilities & Chemicals Global Sector
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
Gro
wth
(%
)
Electricity production (TWh)
Solar PV
Growth (abs.)Capacity Growth (%)
DE
IT
CZ
SK
FR
SI
DE
CZ
FR
2005
2010
2009
2008
2007
2006
Top 3 countries ranked by:
Capacity installed* Growth** (absolute)
2. ES
1. DE
3. IT
2. FR
1. SK
3. SI
* Volume for wind, small hydro, geothermal and solar PV in MW and for biogas and biomass in TWh
** Relative growth additionally displayed for solar PV and wind
Wind
Growth (abs.)Capacity Growth (%)
DE
ES
IT
ES
DE
FR
RO
BG
PL
Biomass
DE
FI
SE
PL
SE
NL
+
2005 2006
2007 2008 2009
2010
2009
Renewable energies have continued their development
19
A stable governmental policy is key for renewables development. The eurozone sovereign debt issues should lead to a subsidies decrease and threaten 2020 objective
achievement
Source: Eur’Observer barometers – Capgemini analysis, EEMO13
Growth rate of renewable energy sources As of May 2011, 10% of the European
generation plants under construction
are from renewable energy sources
(vs. 7% in 2009)
In 2010, wind power provided the
largest output (147 TWh) but had a
declining growth due to onshore
favorable sites saturation and local
negative reactions
Many governments have or are launching
large offshore wind programs
• September 2010: 300 MW offshore wind
farm inaugurated in the UK
• In July 2011, France launched a tender
for 3,000 MW
• North Sea: 400 MW (Germany) and 325
MW (Belgium) under construction
• Nuclear phase out in Germany should
boost wind power but creates issues
on the grid
Despite the solar PV growth in 2010
(+80%), several solar companies went
bust because of China competition
In 2011, renewable energy investment
rose 5% to US$260 billion* globally
(solar energy: +36%)
*Bloomberg New Energy Finance
| Energy, Utilities & Chemicals Global Sector
80
85
90
95
100
105
110
1990 1995 2000 2005 2010 2015 2020
EU
-27
GH
G e
mis
sio
ns [b
ase
ye
ar=
10
0] Historical evolution of GHG emissions
Path to reach 2020 target2020 target for EU-27
-20%
1,450
1,500
1,550
1,600
1,650
1,700
1,750
1,800
1,850
1990 1995 2000 2005 2010 2015 2020
EU
-27
Pri
ma
ry e
ne
rgy c
on
su
mp
tio
n [M
toe
]
Historical evolution of primary energy consumptionPath to reach 2020 target2020 target for EU-27
Projection with current measures in place(as per the March 2011 EU Energy Ef f iciency Plan)
-20%
-9%
Status on the 2020 EU objectives
After the 2009 drop (-7.1%), GHG emissions increased
by 2.2% due to the 2010 economic recovery. For 2011,
88% ETS sector CO2 emissions released data show a
2.4%* decrease, mainly due to the combustion/power
sector (-3.1%)
An economic slowdown would push CO2 emissions
down
In its March 2011 Energy Efficiency plan, the EU
estimated that with current measures only half of the
objective would be attained and developed a new draft
Directive focusing on:
• Triggering better energy efficiency of public buildings
• Demand response programs through smart meters roll out
• White Certificates mechanisms extension
• Better usage of cogeneration
• In 2013, the EU will re-assess the situation
20
Sourc
e: B
P s
tatistical r
eport
2011,
Euro
pean E
nvironm
ent
Agency,
Eur’O
bserv
er
– C
apgem
ini analy
sis
, E
EM
O13
Utilities need to develop end-to-end energy services helping curbing energy
demand
EU-27 GHG emissions
EU-27 primary energy consumption
*Deutsche Bank analysis, April 2012
| Energy, Utilities & Chemicals Global Sector
Pilot programs results on peak shaving
21
% peak shaving observed in various pilots worldwide
Peak shaving: the use of displays helps but the customers’ behavior is key
Several means exist for
peak shaving and energy
savings, that can be
combined or not:
• Dynamic tariffs (that
should be further
developed with the mass
roll-out of smart meters)
• Automation such as smart
thermostat, smart
appliances, in-home
displays or web-based
consumer portal
• Demand management
programs such as
customers alerts, social
networks communication or
feedbacks through bills,
web, SMS, smart phones
% peak shaving Range of peak shaving
Source: Capgemini Consulting
| Energy, Utilities & Chemicals Global Sector
Pilot programs results on energy savings
22
% energy savings observed in various pilots worldwide
Prices increase and Time-of-Use tariffs
should trigger sustained results
Large-scale pilots run
for more than one year
reach energy savings
in the 2-6% range
while more focused
programs based on
customer
segmentation can
reach 18%* energy
savings
% energy saving Range of energy saving
*Literature review for the Energy Demand Research Project, Sarah Darby, Oxford University, 2010
Source: Capgemini Consulting
| Energy, Utilities & Chemicals Global Sector
Demand response potential for EU-27 by 2020
23
Demand Response study
2012 results snapshot
In a dynamic scenario, the demand response potential can be translated into the equivalent capacity of 108 gas plants saved and the consumption of 13 major cities avoided
In our Demand Response (DR) study*, the
potential of peak shaving and energy savings is
modeled on the basis of a baseline scenario:
• GDP growth 2010-20: 1.8% in average
• CAGR electricity consumption 2010-20: 0.7%
• Some existing energy efficiency programs such
as Grenelle de l’Environnement or White
Certificates
Assumptions are made on:
• Regulation (norms and standards, energy
efficiency objectives, tariffs and incentive policies)
• Market design (possibility to monetize DR on
wholesale markets, contracts optimization, capacity
markets)
• Smart meters penetration and functionalities (for
the households segment)
And typical DR offerings are modeled with
hypothesis on their adoption by customers
*Demand Response study 2012 - Capgemini Consulting, VaasaETT and Enerdata
1 Normative hypothesis: 1 kWh saves 700g CO2 (average European value considering avoided peak capacity is mainly gas-fired plants) 2 Expressed in equivalent of avoided consumption of large size cities (2 mio inhabitants and 150,000 commercials, average consumption of 8.2 TWh/year) 3 Expressed in equivalent of avoided construction of power plants (500 MW)
5.2
24
0.9 4.3
22
0.8
3.7
15
0.62.5
14
0.42.8
12
0.5
1.4
7
0.2
1.1
6
0.21.0
5
0.20.7
4
0.1
0.6
4
0.1
13%
2%
15%
1%
13%
2%
13%
1%
13%
2%
13%
1%
13%
1%
13%
2%
14%
1%
15%
1%
Dynamic scenario:
Savings in CO2 emissions (in Mt of CO21)
Savings in electricity consumption (in equivalent number of major cities2 and in % energy savings)
Savings in peak generating capacities (in number of power plants3 and in % peak shaving)
Moderate scenario:Probable savings based on our observation of current trends in regulatory, technical and market conditions (in number of power plants)
3.1
1.0
4
3%
2%
Source: Capgemini Consulting
| Energy, Utilities & Chemicals Global Sector
An overview of the European energy markets
Recent events are impacting the energy markets
• Middle-East political tensions
• Fukushima accident consequences
• Economic downturn
They are changing the electricity security of supply
Present and future energy mix is evolving
How to reach the sustainability objectives?
How to improve Utilities companies performance?
Conclusion
24
| Energy, Utilities & Chemicals Global Sector
0
10
20
30
40
50
60
70
Co
st to
Ser
ve p
er c
on
trac
t, P
PP
an
d la
bo
r co
sts
corr
ecte
d(€
per
co
ntr
act)
To increase profitability, Utilities companies have to improve
their retail business competitiveness
25
European energy retailers are often facing
negative margins on the B2C segment (1/3
of the participants*)
Retailers operating in a competitive
environment for a few years have a higher
Cost to Serve (CtS) due to:
• The necessary adaptation of their loyalty,
marketing and sales strategies, impacting their
processes and channels management
• Higher bad debts (three times higher compared
to other participants) due to insolvent customers
taking advantage of the market opening to switch
supplier and avoid disconnection
Quality of service impacts costs, customer
satisfaction and channels used by customers
Channels are operated at different costs.
The cheapest channels are web and call
centers. And a proper multi-channel
strategy should be implemented
* Multi-client retail benchmarking study 2011, 38 participants in 17 countries
Cost to Serve (CtS) per contract (2010)
Source: Capgemini Multi-client retail B2C benchmark 2011
A complete performance improvement is possible when taking a broad view embracing: • Customer satisfaction improvement leading to a higher customer lifetime value
• End-to-end process efficiency: marketing, acquisition digital meter-to-cash and energy services
Average: €27/contract
Non-competitive market Competitive market since < 10 years Competitive market since > 10 years Large size companies (>800,000 clients)
| Energy, Utilities & Chemicals Global Sector
The performance of distribution network operators (DNO) can
also be improved
26
Structural factors such as consumers’
density, network structure and level of
consumption have an impact on full costs
level of DNOs
Taking these structural factors into
consideration, our benchmark* shows a 40%
performance gap between the most efficient
and the least efficient DNO on full costs
On average, full costs can be decreased by
nearly 7% to reach top performers’ full costs
level through improvement of controllable
costs**. Two third of this decrease arises
from Network Operations and one third from
Customers’ Services
However, most DNOs having a lower cost
of network operations than average have a
poorer quality of supply
* 2011 European power distribution network operators benchmark, 39 participating DNOs from 14 countries ** Controllable costs: network operations and customers services, non-controllable costs: transmission fees, taxes, losses, financial costs, depreciation *** RIIO: Revenue=Incentives+Innovation+Outputs
Performance of each DNO on the same reference network
(basis 100)
With the smart grids and smart metering deployment, investments will increase significantly and lead to lower operational costs. As a consequence, regulation has to evolve to better
incentivize investments such as for example the new RIIO*** in the UK
Source: Capgemini 2011 European power distribution network operators benchmark
| Energy, Utilities & Chemicals Global Sector
An overview of the European energy markets
Recent events are impacting the energy markets
• Middle-East political tensions
• Fukushima accident consequences
• Economic downturn
They are changing the electricity security of supply
Present and future energy mix is evolving
How to reach the sustainability objectives?
How to improve Utilities companies performance?
Conclusion
27
| Energy, Utilities & Chemicals Global Sector
Utilities need to change their business model
European Utilities companies are
under pressure:
• More energy-related investments are
needed
• While electricity and gas prices are
low and demand growth is limited
• Regulation changes are needed
How to be a winner?
• Increase competitiveness
• Develop synergies
• Manage the assets portfolio
• Become more innovative
28
GDF SUEZ plans to spend more than 30% of growth CAPEX in
fast growing countries over 2012-2017
(1) H1 2011: as of June30 ; 2017: estimated as of year end Source: GDF SUEZ investors presentation, December 2011
| Energy, Utilities & Chemicals Global Sector
With around 120,000 people in 40 countries, Capgemini is one of the world's foremost providers of
consulting, technology and outsourcing services. The Group reported 2011 global revenues of EUR 9.7
billion. Together with its clients, Capgemini creates and delivers business and technology solutions that fit
their needs and drive the results they want.
A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative
Business ExperienceTM, and draws on Rightshore ®, its worldwide delivery model.
With EUR 670 million revenue in 2011 and 8,400 dedicated consultants engaged in Utilities projects
across Europe, North & South America and Asia Pacific, Capgemini's Global Utilities Sector serves the
business consulting and information technology needs of many of the world’s largest players of this
industry.
More information is available at www.capgemini.com/energy.
Rightshore® is a trademark belonging to Capgemini
Rightshore® is a trademark belonging to Capgemini
About Capgemini
29
| Energy, Utilities & Chemicals Global Sector
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