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1World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.111World Energy Markets Observatory – 19th Edition
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2World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 2
With strong expertise in
industry sectors …
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services and products
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Capgemini Consulting is the Global Digital
Innovation & Transformation consulting
brand of the Capgemini Group
One of the worldwide largest provider of consulting, technology and
outsourcing services
Consulting
Technology
Managed Services
An independent, global unit of the group which provides best-in-class strategy and transformation consulting for our clients and creates preconditions in order to be able to respond to changing market dynamics more quickly and intuitively
We conceive and implement transformation strategies with measurable results for our clients
Digital Transformation accounts for 50% of our revenues
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Table of Content
Shale oil & gas has changed the worldwide
energy paradigm
Renewables technologies progress bring
significant cost decreases
The 2050 climate changes objectives are
ambitious
European Energy transitions
continue to be bumpy
Digital Transformation is a key enabler
Customers have changed
Utilities situation is slightly improving
Financials
Transformation
Key takeaways
WorldEnergy Market Observatory 2017
5World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 5World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Shale oil & gas has changed the worldwide energy paradigm
World Energy Market Observatory 2017
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Thanks to shale technologies:
in 2011, the USA became the leading gas producer
In 2013 it became the leading oil producer, in 2013
During the global price war in 2014, the shale industry was threaten
Those who survived implemented deep cost cuts:
Since 2013, the average breakeven oil price has decreased from $80/bl to $35/bl
There are structural and cyclical reasons behind this drop
However between half andtwo-thirds of the cost savings arepermanent if oil prices increase
This form of production is farless capital intensive thanconventional methods, it ismuch more flexible
The USA-led “shale revolution” has dramatically changed the world energy outlook and is establishing a new order
Brent oil prices (24/10/2016-24/10/2017) in € and $
Supply cuts and higher prices wanted by Saudi, make it easier for the shale industry to deliver higher profits
Source: Nasdaq, 2017; Capgemini Analysis, 2017
© 2017 Capgemini. All rights reserved.
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Many USA liquefaction projects got permission to export LNG
The first one, Sabine Pass, loaded its first cargo in February 2016
Since April 2017, US total authorized exports are up to 19.3 bcf/d and it should increase
Eastern European countries are keen to pay slightly more for LNG in order to diversify their supply (Poland, Lithuania)
Advanced technologies have enabled the construction of FSRUs whose costs and construction time are half those of traditional terminals.Today, a number of integratedLNG-to-power projects willuse this technology
Global demand for an LNG increase is being outpacedby faster productionincrease, thusexacerbating the glut
The USA natural gas glut, provoked by abundant shale gas, is now expanding to global markets
Gas spot prices (2016 and H1 2017)
The rise of LNG will make natural gas trading much more like oil. Today, the main trade being through regional pipelines, there is no global gas price
© 2017 Capgemini. All rights reserved.
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Renewables technologies
progress bring significant
cost decreases
World Energy Market Observatory 2017
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Solar PV has demonstrated significant growth and cost improvements
Solar
~ 300 GW installed capacity
75 GW added in 2016 (2)
From 2009 to 2016,PV solar LCOE*
decrease by
85%
In 2016, utility-scale cost LCOE*reached $46-61/MWh in USA
(Germany; France = $60/MWh)
Electricity costexpected to decrease
by 59% in 2025
Worldwide 2016
*LCOE: Levelized Cost Of ElectricitySource: Irena (2017); Lazard (2017); IEA (2017)
10World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Wind
Wind: ~ 470 GW installed capacity ~ 455 GW Onshore; ~ 15 GW Offshore
Installed onshorewind capacity increased by25% per year
over thelast decade
Onshore wind LCOE*~$40/MWh in 2015
expected to decrease by
26% by 2025
Offshore wind LCOE*~$170/MWh in 2015
expected to decrease by
35% by 2025
Worldwide 2016
Source: Irena (2017); GWEC (2016); Lazard (2017)
Wind: Onshore wind is the cheapest renewable technology after Hydro Power
*LCOE: Levelized Cost Of Electricity
11World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 11World Energy Markets Observatory | November 2017 | 19th Edition
Storage costs are also decreasing enablingrenewables development
Storage
Worldwide 2016
The most promising batteries technologies are: Lithium-ion batteries, Zinc batteries, …
Battery costs: decreased by80% from 2010 to 2016 and should be below $190/kWh by 2020
Tesla claims that between 2025 and 2030, battery pack costs should fall below $100/kWh
• Storage market to grow by 60% annually
• By 2020, ~30 GW of new storage capacity to be expected
12World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 12World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
EV*: Despite battery costs, EV market share is growing thanks to local environmental considerations
Electrical Vehicle
Worldwide 2016
EV progression is greater (23% inQ1 2017) than the global automotive industry (around3% per year)
At the end of 2016, around 2 million EVs were on the world’s roads, although this still represents avery low (1.4%)market share
By 2030, compact and mid-size EVs should reach true price parity (without subsidies) with gas-fuel vehicles
EV interaction with the grid: Charging impact And Vehicule-to-Grid (frequency regulation, …) solutions
Source: IEA-EV Outlook (2017)
750,000 EVs were sold worldwide in 2016 (Hybrids accounted for 70% of EVs)
*EV=Electrical Vehicule
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Smart Homes are attracting most of the players. Is this a valuable market?
Smart Homes
Basic offers at this stage: Monitoring Control devices Automation
Pitfalls: High prices Technological
fragmentation Consumers’
lack of a perceived benefit
Smart home marketrevenueUS:$15bn in 2017Europe: $5bn in 2017
Smart Home Management is more than Energy(Healthcare security, Entertainement, Home Automation, …)
Source: Statista, 2017
With further IoT integration, Smart Home startups are creating a range of consumer-facing products and services
New Voicecontrolto boostSmart Home?
14World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 14World Energy Markets Observatory | November 2017 | 19th Edition
The downward trend in renewables costs is linked to technological progress:
Size of the turbines
Improvement of the efficiency of PV panels
Installation costs (notably for offshore wind)
Better sites knowledge
Their cost depends on
The locations
Installation conditions
Start date of projects
A major trend is the renewables cost decrease in Europe
Levelized cost of electricity (LCOE) comparison of selected power generation sources in Europe starting production in 2016-2017
When storage cost is added renewables are not yet competitive in Europe butin favorable regions, renewables are competitive
USA
Solar (utility scale): $49-$61/MWh (~42€-52.5 €/MWh)
Onshore Wind: $32-$62/MWh (~27.5 €/MWh-
53€/MWh)
© 2017 Capgemini. All rights reserved.
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Benefits
Carbon free
National energy sources
Decentralized: big advantage in some countries
Cost of technology improvement triggered
Renewable energies have some inherent characteristics that impact grid management
Grids operators have to accelerate smarter grids implementationRegulators have to allow related investments
Concerns
Distributed
Intermittent and impacting grid load balancing and design
Need storage
Bidirectional functioning
The impact on the networkdepends on:
Location: population densityand networks sizing
Power systems reserves
Renewable percentage
Additional grid costsbetween 15%-40%
Source:. http://ses.jrc.ec.europa.eu/project-maps, 2017
Smart Grids Projects
© 2017 Capgemini. All rights reserved.
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The 2050 climate changes objectives are ambitious
World Energy Market Observatory 2017
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Three key trends observed in 2017
Next international steps
1. On 12th December 2017, One planet Summit in Paris to accelerate Climate Financing
2. Spring 2018, a new Special Report by the IPPC will be published on the impact of global warming of 1.5°C.
3. November 2018, the UNFCCC “facilitative dialogue” to take stock of collective climate efforts towards the 1.5- 2°C target. A global stock take will be produced every five years, starting in 2023.
Since the Paris Agreement in 2017, climate change issuehas continued to be on top of international agendas
Countries remain engaged on the the Paris Agreement implementation.The USA’s exit from the Paris Agreement should not have a strong impact on energy transition dynamics in the USA.
Private sector involvement in the transition towards a low-carbon economy is growing. Companies coalitions are calling on governments to increase their objectives and implement carbon pricing policies
Carbon pricing is an essential part ofaction on climate change. An international report* proposes an indicative price corridor of $40-80/tCO2 in 2020 increasing to $50-100/tCO2 in 2030.
However, carbon pricing alone is not enough
1 2 3
* « High-Level Commission on Carbon Prices»
18World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 18World Energy Markets Observatory | November 2017 | 19th Edition
In 2017, carbon
pricing policies have
been implemented by
40 governments
and more than 20
subnational
jurisdictions
covering more
than 13% of
global GHG
emissions
Putting a price on carbon is a region or country’s responsibility
World map of explicit carbon prices
19World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 19World Energy Markets Observatory | November 2017 | 19th Edition
The EU ETS towards its phase 4: the post-2020 reform is progressing
EU GHG decrease on track to achieve 2020 target
Phase 4: In Feb. 2017, the EU Parliament and the Council adopted their respective positions and trilogue started in April 2017.
What are the key elements of thepost-2020 EU ETS reform?
An accelerated decline of the annual CO2 cap,
A doubling of the Market Stability Reserve rate
A cancellation of some of EUAs held in the Reserve,
Changes in free allocations to industries
EUA prices in the EU ETS (2008 to 2017
13 October: ITRE vote on
ETS revision opinion
8 December: ENVI vote on
ETS revision opinion
February: plenary vote on
the ETS revision
April: start of
trilogue
negotiations
20172016
20 July: Publication of a
proposal to revise the
EU ETS
2015
June trilogue
negotiations
September
13th trilogue
negotiations
October
12th trilogue
negotiations
November
8th trilogue
negotiations
20World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 20World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
European Energy transitions continue to be bumpy
World Energy Market Observatory 2017
21World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.World Energy Markets Observatory | November 2017 | 19th Edition
2020
-20% Greenhouse Gases emissions (GHG)+ 20 % Renewable Energy Source (RES)+20% Energy Efficiency improvements (EE)
EU: 2020 GHG decrease objectives should be met and probably surpassed
EU-28 GHG emissions evolution and targets to 2020 and 2030
It is time to design a credible 2030 energy and climate package in line with EU long-term objectives and the Paris Agreement.
In 2015, 22.1% GHG emissions reduction compared to 1990
On track to achieve the 20% RE target for 2020 (16.7% in 2015)
Additional effort is required to meet the +20% inEE by 2020
2030
-40% GHG/ +27% RES / +27% EE
New proposals in 2015 and2016 for a 2030 climate and energy package and first negotiations in 2017
In November 2016, the “Clean Energy for all Europeans” package provides newlegislative proposals on RES,EE, the Energy Union Governance, and thepower market.
22World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Current (2016) and
future capacity mix
(2020, 2025)
EU:2020 renewables objectives should be reached
Source: Entso-E Database, Wemo-Capgemini Consulting, 2017
23World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
EU: 2020 Energy Efficiency objectives remain challenging
Primary energy
consumption and
targets to
2020 and 2030
24World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 24World Energy Markets Observatory | November 2017 | 19th Edition
New EU regulation should slowdown renewables investment
Thanks to cost decrease, installed capacity could continue to grow
In 2016, investments in renewables stabilized in Europe at $60 billion after dropping in 2015
Main reasons:
Subsidies decrease
Lower capital cost per installed
capacity
Main investments in
Wind energy ($42 billion)
Solar energy ($10 billion)
EU reforms will lower renewables subsidies and relate them to market prices
Share of renewables in the member States’gross final energy consumption
While Sweden has reached its objectives, others (France, UK, NL) have to accelerate their efforts
© 2017 Capgemini. All rights reserved.
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Europe:
Is well supplied in gas
In 2016 consumption increase was due
to lower nuclear plants availability
Europe:
Imports 30% of its gas needs from
Russia,
Is willing to diversify its sources of
supply.
This explains why:
Poland and Lithuania US LNG imports
despite $1-2 price premium
However, in Asia, Middle-East and Africa gas demand will grow significantly
Contrary to other regions, gas demand will remain flat in Europe
Natural gas demand prospects by region
Despite large Utilities commitment, the lack of gas new needs and the EU opposition are endangering Nord Stream 2 completion
© 2017 Capgemini. All rights reserved.
Source: Cedigaz
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Dispatchable fossil fuel capacity continued to be retired from the market
Replaced by volatile renewables
Capacity markets ensuring that sufficient reliable capacity is available. They have been functioning with different models
In 2016 fossil fuel plants continued to be decommissioned, though at a slower path
Installed and decommissioned generation capacity per type of source (2016 vs 2015)
Security of supply remains a worry. Nuclear electricity is complementary to renewables
Source: Cedigaz
French capacity market first auctions awarded at €10/kW
The Winter Package recommends that national capacity markets open to other member states and to all technologies (except the polluting ones)
Source: EWEA, Capgemini Analysis, 2017
© 2017 Capgemini. All rights reserved.
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Despite increased coal prices and generation capacity retired, electricity prices remained low in the three first 2016 quarters
During the 2016-2017 winter, lower nuclear plants availability:
Pushed spot prices up and
Endangered security of supply was
threatened
After that episode, prices fell again
The 2017-2018 winter could have similar characteristics than the previous one
Coal prices increases and lower French nuclear plants availability have pushed prices up
Electricity spot prices on the main European markets(2016 and H1 2017)
Forward price for Q1 2018 is at 42€/MWh
© 2017 Capgemini. All rights reserved.
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Winter package measures willprobably not restore a sustained market
Deliver a fair deal for energy consumers Enable them to participate more in electricity markets (self-producers, load shedding offers).
Suppliers to propose more "dynamic“ offerings.Improved customer information.
Strengthen market governanceInterconnections development, better standard harmonization. Stronger role for ACER.
End of national market rules (e.g. price caps). But insufficient to improve security of supply.
Improve renewables integrationStop subsidies for renewables
Encourage calls for tender and recommend "technological neutrality" (e.g lower-cost technologies)
Increase energy efficiencyIncreased target from 27% to 30% by 2030.
Member States to finance a €10 billion fund for existing buildings renovation.Develop Electrical Vehicles
Our proposals Reforming electricity pricing in wholesale markets.
Establishing a high enough and predictable carbon market price.Criterion for MSR intervention defined according to price thresholds.
Reforming network access tariffs because of self-production increase.
To be adopted in 2017 for entry into force between2020 and 2021.
29World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 29World Energy Markets Observatory | November 2017 | 19th Edition
Consequences of Brexit on the British energy sector
Subject to the terms of the UK/EU agreementbeing negotiated
Main consequence: end of application of the EU law and end of EU institutions membership, but likely incorporation of the EU common law input into British law (cf. Repeal Bill)
Major focus of attention: The withdrawal of UK from the various regulatory mechanisms
included in the European energy policy framework (Euratom, ETS,
Remit, etc.);
The impact on UK energy infrastructures development (financing,
operation), especially interconnections.
30World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Global climate changes objectives are ambitious: in 2016 GHG emissions reached a ever high level
Regional outlook
CO2/Greenhouse Gas Emissions Clean Investment LCOE
Value (MtCO2) 2016 value ($ billion) 2016 value
North America
5,157(US; 2016)
500-700(Canada;
2015)
$59bn(US)
Solar (utility scale):$49-$61/MWh
Onshore Wind:$32-$62/MWh
Europe ~4,400(2015)
$58bn
PV Solar (utility scale): $60/MWh
Onshore Wind: $40/MWh
Australia ~ 530
(Jul’15-Jun’16) $5bn+ $2bn (2017)
Solar: $56-$100/MWh
Southeast Asia
~1,000(2016)
$4bn -
Source: U.S. Energy Information Administration (2017); Lazard (2017); Canada Climate Change Service (2017); Australian Clean Energy Council (2017)
• US: only ~14% lower than 2005 + uncertainty
• Canada: Emissions to increase (17%-23% above 1990 levels by 2020)
• ~10.7% below emissions in 2005
• High fossil fuel reliance
• High fossil fuel reliance
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Digital Transformation is a key enabler
World Energy Market Observatory 2017
32World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Hurdles to overcome
Skills and Jobs:
Skills shortage
Major social change threatening jobs and slowing down digital deployment
Digital Utility Transformation started in almost all Utilities.It’s time to accelerate !
Grab opportunities to improve drastically the performance, bolster market position and tap new revenue sources
Customer Experience
Customer understanding
Top line growth
Customer touch points
Started but not completed Achieve a really compelling
Customer Experience, engage customers
Leverage Digital for competitiveness (full digital relationships)
Leverage RPA* and AI**
Operational Process
Process digitization
Worker enablement
Performance management
Priority #1 Up to 27% savings for Digital Plant Thanks to technology progresses,
many Digital operations opport.
Business Model
Customer understanding
Top line growth
Customer touch points
Priority #1 Innovate is a must Choose your innovation domains Eco-systems leverage
*RPA: Robotic Process Automation** AI: Artificial Intelligence
33World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 33World Energy Markets Observatory | November 2017 | 19th Edition
Hurdles to overcome
Skills and Jobs:
Skills shortage
Major social change threatening jobs and slowing down digital deployment
How to accelerate digitalization…..
Large established Utilities have more difficulties to become Digital: technological heritage, way of working, culture
Policies:
The European GDPR* enforceable by May 2018
Its objectives are to give control to citizens over their personal data
Specific legal obligations andliabilities on companies
Additional internal complexity(and cost)
Utilities regulation:
Tariff construction doesnot incentive smartgrid investment
Shortage of
Data ScientistTariffs structure
Internal
Capabilities
RegulationComplex internal
procedures
Resistance to
change
€
* GDPR: General Data Protection Regulation
© 2017 Capgemini. All rights reserved.
34World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
In 2017, major attacks (WannaCry, Petya) shook some large private andgovernmental organizations
Attacks can have multiple motivations:
Money
Destruction of data
Industrial espionage
The area at risk will expand with:
Rise of smart grids
Internet of Things, 5G…
New innovation processes
European regulations willchange the landscape:
NIS (Network and Information
systems Security enforced in 2016)
GDPR (General Data Protection
Regulation) coming into force in 2018
Utilities must anticipate multiformattacks as with the Ukraine
electricity grid
They must:
Identify the most problematic scenarios
Take preventive measures accordingly
How to accelerate digitalization: Cybersecurityconcerns
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Customers have changed
World Energy Market Observatory 2017
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Average significant electricity decrease in the period:
Reflects wholesale markets evolutions(until end of Q3 2016)
Is also a consequence of increasing competition
Electricity and Gas Prices decreased slightly in 2016 / H1 2017
Average European gas & electricity prices in 2016
The Winter Package aims at abolishing the residential tariffs
In France:
Some new entrants set a -10% forgreen offers (residential electricity)
According to the constitutional court,gas tariff have to be abolished
The question remains open forelectricity tariffs
In case of nuclear lowavailability (securitycheckings, refurbishment),wholesale electricity priceswould increase again
Medium to Large Industries
ELEC
GAS
-8.3%
-16.4%
4.7
1.36
12.6
3.58
In c€/kWh excluding VAT*
In c€/kWh TTC**with PPP adjustment
Residential
9.38
3.11
30.84
11.42
ELEC
GAS
-2.3%
-10.5%
Source: Eurostat, 2017
37World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 37World Energy Markets Observatory | November 2017 | 19th Edition
Trends
Green offers massive deployment, some like ENGIE offer an Energy mix “à la carte”
Low-cost and full Digital innovative offerings
Development of Energy Services including Energy Efficiency
Peer-to-peer market places development continues
Competition continues to increase and churn rates are consistent with this trend
Aggregated European Electricity switching rates (2016)
Churn rates of BE (Flanders), NL,NO and UK/IE became the superhot markets (+3% churn rate)
France residential switchingrate went up to 6.1%
Upward switching ratesmainly profit toalternative players
Many markets remainconcentrated
Gas switching rates are higher on average than electricity switching ratesHigh switching rates countries are similar for electricity and gas
© 2017 Capgemini. All rights reserved.
38World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Our recent survey shows customer expectations evolutions in Western Europe
New suppliers mushrooming
Appetite for local energy becomes a topic in some countries
Price comparison platforms increasingly used by customers
New alternative players concentrate on an offer/a service
Appetite for green energy is growing everywhere
When additional costs are limited to less than 5%
Group purchasing or peer-to-peer platforms/communities becomes significant
39World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Thanks to shale gas US retail prices are the lowest, competition is getting aggressive all over
Regional outlook
Retail Price Industrial price Deregulation Switch rates
2016 value US$ cts/kWh 2016 valueUS$ cts/kWh 2016 value
North America
Elec: 12.55* cts/kWh Gas: 3.3 cts/kWh
* Average
Elec: 6.75*cts/kWh
Gas: 1.2 *cts/kWh
* Average
Drop in consumerincome/riskadverse
Europe
Elec: 11-35.5 cts/kWh
Gas: 3.5-13 cts/kWh
Elec: 5.5-14.5/kWh
Gas: 1.5-4 cts/kWh
Alternativesuppliersdevelopment
Australia Elec:17-25 cts/kWh
Gas: 13-16 cts/kWh -
• Strong price increase
• Security of supply at stake
Southeast Asia
Elec: 10.9 (Singapore)/15.1 (HK) cts/kWh (7.6 cts/kWh for Vietnam)
- Competition is limited
30% 70%
Source: U.S. Energy Information Administration (2017); Lazard (2017); Canada Environment Climate Change Services (2017)
Retail marketderegulated prices
100% deregulatedMarket fully
regulated/monopoliesRetail market
regulated prices
70% 30%
70% 30%
20% 80%
Legend:
• Wholesale marketvolatility/Gas cost increase
• Gas cost increase
40World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 40World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Utilities situation is slightly improving –Financials
World Energy Market Observatory 2017
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Revenues erosion continued in 2016 (~ -3%), mostly due to low wholesale prices and end customer prices decrease
H1 2017 was slightly better (wholesale electricity prices increase)
Centrica external growth boosted the revenue(Neas Energy)
Engie revenue fell from €92b in 2012 to €66.6b (portfolio reduction and prices decrease)
Revenue are stable or decreasing for most of the players of our sample(~-3% in average)
E-On & RWE splitted in two parts:1. E-On (Nuclear & Regulated) / Uniper (Conventional generation)2. RWE (Nuclear/ Conventional Generation) / Innogy (Regulated & Sales)
*Sample for Europe: Fortum; DONG Energy; RWE; Uniper Vattenfall; Centrica; EnBW; EDF; SSE; CEZ; Engie; Enel GNF; Iberdrola; E.ON; EDP
(UNIPER makes the figure not consistent)
2015 & 2016 revenues in € billion and CAGR 2016
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Downward trend of the five last years continued but slowed down
ENEL, IBERDOLA and DONG show a positive trend this year
Figures improved in average in H1 2017, particularly with good news for EON and RWE and higher wholesale prices
Engie divestment plan:gas upstream and LNG assets for sale
Fortum entered in negotiations to buy Uniper → is
conventional generation gaining more interest ?
EBITDAs decrease is slowing down
In H1 2017, thanks to higher electricity and carbon prices, many Utilities results have improved. North American Utilities are more profitable
EBITDA margins and associated CAGR (2012-2016)
© 2017 Capgemini. All rights reserved.
43World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 43World Energy Markets Observatory | November 2017 | 19th Edition
All Utilities have an ambitious divestment plan
8 companies expect their divestment policy to be visible in 2018
In 2016, despite those divestments, the average leverage ratio increased except for 5 Utilities
In 2017, several major Utilities expect their ratio to land between 2.5X and 3.0x
Most companies were able to reduce their net debts, but the leverage ratio continues to increase (2.7x to 3.0x)
Net debt and EBIDTA in €million and leverage ratios for 2015 and 2016
Performance plans seem to have some positive effects. With expected margin improvements and the debt level decrease, the leverage ratio should improve- if not in
2017- in 2018 or 2019
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44World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Utilities situation isslightly improving –Transformation
World Energy Market Observatory 2017
© 2017 Capgemini. All rights reserved.
45World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Downstream energy transformation and value proposition development gravitate around four Smart areas
Smart City &
Community
Monitor and manage all flows (energy, water, networks, etc.)
Provide new public services (communication, security, etc.)
Better plan & design intelligent districts
SMART4
Smart
Mobility
Enable low emission
transportation
(e.g. e-vehicles)
Foster energy
efficiency in
mobility (with
fuel consumption
monitoring, with
alternative
models such as
car pooling, etc.)
Improve traffic
management
Smart Home (B2C)
Increase Home automation
Enable Energy Management
Improve comfort & security
Increase Energy performance of building
Increase operational efficiency
Improve comfort & security
Smart Building & Factory (B2B)
Smart = Digital
Energy Transition
enables
Source: WEMO 2017 – Capgemini Consulting Analysis
The SMART4 approach – the 4 smart areas of the energy transition downstream
46World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Contribution of the key technology levers to the 4 Smart areas
Storage solutions
Energy marketplaces
EV charge management
Solarself-consumption
Blockchainfor Energy
Ex: Self-consumption is currentlyboosting Smart Home development and has a significant potential to
increase its growth
KEY LEVERS
Energy management
platforms
SMART CITY & COMMUNITY
SMART MOBILITY
SMART HOME
SMART BUILDING & FACTORY
Current impact Estimated potential
Contribution of key levers to the 4 Smart areas
47World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Players are diverse, beyond Utilities
Heatmap of types of players on key levers
TRADITIONAL PLAYERS PLAYERS FROM ADJACENT SECTORS SPECIFIC PLAYERS
Storage solutions
Energy marketplaces
Solar self-consumption
Blockchain for Energy
EV charge management
Energy management platforms
Utilities ESCOs*Car
manufacturersNet players (GAFA…)
CPG-Retailers TelCosSolar & storage players
OtherSpecific
small playersConstruction
KEY
LEV
ER
S
Ex: Utilities are moderately
active regardingself-consumption
offersElectrical
equipment manufacturers
*ESCOs: Energy Service Company Level of activity of the players
48World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Key takeaways
World Energy Market Observatory 2017
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49World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
The renewables development 2030 objective should bemet thanks to renewable cost decrease
OurRecommendations
Reforming electricity pricing
in wholesale markets.
Establishing a high enough
and predictable carbon
market price
Factor for MSR intervention
defined according to price
thresholds
Reforming network
access tariffs because of
self-production increase
The Climate-Energy package aims at reducing GHG but no priority is allocated
GHG target will be reached and even surpassed in 2020:
Thanks to economic crisis
Despite lowGHG price (€7/t)
With the economic recovery, will it last?
PV is the front runner with big cost decrease potential
Onshore wind is the cheapest (except Hydro) but has toface local opposition
Offshore wind costs are also decreasing (fall by 35% by 2025)
Battery costs have decreased by 80% from 2010 to 2016 and should be decreasing further
Battery energy storage is ready for market take off
EV have a charging impact but can also contribute to grid balancing
GHG€
50World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Customer must be able to participate more fully in electricity markets with suitable offerings
Delivering a fair deal for
energy consumers
(real green energy, more
systematic “dynamic”
pricing offerings better
reflecting wholesale market
prices in real time)
Gas and electricity prices falling but moderately for residential electricity price
Switch rates increased in average but their level varies from region to region
Aggressive Utilities transformationplans with objectives to reduce thecost-to-serve
Customers seeking more involvement and low price
Demand response is a necessity
Aggregation becoming critical for load adjustment
Offerings
Low cost anddigital offers
Innovative tariffs and discounts
Self service and“à la carte” supply
Energy marketplaces
Various new services
OurRecommendations
Creating special prices for
self-consumers
Inventing new business models,
trying to find the grail: differentiated
services valued by customers
51World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
2016 Utilities financials,while remainingproblematic, seemstabilizing due to transformation plansand wholesale marketprices slight rebound
Accelerating large
transformation plans
Adapting ambitions to
financial resources and
human capabilities
Transforming business
models to be more profitable
Revenue decreased due to electric and gas spot prices evolution with some exception (Nordic Utilities)
Profitability decreased
Debts decreased
But leverage ratio increased
Stock values underperformed against the Euro Stoxx index
OurRecommendations
€€
52World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
Boosting profitthrough Digitalization(20-30% costs gains)
Establishing an
innovative environment
(open innovation,
start-ups…)
Evolving Business Models to be
more profitable
Overcome
digitalization hurdles:
Skills and jobs,
Policies,
Regulation,
Cyber-security threats, …
Smart grids allow renewable increase in the electricity mix
Smart meters enable dynamic tariffs and energy management
Helping smart buildings will contribute to clients better awareness and energy efficiency improvements
Applications enable the residential customers to manage heating and cooling expenses, as well as other servicesbeyond energy
New approaches as use of massive data, mobility, robotics and AI, shouldlead to plants performance improvement
Digital Operations being the priority #1
OurRecommendations
53World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.
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