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Capturing the value of renewable energyHow technology innovation helps you drive margin
Arij van Berkel, Ph.D.
Research Director - Energy, Lux Research
The market opportunity in renewable energyThe roadmap of the energy transition in dollars
2
What I showed last year
3
Key technology is ready to deploy
4
Technologies that will change the global energy system
will be deployed on a large scale the coming years.
They can decrease our energy need and our need for
combustion by at least 50%.
5
You asked: “When?”
I answered: “Regulation sets the pace”
How COP-21 works
• Countries need to submit plans
• NDC: Nationally Defined Contribution
• Most plans are in now, at least
until 2030
• Acceleration will need to happen
post 2030
Take a look yourself, these people keep
track: http://themasites.pbl.nl/climate-ndc-
policies-tool/
As NDC’s of COP-21 materialize, the roadmap takes shape
6
All countries are on the same track
7
Per capita GDP ($)
CO
2(e
q)
pe
r G
DP
(kg
/$)
Source: Lux Research 2018, based on UN and PBL data
All countries are on the same track
8
Per capita GDP ($)
CO
2(e
q)
pe
r G
DP
(kg
/$)
Source: Lux Research 2018, based on UN and PBL data
9
Different phases present different options
Per capita GDP ($)
CO
2(e
q)
pe
r G
DP
(kg
/$)
Showing required investment to reduce 1 ton of CO2 emissions per year
One car produces an avg of 5 tons of CO2 emissions per year
Source: Lux Research 2018, based on UN and PBL data
10
Different phases present different options
Per capita GDP ($)
CO
2(e
q)
pe
r G
DP
(kg
/$)
High CO2 intensity Growth scenario: $250
Use low hanging fruit like energy efficiency Steady scenario: $250
Source: Lux Research 2018, based on UN and PBL data
11
Different phases present different options
Per capita GDP ($)
CO
2(e
q)
pe
r G
DP
(kg
/$)
High CO2 intensity Growth scenario: $250
Use low hanging fruit like energy efficiency Steady scenario: $250
Medium CO2 intensity Growth scenario: $600
Mix of energy efficiency and renewable energy Steady scenario: $1100
Source: Lux Research 2018, based on UN and PBL data
12
Different phases present different options
Per capita GDP ($)
CO
2(e
q)
pe
r G
DP
(kg
/$)
High CO2 intensity Growth scenario: $250
Use low hanging fruit like energy efficiency Steady scenario: $250
Medium CO2 intensity Growth scenario: $600
Mix of energy efficiency and renewable energy Steady scenario: $1100
Low CO2 intensity Growth scenario: $2400
Add electrification to the mix Steady scenario: $3400
Source: Lux Research 2018, based on UN and PBL data
The roadmap defines a multi-trillion dollar market
13
0
1000
2000
3000
4000
5000
6000
7000
Energyefficiency
Renewableenergy
Electrification Total
Bill
ion
US
D p
er
ye
ar
Global average required investment per year
2010 -- 2020 2020 -- 2030
$6.1T
$4.2T
$2.4T
$0.9T
$3.1T
$2.5T
$0.7T$0.8T
The roadmap defines a multi-trillion dollar market
14
0
1000
2000
3000
4000
5000
6000
7000
Energyefficiency
Renewableenergy
Electrification Total
Bill
ion
US
D p
er
ye
ar
Global average required investment per year
2010 -- 2020 2020 -- 2030
About 3% of global GDP
Varies by country; between
0.5% and 13% of GDP$6.1T
$4.2T
$2.4T
$0.9T
$3.1T
$2.5T
$0.7T$0.8T
The roadmap defines a multi-trillion dollar market
15
0
1000
2000
3000
4000
5000
6000
7000
Energyefficiency
Renewableenergy
Electrification Total
Bill
ion
US
D p
er
ye
ar
Global average required investment per year
2010 -- 2020 2020 -- 2030
About 3% of global GDP
Varies by country; between
0.5% and 13% of GDP
Based on the most
aggressive promised
reduction
$6.1T
$4.2T
$2.4T
$0.9T
$3.1T
$2.5T
$0.7T$0.8T
The roadmap defines a multi-trillion dollar market
16
0
1000
2000
3000
4000
5000
6000
7000
Energyefficiency
Renewableenergy
Electrification Total
Bill
ion
US
D p
er
ye
ar
Global average required investment per year
2010 -- 2020 2020 -- 2030
About 3% of global GDP
Varies by country; between
0.5% and 13% of GDP
Based on the most
aggressive promised
reduction
Still a conservative estimate;
the most aggressive plans
are not enough yet
$6.1T
$4.2T
$2.4T
$0.9T
$3.1T
$2.5T
$0.7T$0.8T
With a steep ramp-up in time required
17
0
2000
4000
6000
8000
10000
12000
14000
16000
2010 2015 2020 2025 2030
Total Energy efficiency Renewable energy Electrification
0
1000
2000
3000
2014 2016 2018 2020
Market growth over time
An
nu
al in
ve
stm
en
t (b
illio
n U
SD
)
Year
The value capture issueThere is a market, but do you also make money?
18
The renewable
energy industry
needs to
switch mode
The race to grid parity
began in the 1970s
Many renewable options
are now below grid parity
So there is value, margin20
The renewable
energy industry
needs to
switch mode
Source: IRENA Renewable Cost Database and Auctions Database
The race to grid parity
began in the 1970s
Many renewable options
are now below grid parity
So there is value, margin
The industry needs to capture that margin
But, auctions suggest the race to the
bottom continues
What business model will capture this
value?21
Source: IRENA Renewable Cost Database and Auctions Database
The renewable
energy industry
needs to
switch mode
2014: EU investments in renewable energy
totaled about €60B with 50% subsidies
2017 / 2018: First wind and solar projects
granted with no subsidy
Governments are now cashing value from innovation
22
2014: EU investments in renewable energy
totaled about €60B with 50% subsidies
2017 / 2018: First wind and solar projects
granted with no subsidy
Governments are now cashing value from innovation
23
Huge value generation through innovation.
Value capture by governments only.
Strategies to capture value
24
Mass
Production
Always produce power
at the lowest price
Build an asset base with good
technology and spatial distribution
Wholesale
Retail
Service
Strategies to capture value
25
Mass
Production
Always produce power
at the lowest price
Build an asset base with good
technology and spatial distribution
WholesaleBe the electricity oil
terminal company
Arbitrage as the primary business
logic. Buy low, store, sell high
Retail
Service
Strategies to capture value
26
Mass
Production
Always produce power
at the lowest price
Build an asset base with good
technology and spatial distribution
WholesaleBe the electricity oil
terminal company
Arbitrage as the primary business
logic. Buy low, store, sell high
RetailBe the key player in
running the market
Assemble and manage as many
users as possible
Service
Strategies to capture value
27
Mass
Production
Always produce power
at the lowest price
Build an asset base with good
technology and spatial distribution
WholesaleBe the electricity oil
terminal company
Arbitrage as the primary business
logic. Buy low, store, sell high
RetailBe the key player in
running the market
Assemble and manage as many
users as possible
ServiceHelp energy users
become prosumers
Build software to manage assets
and contracts
A map for capturing value for each strategy
28
Sensor Equipment Software
Mass
Production
Wholesale
Retail
Service
How others are leveraging technologyExamples
29
Storage
(> $1.5 billion)
Management and
integration
(~ $ 1 billion)
Generation
(> $1 billion)
Total turning itself into a power company
30
Company:
HQ: France
Revenues: $166 billion
Profits: $6.9 billion
Preparing for:
Mass
Production
Wholesale
Recent acquisitions and investments
Optimization
Asset manage-
ment
StorageEnergy demand
Enel: turning a classic utility into a service company
31
Company:
HQ: Italy
Revenues: $87 billion
Profits: $4.5 billion
Preparing for:
Retail
Service
OPTIMIZATION
E.On shedding its generation roots to focus on retail
32
2010 20182014 20172015 2016
Germany embarks on
the “Energiewende”
Record loss for
E.On due to losses
on baseload assets
Preparing to split
in two companies
E.On sells Uniper
shares to Fortum,
gets $ 4.7 billion USD
E.On invests in Elcore
to supply Fuel cell
based CHP
E.On reinforces its
consumer base by
acquiring Innogy
Company:
HQ: Germany
Revenues: $46.6 billion
Profits: ($20) billion
Preparing for:
Retail
Service
GE: developing wholesaler hardware
33
Combination of:
50 MW CC gas turbine
10 MW, 4.3 MWh battery
Provides a sweet spot
between gas peakers (cheap)
and storage (long-term need)
Company:
HQ: USA
Revenues: $122 billion
Profits: $5.8 billion
Preparing for:
Mass
Production
Wholesale
It’s about integration…with a purpose
34
It’s about integration…with a purpose
35
There is a large market opportunity, but making a
margin is not trivial.
It’s about integration…with a purpose
36
There is a large market opportunity, but making a
margin is not trivial.
Value capture is all about smart integration.
It’s about integration…with a purpose
37
There is a large market opportunity, but making a
margin is not trivial.
Value capture is all about smart integration.
Pick your preferred role; buy and build hardware and
software to carve out a unique position.
www.luxresearchinc.com
@LuxResearch
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Thank you for joining us.
Arij van Berkel
+ 31 6 512 97 513
