editorial: the european energy markets observatory, 16th edition
DESCRIPTION
http://www.capgemini.com/thought-leadership/european-energy-markets-observatory Read the editorial by Colette Lewiner for the 16th Edition of the European Energy Markets Observatory. Capgemini's European Energy Markets Observatory is an annual report initiated in 2002. It tracks the progress of two subjects: the establishment of an open and competitive electricity and gas market in EU-28 (plus Norway and Switzerland) and the reaching of the EU's 3x20 climate change objectives. The report looks at all segments of the value chain and analyzes leading-edge energy themes — digital revolution, customer experience, smart grids and demand response management — to identify key trends in the electricity and gas industries. The observatory is produced in collaboration with three partners: Natixis, CMS Bureau Francis Lefebvre and VaasaETT Global Energy Think Tank. Download the full report: https://www.capgemini.com/order-a-copyTRANSCRIPT
iNP A Strategic Overview of the European Energy Markets
the way we see itUtilities
©Capgemini 2014Capgemini has used its best efforts in collecting the information published in the 16th European Energy Markets Observatory to make it accurate and complete. Capgemini does not assume, and hereby disclaims, any liability for any loss or damage caused by errors or omissions in the 16th European Energy Markets Observatory, whether such errors or omissions result from negligence, accident, or other causes.
The information contained in the 16th European Energy Markets Observatory and provided to the user by Capgemini is protected by copyright law. The user is responsible for any breach of copyright law it may commit.
The user:
n Cannot modify, translate, alter, amend or disassemble any information contained in the 16th European Energy Markets Observatory in any way;
n Cannot alter, delete or conceal the copyright notices contained in the 16th European Energy Markets Observatory;
n Cannot store the 16th European Energy Markets Observatory in a shared electronic archive or database; and
n Cannot communicate or transmit the 16th European Energy Markets Observatory in any form or by any means electronic or mechanical, or in any other computer networks systems such as any intranet and/or the Internet.
If the user wishes to cite or reproduce some portions or extracts of the 16th European Energy Markets Observatory:
n It must obtain a written permission from Capgemini and;
n If such permission is given, it must ensure that all such material or information is clearly attributed to Capgemini, and bears a notation that it is copyrighted by Capgemini with the year of copyright.
the way we see itUtilities
In collaboration with
EU
RO
PE
AN
EN
ER
GY
MA
RK
ETS
OB
SE
RVATO
RY
�
2013 AN
D W
INTE
R 2013/2014 D
ATA S
ET - S
IXTE
EN
TH E
DITIO
N
2013 and Winter 2013/2014 Data Set Sixteenth Edition, October 2014
European Energy Markets Observatory
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Markets Observatory
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Markets Observatory
2 European Energy Markets Observatory
Contents
A Strategic Overview of the European Energy Markets 4
Energy Regulation and Policies Overview 18
Governance and Coordination across Europe 18
Sustainability and Climate Change Targets 24
Electricity Markets 28
Electricity Generation 28
Electricity Infrastructures 38
Electricity Wholesale Markets 46
Gas Markets 50
Upstream Gas 50
Gas Infrastructures 58
Gas Wholesale Markets 64
Customer Transformation 68
Energy Transition Markets & Trends 78
Companies’ Overview 84
Finance and Valuation 84
Strategy and Organizational Challenges 98
Appendix Tables 101
Glossary 108
Country Abbreviations and Energy Authorities 111
Team and Authors 112
©2014 Capgemini. Reproduction in part or in whole is strictly prohibited.
2
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
4
Co
pyr i
gh
t ©
Cap
gem
ini
2014
4
Energy Transition Markets & Trends
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Energy Transition Markets & Trends
Companies’ Overview
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Companies’ Overview
Finance and Valuation
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Finance and Valuation
Strategy and Organizational Challenges
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Strategy and Organizational Challenges
Appendix Tables
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Appendix Tables
Glossary
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Glossary
Country Abbreviations and Energy Authorities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Country Abbreviations and Energy Authorities
Team and Authors
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Team and Authors
3
the way we see itUtilities
3
Tables
Table 1.1 Major energy events (2013 and H1 2014) ........................................................... 22
Table 1.2 3x20 European Union climate change objectives (status as of 2012 with provisional 2013 data) ............................... 25
Table 2.1 Installed and decomissioned generation capacity per type of source (2013 versus 2012) ............................................ 29
Table 2.2 Peak load, generation capacity and electricity mix (2013) .................................. 30
Table 2.3 Map of generation capacities projects in MW (as of April 2014) ...................... 32
Table 2.4 Current (2014) and future (2020 and 2030) electricity capacity mix (as of June 2014)............................................... 37
Table 3.1 Investments by selected electricity TSOs in their national grid (2005 to 2013) ........ 38
Table 3.2 Investment plans for selected electricity TSOs ................................................ 39
Table 3.3 Map of interconnections levels and interconnections projects (2013) ....................... 40
Table 3.4 Smart electricity meters deployment status in Europe (as of July 2014) ..................... 44
Table 4.1 Commodity prices (2013 and H1 2014) ........................................................... 46
Table 4.2 Yearly (2012 and 2013) and winter (2012/2013 and 2013/2014) average electricity spot prices .......................... 47
Table 4.3 Electricity spot prices on the main European markets (2013 and H1 2014) ............ 48
Table 4.4 Electricity futures prices (year ahead) on the main European markets (2013 and H1 2014) ........................................... 49
Table 5.1 Domestic gas production versus piped gas and LNG imports (2013) .................. 51
Table 5.2 Proven conventional gas reserves in Europe (1980-2013) ...................................... 51
Table 5.3 Map of gas imports (2013) ................ 53
Table 5.4 LNG imports to Europe (2013) .......... 54
Table 5.5 Dependence of European countries on Russian gas (2013) ...................................... 55
Table 5.6 Map of pipelines and LNG terminals projects (as of June 2014) ................................. 57
Table 6.1 Investments by selected gas TSOs in their national grid (2008 to 2013) .................. 58
Table 6.2 Investment plans for selected gas TSOs .......................................................... 59
Table 6.3 Smart gas meters deployment status in Europe (as of July 2014) ..................... 61
Table 6.4 Gas storage capacities (2013) ........... 62
Table 6.5 Gas storage projects (as of June 2014)............................................... 63
Table 7.1 Gas spot prices (2013 and H1 2014) . 64
Table 7.2 Gas futures prices on Dutch TTF (year ahead 2015) ............................................. 66
Table 8.1 Total gas consumption and size of I&C and residential markets (2013) ................... 68
Table 8.2 Total electricity consumption and size of I&C and residential markets (2013) ........ 69
Table 8.3 Residential gas prices – all tax included and with PPP (H2 2013 and % change with H2 2012) .................................. 71
Table 8.4 Residential electricity prices – all tax included and with PPP (H2 2013 and % change with H2 2012) ........................... 72
Table 8.5 Aggregated European electricity switching rates (2013) ....................................... 73
Table 8.6 Aggregated European gas switching rates (2013) ....................................... 73
Table 9.1 Growth rate of renewable energy sources for electricity production (2005 to 2012 or 2013) ..................................... 80
Table 10.1 Relative performance of European Utilities vs. Euro stoxx 50 (2012, 2013 and YTD 2014) ............................. 84
Table 10.2 Evolution of European Utilities’ implied EV/EBITDA multiples (2003-2014) ........ 85
Table 10.3 Spain’s (left-hand side graph) and Portugal’s (right-hand side graph) sovereign CDS (2013-2014) .............................. 86
Table 10.4 Change in industrial production in Spain (left-hand side graph) and Italy (right-hand side graph) ..................................... 86
Table 10.5 YTD evolution of Spain’s industrial demand vs. overall demand (YoY, in %) ............ 87
Table 10.6 Evolution of EBITDA consensus estimates for European Utilities: 2013-14 (base 100 at 01/01/2013) and 2014-15 (base 100 at 01/01/2014) .............................................88
Table 10.7 2013 EBITDA share of regulated networks and generation businesses (in %) ..... 89
Table 10.8 Evolution of German Clean Dark Spreads and Clean Spark Spreads (2009-2014)....................................................... 89
Table 10.9 Most significant cost-cutting plans underway in the Utilities sector ......................... 90
Table 10.10 Utilities sector average investment effort (2008 to 2015e) .................... 92
Table 10.11 Regulated networks operators average investment effort (2008 to 2015e) ....... 92
Table 10.12 Total free cash-flow generation post-dividend payment for the main European integrated Utilities (2008 to 2015e) ................... 93
Table 10.13 Most significant asset sales (>€500m) in the Utilities sector (2009-2014) .... 94
Table 10.14 Total hybrid debt issuances by European Utilities over 2010-2014 (€-denom. and €-equiv.bn) .............................. 95
Table 10.15 Main hybrid debt issuers (>€2 bn) over 2010-2014 (€-denom. and €-equiv.bn) ..... 96
Topic Focus
Are the European regulatory principles obsolete in regard to energy transition? ........... 21
Going off grid will be possible sooner than expected ................................................... 34
Distribution Network Operators (DNOs) – a business in full transformation ....................... 43
New Spanish regulation based on a smart meter model shakes the whole retail market .... 70
Alternative propulsion technologies: time to join the market? .................................... 77
The German Energiewende – a role model for the European energy market? ..................... 82
Appendix Tables
Table A.1 Electricity generation mix (2005, 2010 and 2013) .................................... 101
Table A.2 Map of electricity distribution (2013) ..102
Table A.3 Map of gas distribution (2013) ........ 102
Table A.4 I&C electricity prices – VAT excluded (H2 2013 and % change with H2 2012) .......... 103
Table A.5 Status of electricity price regimes (as of June 2014)............................................. 103
Table A.6 Electricity retail market size (2013) .. 103
Table A.7 Residential electricity price breakdown (as of June 2014) .......................... 104
Table A.8 Potential annual savings from switching electricity retailer (H1 2014) ............ 104
Table A.9 I&C gas prices – VAT excluded (H2 2013 and % change with H2 2012) .......... 105
Table A.10 Status of gas price regimes (as of June 2014)............................................. 105
Table A.11 Gas retail market size (2013) ......... 105
Table A.12 Residential gas price breakdown (as of June 2014)............................................. 106
Table A.13 Potential annual savings from switching gas retailer (H1 2014) ...................... 106
Table A.14 Sales, EBITDA and debts of the main European Utilities (2008 to 2013) ..... 107
Co
pyr i
gh
t ©
Cap
gem
ini
2014Table A.1 Electricity generation mix
Co
pyr i
gh
t ©
Cap
gem
ini
2014Table A.1 Electricity generation mix
(2005, 2010 and 2013)
Co
pyr i
gh
t ©
Cap
gem
ini
2014(2005, 2010 and 2013)....................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014....................................
Table A.2 Map of electricity distribution (2013)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.2 Map of electricity distribution (2013)
Table A.3 Map of gas distribution (2013)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.3 Map of gas distribution (2013)
Table A.4 I&C electricity prices – VAT excluded
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.4 I&C electricity prices – VAT excluded (H2 2013 and % change with H2 2012)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(H2 2013 and % change with H2 2012)
Table A.5 Status of electricity price regimes
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.5 Status of electricity price regimes (as of June 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(as of June 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
................................. 57
Co
pyr i
gh
t ©
Cap
gem
ini
2014
57
Table 6.1 Investments by selected gas TSOs
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 6.1 Investments by selected gas TSOs ..................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.................. 58
Co
pyr i
gh
t ©
Cap
gem
ini
2014
58
Table 6.2 Investment plans for selected
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 6.2 Investment plans for selected ..........................................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.......................................................... 59
Co
pyr i
gh
t ©
Cap
gem
ini
2014
59
Table 6.3 Smart gas meters deployment
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 6.3 Smart gas meters deployment status in Europe (as of July 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
status in Europe (as of July 2014) .....................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.....................
Table 6.4 Gas storage capacities (2013)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 6.4 Gas storage capacities (2013)...........
Co
pyr i
gh
t ©
Cap
gem
ini
2014
...........
Table 6.5 Gas storage projects
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 6.5 Gas storage projects ...............................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
...............................................
Table 7.1 Gas spot prices (2013 and H1 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 7.1 Gas spot prices (2013 and H1 2014)
Table 7.2 Gas futures prices on Dutch TTF
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 7.2 Gas futures prices on Dutch TTF (year ahead 2015)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(year ahead 2015) .............................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.............................................
80
Co
pyr i
gh
t ©
Cap
gem
ini
2014
80
.............................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
............................. 84
Co
pyr i
gh
t ©
Cap
gem
ini
2014
84
Table 10.2 Evolution of European Utilities’
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.2 Evolution of European Utilities’ implied EV/EBITDA multiples (2003-2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
implied EV/EBITDA multiples (2003-2014)........
Co
pyr i
gh
t ©
Cap
gem
ini
2014
........ 85
Co
pyr i
gh
t ©
Cap
gem
ini
2014
85
Table 10.3 Spain’s (left-hand side graph)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.3 Spain’s (left-hand side graph) and Portugal’s (right-hand side graph)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and Portugal’s (right-hand side graph) ..............................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
..............................
Table 10.4 Change in industrial production in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.4 Change in industrial production in Spain (left-hand side graph) and Italy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Spain (left-hand side graph) and Italy .....................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.....................................
Table 10.5 YTD evolution of Spain’s industrial
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.5 YTD evolution of Spain’s industrial demand vs. overall demand (YoY, in %)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
demand vs. overall demand (YoY, in %)
Table 10.6 Evolution of EBITDA consensus
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.6 Evolution of EBITDA consensus estimates for European Utilities: 2013-14
Co
pyr i
gh
t ©
Cap
gem
ini
2014
estimates for European Utilities: 2013-14 (base 100 at 01/01/2013) and 2014-15
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(base 100 at 01/01/2013) and 2014-15 (base 100 at 01/01/2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(base 100 at 01/01/2014).............................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.............................................
Table 10.7 2013 EBITDA share of regulated
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.7 2013 EBITDA share of regulated networks and generation businesses (in %)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
networks and generation businesses (in %)
Table 10.8 Evolution of German Clean Dark
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.8 Evolution of German Clean Dark Spreads and Clean Spark Spreads
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Spreads and Clean Spark Spreads (2009-2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(2009-2014).......................................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.......................................................
Table 10.9 Most significant cost-cutting plans
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.9 Most significant cost-cutting plans underway in the Utilities sector
Co
pyr i
gh
t ©
Cap
gem
ini
2014
underway in the Utilities sector
Table 10.10 Utilities sector average
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.10 Utilities sector average investment effort (2008 to 2015e)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
investment effort (2008 to 2015e)
Table 10.11 Regulated networks operators
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table 10.11 Regulated networks operators
.............................................
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.............................................
Table A.6 Electricity retail market size (2013)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.6 Electricity retail market size (2013)
Table A.7 Residential electricity price
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.7 Residential electricity price breakdown (as of June 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
breakdown (as of June 2014)
Table A.8 Potential annual savings from
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.8 Potential annual savings from switching electricity retailer (H1 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
switching electricity retailer (H1 2014)
Table A.9 I&C gas prices – VAT excluded
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.9 I&C gas prices – VAT excluded (H2 2013 and % change with H2 2012)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(H2 2013 and % change with H2 2012)
Table A.10 Status of gas price regimes
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Table A.10 Status of gas price regimes (as of June 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(as of June 2014)
4 A Strategic Overview of the European Energy Markets
1 BP 2014 annual oil statistics
2 EU ETS: European Emissions Trading System
3 As an example, in 2013 GDF Suez has depreciated its gas generation and storage assets by €14.9 billion
4 RES: Renewable Energies Sources
A Strategic Overview of the European Energy
Markets
Editorial by Colette Lewiner
Oil markets
In 2013, thanks to the spectacular expansion of shale oil and to a certain extent the curbing of domestic consumption due to the economic crisis, the US – which used to import two-thirds of its needs – imported only half, mainly from other North American countries (Canada and Mexico) and the Middle East.
This shale revolution is mitigating the impact of geopolitical events on oil prices. Since 2011 and the start of the Arab uprising, the world has experienced a cumulative disruption in supply equivalent to 3.5 million barrels a day (from places such as Libya1); this was cancelled out by a similar amount of US production that exceeded 10 mbl/d in 2013 to reach the highest level since 1986.
The increase in US shale oil production is one reason why, despite recent geopolitical issues (notably the annexation of Crimea by Russia, the Ukraine crisis, and the unsettled situation in the Middle East), the oil price remained stable and even decreased to less than $100/bl in September 2014. Other factors contributing to the decrease are slower
economic growth and the effect of speculation.
The shale gas revolution and related gas spot markets developments have decreased the impact of the oil price on the overall energy economy, as gas prices (and hence electricity prices in certain regions) are less and less correlated to oil prices.
Power markets
Present situationThe chaotic situation on the electricity wholesale markets has continued with larger time intervals of negative prices; continued closures of gas-fired plants needed to guarantee security of supply (over 10 GW decommissioned in 2013); CO2 prices too low on the EU ETS2 to push for de-carbonized investments; increased retail prices; and a steady deterioration in the Utilities’ financial situation3.
The root causes are:
The Climate-Energy package: in order to comply with the 20% RES4 share in the energy mix target by 2020, the European countries have massively invested in renewable energies. With around 7% of worldwide population, C
op
yr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
In 2013, thanks to the spectacular
Co
pyr i
gh
t ©
Cap
gem
ini
2014
In 2013, thanks to the spectacular expansion of shale oil and to a certain
Co
pyr i
gh
t ©
Cap
gem
ini
2014
expansion of shale oil and to a certain extent the curbing of domestic
Co
pyr i
gh
t ©
Cap
gem
ini
2014
extent the curbing of domestic consumption due to the economic
Co
pyr i
gh
t ©
Cap
gem
ini
2014
consumption due to the economic crisis, the US – which used to import
Co
pyr i
gh
t ©
Cap
gem
ini
2014
crisis, the US – which used to import two-thirds of its needs – imported only
Co
pyr i
gh
t ©
Cap
gem
ini
2014
two-thirds of its needs – imported only half, mainly from other North American
Co
pyr i
gh
t ©
Cap
gem
ini
2014
half, mainly from other North American countries (Canada and Mexico) and the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
countries (Canada and Mexico) and the Middle East.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Middle East.
This shale revolution is mitigating
Co
pyr i
gh
t ©
Cap
gem
ini
2014
This shale revolution is mitigating the impact of geopolitical events on
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the impact of geopolitical events on oil prices. Since 2011 and the start
Co
pyr i
gh
t ©
Cap
gem
ini
2014
oil prices. Since 2011 and the start
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of the Arab uprising, the world has
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of the Arab uprising, the world has experienced a cumulative disruption in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
experienced a cumulative disruption in supply equivalent to 3.5 million barrels
Co
pyr i
gh
t ©
Cap
gem
ini
2014
supply equivalent to 3.5 million barrels a day (from places such as Libya
Co
pyr i
gh
t ©
Cap
gem
ini
2014
a day (from places such as Libyawas cancelled out by a similar amount
Co
pyr i
gh
t ©
Cap
gem
ini
2014
was cancelled out by a similar amount of US production that exceeded
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of US production that exceeded
5
the way we see itUtilities
At the end of 2013, there was a surplus of over 2.1 billion allowances, hence the low prices. As a short-term measure to mitigate the effects of the surplus, the EU decided to postpone (backload) the auctioning of 900 million allowances in the early years of phase 3. This measure had little effect on prices, which stayed at €5.6/t on average in H1 2014.
Backloading is only a temporary measure; a sustainable solution to the imbalance between supply and demand requires structural changes to the EU ETS. This is why the EC proposes to establish a market stability reserve at the beginning of the next trading period in 202110. This market stability reserve would function by triggering adjustments to annual auction volumes in situations where the total number of allowances in circulation is outside a certain predefined range.
Very generous feed-in tariffs subsidizing development of renewables. This policy was effective – the RES share in the energy mix grew to 14.1% in 2012 and the 20% objective for 2020 should be met. However, it led to increased electricity retail prices triggering customer dissatisfaction.
Many Member States and the EC are looking at reducing these tariffs and progressively bringing them into line with market conditions, which is, after all, normal for maturing technologies.
The Spanish situation is a good illustration of these considerations. In 2013, 42.4% of Spanish electricity was produced from renewables (of which 14% was hydropower). Wind power was the first generation source (21.1%) followed by nuclear (20%). The large renewable-related investments have
the EU has spent around €500 billion for renewable energies from 2004 to 2013 (included), nearly half of the worldwide investments5. The RES share in the energy mix increased from 8.3% (in 2004) to 14.1% in 2012. For electricity that benefited from the main part of investments, this share increased from 14.3% to 23.5% on the same period.
Flat or decreasing consumption (-0.5% for electricity, -1.4% for gas6). This is linked to the economic crisis and to a certain extent to energy efficiency measures. As usual, gas consumption is more impacted than electricity’s7 as the latter is favored by new applications such as ICT8 and electric vehicles (EVs). For example, the new French law on energy transition forecasts that 15% of French travels in 2030 will use 100% renewable fuels and that 7 million electric battery-charging points (compared to 10,000 today) will be installed. This could have a big impact on the grid balance.
No anticipation of the economic environment on CO2 emission allowances. According to CDC Climat9, between 2005 and 2011 some 1.1 billion tCO2 emission reductions occurred in installations covered by the EU ETS. Between 600 and 700 Mt of avoided emissions resulted from the climate and energy package objectives (500 Mt resulting from RES development and between 100 and 200 Mt from improving energy intensity). The economic crisis has also played a significant role in reducing CO2 emissions, estimated at 300 Mt. As a consequence of this lack of anticipation, too many CO2 emission allowances were issued by the European Commission (EC).
5 UNEP report
6 Data not corrected for the temperature effect
7 Around one third of gas is used for power generation plants, thus there is a double consumption decrease (direct gas usage and electricity consumption)
8 ICT: Information and Communication Technologies
9 CDC Climat Recherche: Octobre 2013 « Les facteurs explicatifs de l’évolution des émissions de CO2 sur les deux phases de l’EU-ETS : une analyse économétrique »
10 Proposal for a decision of the European Parliament and of the Council concerning the establishment and operation of a market stability reserve for the Union
generated a huge debt for Spanish Utilities (about €30 billion) because the government did not allow them to pass these extra costs on to their customers. Despite this restriction, electricity prices increased significantly. For example, until 2006 residential prices in France and Spain were similar, whereas in 2013 Spanish prices were 75% higher than those in France.
In recent years, successive Spanish governments have tried to reduce renewables costs, which amounted to €9 billion in 2013 (including cogeneration).
Recent developmentsThe European Council will make its final decision on the new framework for climate and energy policies, including further measures aimed at enhancing Europe’s energy security and specific 2030 interconnection objectives, on October 23-24, 2014.
The latest EC proposal is to replace the 3x20 objectives by a single objective on CO
2 emissions (a 40% decrease compared to 1990 levels). No compulsory targets on renewables or energy efficiency would be set at Member States level, only at EU level (27% RES in the final energy consumption mix and 30% energy efficiency).
Energy efficiency is not only important for preserving our planet’s resources and limiting CO2 emissions, but also for guaranteeing energy security of supply. Recent events in Ukraine have highlighted European exposure with respect to energy imports and, Member States most exposed to gas imports from Russia are also those that have greatest potential to improve efficiency.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
generated a huge debt for Spanish
Co
pyr i
gh
t ©
Cap
gem
ini
2014
generated a huge debt for Spanish 30 billion) because the
Co
pyr i
gh
t ©
Cap
gem
ini
201430 billion) because the
government did not allow them to pass
Co
pyr i
gh
t ©
Cap
gem
ini
2014government did not allow them to pass
these extra costs on to their customers.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
these extra costs on to their customers. Despite this restriction, electricity prices
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Despite this restriction, electricity prices increased significantly. For example,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
increased significantly. For example, until 2006 residential prices in France
Co
pyr i
gh
t ©
Cap
gem
ini
2014
until 2006 residential prices in France and Spain were similar, whereas in 2013
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and Spain were similar, whereas in 2013 Spanish prices were 75% higher than
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Spanish prices were 75% higher than
Co
pyr i
gh
t ©
Cap
gem
ini
2014
proposes to establish a market stability
Co
pyr i
gh
t ©
Cap
gem
ini
2014
proposes to establish a market stability reserve at the beginning of the next
Co
pyr i
gh
t ©
Cap
gem
ini
2014
reserve at the beginning of the next . This market
Co
pyr i
gh
t ©
Cap
gem
ini
2014
. This market stability reserve would function by
Co
pyr i
gh
t ©
Cap
gem
ini
2014
stability reserve would function by triggering adjustments to annual
Co
pyr i
gh
t ©
Cap
gem
ini
2014
triggering adjustments to annual auction volumes in situations where the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
auction volumes in situations where the total number of allowances in circulation
Co
pyr i
gh
t ©
Cap
gem
ini
2014
total number of allowances in circulation is outside a certain predefined range.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
is outside a certain predefined range.
Very generous feed-in tariffs
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Very generous feed-in tariffs subsidizing development of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
subsidizing development of renewables.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
renewables. This policy was effective
Co
pyr i
gh
t ©
Cap
gem
ini
2014
This policy was effective – the RES share in the energy mix grew
Co
pyr i
gh
t ©
Cap
gem
ini
2014
– the RES share in the energy mix grew to 14.1% in 2012 and the 20% objective
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to 14.1% in 2012 and the 20% objective for 2020 should be met. However, it
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for 2020 should be met. However, it led to increased electricity retail prices
Co
pyr i
gh
t ©
Cap
gem
ini
2014
led to increased electricity retail prices triggering customer dissatisfaction.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
triggering customer dissatisfaction.
Many Member States and the EC are
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Many Member States and the EC are looking at reducing these tariffs and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
looking at reducing these tariffs and progressively bringing them into line
Co
pyr i
gh
t ©
Cap
gem
ini
2014
progressively bringing them into line with market conditions, which is, after
Co
pyr i
gh
t ©
Cap
gem
ini
2014
with market conditions, which is, after all, normal for maturing technologies.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
all, normal for maturing technologies.
from the climate and energy package
Co
pyr i
gh
t ©
Cap
gem
ini
2014
from the climate and energy package
RES development and between 100
Co
pyr i
gh
t ©
Cap
gem
ini
2014
RES development and between 100 and 200 Mt from improving energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and 200 Mt from improving energy intensity). The economic crisis has also
Co
pyr i
gh
t ©
Cap
gem
ini
2014
intensity). The economic crisis has also played a significant role in reducing
Co
pyr i
gh
t ©
Cap
gem
ini
2014
played a significant role in reducing emissions, estimated at 300 Mt.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emissions, estimated at 300 Mt. As a consequence of this lack of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
As a consequence of this lack of anticipation, too many CO
Co
pyr i
gh
t ©
Cap
gem
ini
2014
anticipation, too many CO
Co
pyr i
gh
t ©
Cap
gem
ini
2014
2
Co
pyr i
gh
t ©
Cap
gem
ini
2014
2 emission
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emission allowances were issued by the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
allowances were issued by the European Commission (EC).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
European Commission (EC).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
UNEP report Co
pyr i
gh
t ©
Cap
gem
ini
2014
UNEP report
Data not corrected for the temperature effectCo
pyr i
gh
t ©
Cap
gem
ini
2014
Data not corrected for the temperature effect
those in France.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
those in France.
In recent years, successive Spanish
Co
pyr i
gh
t ©
Cap
gem
ini
2014
In recent years, successive Spanish governments have tried to reduce
Co
pyr i
gh
t ©
Cap
gem
ini
2014
governments have tried to reduce renewables costs, which amounted
Co
pyr i
gh
t ©
Cap
gem
ini
2014
renewables costs, which amounted to
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to €
Co
pyr i
gh
t ©
Cap
gem
ini
2014
€9 billion in 2013 (including
Co
pyr i
gh
t ©
Cap
gem
ini
2014
9 billion in 2013 (including cogeneration).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
cogeneration).
6 A Strategic Overview of the European Energy Markets
Taking these two factors into consideration, the present power overcapacity would remain (or grow).
Conversely, the EU’s Large Combustion Plants Directive (requiring 15.8 GW of coal-fired capacity to be closed by the end of 2015 at the latest) and Industrial Emissions Directive (the closure of 65 to 70 GW of coal-fired capacity by 2020/23) will contribute to rebalance the market. However, it can be predicted that the present chaotic situation will remain for a few more years.
In the longer term, the International Energy Agency (IEA) estimates that despite slow growth in electricity demand (11% from now to 2035), Europe will need to add almost 740 GW of power capacity by 2035 to replace ageing infrastructure (40% of thermal plants’ power capacity will be decommissioned by 2035) and to decarbonize the electricity mix. This represents $2,200 billion investments of which 70% will be for power plants and 30% for grids.
In order to achieve the right investment incentives, electricity prices need to increase by at least 20% in the next decade. Thus governments and regulators need to adopt a long-term view and act in a determined way.
With Utilities in a difficult financial situation, how will they be able to invest? The chapter Finance and Valuation describes the new financial instruments (such as hybrid debt emissions and project financing) that will help existing Utilities to find the resources they need. In addition, it is likely that infrastructure funds and non-European Utilities will take a significant share of new investment, having positioned themselves in this sector in previous years.
• Securitythroughvolumewheretheamount of capacity is fixed and the mode of remuneration varies. This is a strategic reserve scheme, where some generation capacity is set aside to ensure security of supply in exceptional circumstances (e.g. in Sweden, Finland and under review in Germany),
• Capacitymarkets,wheretwodifferent mechanisms exist:■� Capacity obligation: suppliers are required to contract a certain level of capacity from generators at a price agreed between the parties, and to pay a fine if this capacity is not sufficient (France is due to start this in 2016),
■� Capacity auction: the total required capacity is set several years in advance by the transmission system operator (TSO) or the regulator. The price is set by forward auction and paid to all participants in the auction. The cost is charged to the end customer (e.g. PJM and ISO-NE11 markets in the USA).
These capacity markets will be gradually adopted in different EU countries and should enhance security of supply. However, their different designs will create competition issues on the EU electricity market.
Evolution in the next few yearsFor the coming years we could forecast:• Moderate economic growth
combined with energy-efficient measures leading to moderate consumption growth reaching pre-crisis levels only in 202012,
• Slower growth in renewables’ new capacity linked to the subsidies decrease (see above) and to their impact on grid management (see below).
11 PJM: regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia of the US East coast. NE-ISO: New England Independent System Operator
12 IEA June 2014
On April 9, 2014, the Commission adopted new rules on public support for projects relating to environmental protection and energy. The guidelines address market distortions that may result from subsidies granted to renewables. They promote a gradual move to market-based support for RES through the introduction of competitive bidding processes for allocating public support, and the gradual replacement of feed-in tariffs by feed-in premiums, which expose RES to market signals. These rules should slow down, but not stop, renewables development.
Promotion of European industry competitiveness: these new rules provide criteria to relieve energy-intensive companies that are particularly exposed to international competition in a limited number of energy-intensive sectors. Combining this measure with measures aimed at decreasing (or limiting) the electricity invoices for the low-income consumers (up to 30% of customers in certain EU countries), this means that only a subset of retail customers will carry the burden of increasing retail prices and this burden will be higher than if all customers would pay these levies.
Another new feature is to allow Member States to introduce capacity remuneration mechanisms. They are designed to ensure security of electricity supply during tense periods and to make new capacity investments profitable. Different types of capacity remuneration mechanism (CRM) exist:• Securitythroughprices(forexample
the capacity payment mechanism) where a fixed amount set by a central body is paid to generators for available capacity and for new investments. This mechanism has been used in Spain since 1998 and in Italy starting in 2014,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Taking these two factors into
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Taking these two factors into consideration, the present power
Co
pyr i
gh
t ©
Cap
gem
ini
2014consideration, the present power
overcapacity would remain (or grow).
Co
pyr i
gh
t ©
Cap
gem
ini
2014overcapacity would remain (or grow).
Conversely, the EU’s Large Combustion
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Conversely, the EU’s Large Combustion Plants Directive (requiring 15.8 GW
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Plants Directive (requiring 15.8 GW of coal-fired capacity to be closed
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of coal-fired capacity to be closed by the end of 2015 at the latest) and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by the end of 2015 at the latest) and Industrial Emissions Directive (the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Industrial Emissions Directive (the closure of 65 to 70 GW of coal-fired
Co
pyr i
gh
t ©
Cap
gem
ini
2014
closure of 65 to 70 GW of coal-fired capacity by 2020/23) will contribute
Co
pyr i
gh
t ©
Cap
gem
ini
2014
capacity by 2020/23) will contribute to rebalance the market.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to rebalance the market. it can be predicted that the present
Co
pyr i
gh
t ©
Cap
gem
ini
2014
it can be predicted that the present chaotic situation will remain for a few
Co
pyr i
gh
t ©
Cap
gem
ini
2014
chaotic situation will remain for a few more years.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
more years.
In the longer term, the International
Co
pyr i
gh
t ©
Cap
gem
ini
2014
In the longer term, the International price agreed between the parties,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
price agreed between the parties, and to pay a fine if this capacity is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and to pay a fine if this capacity is not sufficient (France is due to start
Co
pyr i
gh
t ©
Cap
gem
ini
2014
not sufficient (France is due to start
Capacity auction: the total required
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Capacity auction: the total required capacity is set several years in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
capacity is set several years in advance by the transmission
Co
pyr i
gh
t ©
Cap
gem
ini
2014
advance by the transmission system operator (TSO) or the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
system operator (TSO) or the regulator. The price is set by
Co
pyr i
gh
t ©
Cap
gem
ini
2014
regulator. The price is set by forward auction and paid to
Co
pyr i
gh
t ©
Cap
gem
ini
2014
forward auction and paid to all participants in the auction.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
all participants in the auction. The cost is charged to the end
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The cost is charged to the end customer (e.g. PJM and ISO-NE
Co
pyr i
gh
t ©
Cap
gem
ini
2014
customer (e.g. PJM and ISO-NEmarkets in the USA).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
markets in the USA).
These capacity markets will be
Co
pyr i
gh
t ©
Cap
gem
ini
2014
These capacity markets will be gradually adopted in different EU
Co
pyr i
gh
t ©
Cap
gem
ini
2014
gradually adopted in different EU
Co
pyr i
gh
t ©
Cap
gem
ini
2014
countries and should enhance security
Co
pyr i
gh
t ©
Cap
gem
ini
2014
countries and should enhance security of supply. However, their different
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of supply. However, their different designs will create competition issues
Co
pyr i
gh
t ©
Cap
gem
ini
2014
designs will create competition issues on the EU electricity market.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
on the EU electricity market.
Evolution in the next few years
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Evolution in the next few yearsFor the coming years we could
Co
pyr i
gh
t ©
Cap
gem
ini
2014
For the coming years we could electricity supply during tense periods
Co
pyr i
gh
t ©
Cap
gem
ini
2014
electricity supply during tense periods and to make new capacity investments
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and to make new capacity investments profitable. Different types of capacity
Co
pyr i
gh
t ©
Cap
gem
ini
2014
profitable. Different types of capacity remuneration mechanism (CRM) exist:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
remuneration mechanism (CRM) exist:(for
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(for example
Co
pyr i
gh
t ©
Cap
gem
ini
2014
examplethe capacity payment mechanism)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the capacity payment mechanism) where a fixed amount set by a
Co
pyr i
gh
t ©
Cap
gem
ini
2014
where a fixed amount set by a central body is paid to generators
Co
pyr i
gh
t ©
Cap
gem
ini
2014
central body is paid to generators
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for available capacity and for new
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for available capacity and for new investments. This mechanism has
Co
pyr i
gh
t ©
Cap
gem
ini
2014
investments. This mechanism has been used in Spain since 1998 and in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
been used in Spain since 1998 and in Italy starting in 2014,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Italy starting in 2014,
7
the way we see itUtilities
Electricity gridsEuropean electricity market fluidity has progressed. European interconnection capacity should increase by around 3,000 MW in 2013 and 2014. However, due to public opposition at local level and a complex bureaucratic system, it takes around 10 years to build a new transmission line in Europe. Congestion is still significant in certain cross-border links and several countries, such as the UK and Finland, still fall short of the 10% interconnection level required by the EC.
Extended market coupling. Since February 2014, the NWE region, stretching from France to Finland, has operated under a common day-ahead power price calculation using the Price Coupling of Regions (PCR) solution. This solution is also used in the SWE (France, Spain and Portugal) region in a common synchronized mode.
“Thanks to this NEW Price coupling for the first time Power Exchanges from countries which account for 75% (more than 2000 TWh) of European electric consumption, calculate electricity prices at the same time and in the same way – a revolutionary first step towards a common European power market. In time, Europe’s power consumers will benefit from the more efficient use of the power system in the region, resulting from a more closely connected market.”13
Economic impact of renewables on the grid system. The variability and unpredictability of wind and solar power production generate additional requirements in terms of flexibility for the supply-demand balance of the electricity system. These requirements generate additional costs.
The question is how to evaluate these extra costs (integration costs) in
PV facilities has led to grid redesign and construction of new north-south transmission lines. The grid overhaul investment is estimated at €400/kW (solar and wind)16.
The integration costs calculation is complex and varies between the different grids and generation mix. In Germany, integration costs of wind power can be in the same range as generation costs at a moderate renewable proportion of the electricity mix (~20%).
Integration costs can become an economic barrier to deploying variable renewables at a high proportion of the generation mix.
Integration costs will decrease with:• Import/exportinterconnectionsthat
enable optimization of the system on a larger scale and,
• Demand-sidemanagement:demandincrease or decrease would be managed according to fluctuation of short-term prices. An example would be using intermittent electrolysis during low electricity cost periods to produce hydrogen or methane out of CO2 (methanation). Both gases are storable.
These integration costs will also significantly decrease if large storage capacity at competitive costs is available.
Smart grid development. A smart grid is a power grid that can integrate intelligent interaction between all users in order to provide economical, safe and sustainable electrical energy. Smart grid industrial deployment is not as rapid as expected, mainly due to the volume of investment required and the not yet fit-for-purpose regulatory and markets frameworks (especially in Europe).
order to get an accurate comparison between different generation technologies and especially between dispatchable and non-dispatchable generation (e.g. thermal generation with variable renewables such as wind or solar).
The classic LCOE14 is not enough and integration costs have to be added in order to get the right metric.
In order to evaluate them, one has to take into account the variable characteristics of renewables (wind and solar mainly):• Theiroutputfluctuates:wind
speeds and solar radiation vary over time. Thus the value of this type of generation depends on when it is produced (high demand or low demand periods) – there is a profile cost,
• Theiroutputisuncertain:windandsolar radiation is uncertain in day-ahead terms. For example, wind energy is subject to strong and sudden increases in production creating hourly variations in France of up to 300 MW (out of 7,500 MW installed capacity)15. Solar energy is subject to significant and very rapid variations in daytime production (from clouds). The development of large wind power plants improves statistically the accuracy of the forecast. Even taking this factor into account, the effects of forecast errors in France represent variations of up to 2 GW today and 4.6 GW in 2020. Forecast errors are costly and lead to extra balancing costs,
• Theyareboundtocertainlocations:their value depends on where they generate electricity. The grid-related costs can be high. For example, in Germany the shift of generation from centralized large nuclear plants to decentralized wind farms (onshore and offshore) and solar
13 Press release from EPEX Spot
14 LCOE: Levelized Cost Of Energy which is the full lifecycle costs (fixed and variable) of a technology per generation unit
15 ENR Pool, « Enjeux de l’intégration des EnR au réseau électrique », Smart Grid conference, Paris, June 2014
16 “Cost-Supply Curves of renewable electricity in Germany – First Results” M. Wiesmeth R. Barth A. Voß, Institute of Energy Economics and the Rational Use of Energy (IER). University of Stuttgart, IRENA-ETSAP Joint Session: REMAP 2030 17. June 2013, Paris
Co
pyr i
gh
t ©
Cap
gem
ini
2014
PV facilities has led to grid redesign
Co
pyr i
gh
t ©
Cap
gem
ini
2014
PV facilities has led to grid redesign and construction of new north-south
Co
pyr i
gh
t ©
Cap
gem
ini
2014and construction of new north-south
transmission lines. The grid overhaul
Co
pyr i
gh
t ©
Cap
gem
ini
2014transmission lines. The grid overhaul
investment is estimated at
Co
pyr i
gh
t ©
Cap
gem
ini
2014
investment is estimated at (solar and wind)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(solar and wind)16
Co
pyr i
gh
t ©
Cap
gem
ini
2014
16.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
.
The integration costs calculation is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The integration costs calculation is complex and varies between the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
complex and varies between the different grids and generation mix. In
Co
pyr i
gh
t ©
Cap
gem
ini
2014
different grids and generation mix. In Germany, integration costs of wind
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Germany, integration costs of wind power can be in the same range
Co
pyr i
gh
t ©
Cap
gem
ini
2014
power can be in the same range as generation costs at a moderate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
as generation costs at a moderate renewable proportion of the electricity
Co
pyr i
gh
t ©
Cap
gem
ini
2014
renewable proportion of the electricity mix (~20%).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
mix (~20%).
Integration costs can become an
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Integration costs can become an economic barrier to deploying variable
Co
pyr i
gh
t ©
Cap
gem
ini
2014
economic barrier to deploying variable
characteristics of renewables (wind and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
characteristics of renewables (wind and
speeds and solar radiation vary over
Co
pyr i
gh
t ©
Cap
gem
ini
2014
speeds and solar radiation vary over
Co
pyr i
gh
t ©
Cap
gem
ini
2014
efficient use of the power system in the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
efficient use of the power system in the region, resulting from a more closely
Co
pyr i
gh
t ©
Cap
gem
ini
2014
region, resulting from a more closely
Economic impact of renewables
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Economic impact of renewables The variability
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The variability and unpredictability of wind and solar
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and unpredictability of wind and solar power production generate additional
Co
pyr i
gh
t ©
Cap
gem
ini
2014
power production generate additional requirements in terms of flexibility for
Co
pyr i
gh
t ©
Cap
gem
ini
2014
requirements in terms of flexibility for the supply-demand balance of the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the supply-demand balance of the electricity system. These requirements
Co
pyr i
gh
t ©
Cap
gem
ini
2014
electricity system. These requirements generate additional costs.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
generate additional costs.
The question is how to evaluate these Co
pyr i
gh
t ©
Cap
gem
ini
2014
The question is how to evaluate these extra costs (integration costs) in C
op
yr i
gh
t ©
Cap
gem
ini
2014
extra costs (integration costs) in
time. Thus the value of this type
Co
pyr i
gh
t ©
Cap
gem
ini
2014
time. Thus the value of this type of generation depends on when it
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of generation depends on when it is produced (high demand or low
Co
pyr i
gh
t ©
Cap
gem
ini
2014
is produced (high demand or low demand periods) – there is a profile
Co
pyr i
gh
t ©
Cap
gem
ini
2014
demand periods) – there is a profile
uncertain:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
uncertain: wind
Co
pyr i
gh
t ©
Cap
gem
ini
2014
windsolar radiation is uncertain in day-
Co
pyr i
gh
t ©
Cap
gem
ini
2014
solar radiation is uncertain in day-ahead terms. For example, wind
Co
pyr i
gh
t ©
Cap
gem
ini
2014
ahead terms. For example, wind energy is subject to strong and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy is subject to strong and sudden increases in production
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sudden increases in production creating hourly variations in France
Co
pyr i
gh
t ©
Cap
gem
ini
2014
creating hourly variations in France of up to 300 MW (out of 7,500 MW
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of up to 300 MW (out of 7,500 MW installed capacity)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
installed capacity)subject to significant and very rapid
Co
pyr i
gh
t ©
Cap
gem
ini
2014
subject to significant and very rapid variations in daytime production
Co
pyr i
gh
t ©
Cap
gem
ini
2014
variations in daytime production (from clouds). The development of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(from clouds). The development of large wind power plants improves
Co
pyr i
gh
t ©
Cap
gem
ini
2014
large wind power plants improves statistically the accuracy of the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
statistically the accuracy of the forecast. Even taking this factor
Co
pyr i
gh
t ©
Cap
gem
ini
2014
forecast. Even taking this factor
8 A Strategic Overview of the European Energy Markets
Seven export terminals have received DOE non-FTA19 authorization (out of 26 applications). One Sabine Pass) got DOE and FERC20 approvals. It is expected that five out of the seven will get FERC approval. On May 29, 2014, the US Department of Energy declared that it would authorize more LNG exports by lifting the soft cap of cumulative authorizations from 12 bcf21/d (90 Mt/year) to 20 bcf/d (5,150 Mt/year). Total export capacity is likely to be in the 6-8 bcf/d range by 2020 even if the new EPA22 legislation on CO2 emissions is enforced. The US will become a swing supplier in the global market and create a ceiling price.
Growth of global gas demand. Demand growth will be strong in Asia, Africa and the Middle East. China will double its gas consumption by 2019, offsetting slowdowns in regions such as Europe23.
With very slow growth (or even a decrease) in European gas consumption projected, Russia is seeking alternative markets and on May 23, 2014 struck a landmark deal (worth $400 billion) with China. The deal represents 25% of the volume that Gazprom sold to Europe and places China second in the Gazprom market after Germany.
The IEA forecasts that global gas demand will rise by 2.2% in the next five years. LNG is expected to meet much of the growth in global demand, and is forecast to grow by 40% in the period to 2019.
European situationGas demand decreased by 1.4% in Europe in 2013 and no growth in demand is forecast for the 2013-2019 period. However, as European gas reserves are depleting, gas imports are likely to grow in Europe, weakening security of the gas supply. Shale gas development in Europe is controversial in many countries. The UK and Poland, the countries most in favor of shale gas development, were joined in June 2014 by Germany where fracking technology has been accepted under certain conditions. This last move is strongly correlated to the Ukraine crisis and the increasing tension with Russia.
On the other hand, France remains strongly opposed to fracking and refuses even to deliver exploration permits.
Shale gas development in Europe will be slower than in the US for many reasons including higher population density, different mining codes24, and a less dense pipeline network. However, thanks to unconventional gas exploitation, Europe’s dependency on gas imports could be reduced to 60% instead of the projected 80% by 203025.
Importation of US shale gas will improve European security of supply and lower gas prices. However, in the present market conditions it should have only a minor effect on prices, as the LNG exporters will favor Asian destinations where the price premium is higher. This situation could change if, following the Japan Nuclear Regulatory Authority (NRA) and the new Energy Minister recommendations, Regional Authorities allow some nuclear plants
Smart grid pilot development is accelerating (so far more than $20 billion investments17 worldwide).
Despite the different characteristics of each network and customer base, it is useful to study the outcomes of the pilot projects:• Storage,real-timedatamanagement,
and load balancing are among the most important devices and systems enabling accommodation of larger RES shares,
• SustainableDemandSideManagement is an important factor for lowering integration costs and optimizing renewables output,
• Norms,standards,regulatoryframeworks, and market mechanisms need to be enhanced, clarified and implemented rapidly with a long-term vision.
Provided that the right regulatory framework is established and that technologies are available, a huge worldwide smart grid market is expected in the 10 to 20 years, especially in North America, China and Europe.
Gas markets
Global market perspectiveUS shale gas. In the US, unconventional gas development is changing the paradigm. In 2013, shale gas accounted for 39% of total gas production in the US vs. 25% in 2010. This share is expected to grow to 53% in 204018.
17 Capgemini estimate
18 EIA Annual Energy Outlook 2014
19 DOE: Department Of Energy, FTA: Free Trade Agreement
20 FERC: Federal Energy Regulatory Commission
21 bcf: billion cubic feet
22 If the new EPA (Environment Protection Agency) Legislation on CO2 emission reductions for coal plants is enforced, EIA predicts that the gas demand would increase (because of power plants switch from coal to gas) only by 5% in 2020.
23 IEA 2014
24 In Europe the underground belongs to the State while in the US it belongs to the surface owner
25 EC study
Co
pyr i
gh
t ©
Cap
gem
ini
2014
European situation
Co
pyr i
gh
t ©
Cap
gem
ini
2014
European situationGas demand decreased
Co
pyr i
gh
t ©
Cap
gem
ini
2014Gas demand decreased by 1.4%
Co
pyr i
gh
t ©
Cap
gem
ini
2014 by 1.4%
in Europe in 2013 and no growth in
Co
pyr i
gh
t ©
Cap
gem
ini
2014in Europe in 2013 and no growth in
demand is forecast for the 2013-2019
Co
pyr i
gh
t ©
Cap
gem
ini
2014
demand is forecast for the 2013-2019 period. However, as European gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
period. However, as European gas reserves are depleting, gas imports
Co
pyr i
gh
t ©
Cap
gem
ini
2014
reserves are depleting, gas imports are likely to grow in Europe, weakening
Co
pyr i
gh
t ©
Cap
gem
ini
2014
are likely to grow in Europe, weakening security of the gas supply. Shale gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
security of the gas supply. Shale gas development in Europe is controversial
Co
pyr i
gh
t ©
Cap
gem
ini
2014
development in Europe is controversial
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emissions is enforced. The US
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emissions is enforced. The US
global market and create a ceiling price.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
global market and create a ceiling price.
Growth of global gas demand.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Growth of global gas demand. Demand growth will be strong in Asia,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Demand growth will be strong in Asia, Africa and the Middle East. China will
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Africa and the Middle East. China will double its gas consumption by 2019,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
double its gas consumption by 2019, offsetting slowdowns in regions such
Co
pyr i
gh
t ©
Cap
gem
ini
2014
offsetting slowdowns in regions such
With very slow growth (or even
Co
pyr i
gh
t ©
Cap
gem
ini
2014
With very slow growth (or even a decrease) in European gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
a decrease) in European gas consumption projected, Russia is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
consumption projected, Russia is seeking alternative markets and on
Co
pyr i
gh
t ©
Cap
gem
ini
2014
seeking alternative markets and on May 23, 2014 struck a landmark deal
Co
pyr i
gh
t ©
Cap
gem
ini
2014
May 23, 2014 struck a landmark deal (worth $400 billion) with China. The
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(worth $400 billion) with China. The deal represents 25% of the volume that
Co
pyr i
gh
t ©
Cap
gem
ini
2014
deal represents 25% of the volume that Gazprom sold to Europe and places
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Gazprom sold to Europe and places China second in the Gazprom market
Co
pyr i
gh
t ©
Cap
gem
ini
2014
China second in the Gazprom market after Germany.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
after Germany.
The IEA forecasts that global gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The IEA forecasts that global gas demand will rise by 2.2% in the next
Co
pyr i
gh
t ©
Cap
gem
ini
2014
demand will rise by 2.2% in the next five years. LNG is expected to meet
Co
pyr i
gh
t ©
Cap
gem
ini
2014
five years. LNG is expected to meet
Co
pyr i
gh
t ©
Cap
gem
ini
2014
in many countries. The UK and Poland,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
in many countries. The UK and Poland, the countries most in favor of shale gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the countries most in favor of shale gas development, were joined in June 2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
development, were joined in June 2014 by Germany where fracking technology
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by Germany where fracking technology has been accepted under certain
Co
pyr i
gh
t ©
Cap
gem
ini
2014
has been accepted under certain conditions. This last move is strongly
Co
pyr i
gh
t ©
Cap
gem
ini
2014
conditions. This last move is strongly correlated to the Ukraine crisis and the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
correlated to the Ukraine crisis and the
changing the paradigm. In 2013, shale
Co
pyr i
gh
t ©
Cap
gem
ini
2014
changing the paradigm. In 2013, shale gas accounted for 39% of total gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
gas accounted for 39% of total gas production in the US vs. 25% in 2010.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
production in the US vs. 25% in 2010. This share is expected to grow to 53%
Co
pyr i
gh
t ©
Cap
gem
ini
2014
This share is expected to grow to 53%
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Capgemini estimate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Capgemini estimate
EIA Annual Energy Outlook 2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
EIA Annual Energy Outlook 2014
DOE: Department Of Energy, FTA: Free Trade Agreement
Co
pyr i
gh
t ©
Cap
gem
ini
2014
DOE: Department Of Energy, FTA: Free Trade Agreement
Co
pyr i
gh
t ©
Cap
gem
ini
2014
FERC: Federal Energy Regulatory CommissionCo
pyr i
gh
t ©
Cap
gem
ini
2014
FERC: Federal Energy Regulatory Commission
bcf: billion cubic feetCo
pyr i
gh
t ©
Cap
gem
ini
2014
bcf: billion cubic feet
9
the way we see itUtilities
by bureaucratic stalling. It has started to do so in Bulgaria.
Nevertheless, the Ukraine-Russia crisis was a wake-up call for European gas security of supply and strengthened the need for Europe to diversify its gas supplies: Russia accounts for 30% of Europe’s total gas supplies and about 50% of this gas transits through Ukraine.
If the EU-Russia conflict about Ukraine stays tense and sanctions against Russia are increased, the gas supply situation could be worrying at the beginning of the 2014 winter heating season.
As already stated in our 2009 EEMO, and as was recently confirmed in May 2014 by the EC27, in order to diversify its gas supplies Europe has several levers:• IncreaseLNGimports,• Sponsoralternativegaspipelines,• Increasegasstorage,• Increasegasmarketfluidity,• Developshalegas,• Increaseenergyefficiency.
However, the present gas market crisis does not provide the right economic incentives for implementation of these levers. For example, LNG imports, accounting for only 20% of Europe’s total gas supplies, have decreased in Europe (-28% over 2012). This is mainly due to the Europe-Asia price differential in favor of Asia28. Consequently, there is no incentive to build new re-gases facilities as the existing ones are operating at low capacity.
Alternative pipeline routes bypassing Russia, such as the Nabucco pipeline (31 bcm29/year of capacity, due to transport Caspian gas), did not materialize, to the benefit of South Stream supported by Gazprom (a
that were stopped after the Fukushima accident to restart again26.
Gas prices and contract indexation. Long-term gas contracts were traditionally indexed to the price of oil. This indexation has been very advantageous for suppliers, as oil prices remained high; it is one of the reasons why gas prices are three times higher in Europe than in the US. Gradually, German Utilities, followed by others, have managed to reach a position where more than 50% of their supplies are linked to market prices. More recently, ENI signed a contract with Gazprom at market price (rather than at a rate linked to the oil price).
In the future, oil indexation of long-term gas contracts is likely to disappear, especially if shale gas is developed in Europe, and will be replaced by spot market related prices (as in all commodities).
Security of supply. In April 2014, Gazprom increased gas prices to Ukraine by 80% (from $268.5 to $485.5/1,000 m3). Ukraine has a $4.5 billion debt towards Gazprom that it refuses to pay, arguing that the prices Gazprom wants are too high. The EU-brokered negotiations failed and on June 16, 2014, Gazprom cut supplies (for the third time in eight years). The situation was not as dramatic as during winter 2009. During the summer, gas consumption is low; Ukraine has roughly six months’ reserves and thanks to a mild winter and decreasing gas consumption, the European countries gas stocks were high (64% full).
As a retaliation measure, the EC threatens to apply sanctions and could disrupt the South Stream pipeline (Gazprom’s project to bypass Ukraine by moving gas through the Black Sea)
26 In July 2014, the NRA declared that some reactors (Sendai 1&2) fulfill the recent “post-Fukushima” safety requirements.
27 European Energy Security Strategy communication published by the EC on May 28, 2014 and validated by the European Council on June 27, 2014
28 This situation could change if a tense gas situation leads to higher gas prices in Europe and if Japanese nuclear plants would return to operations decreasing Asia gas demand and prices
29 bcm: billion cubic meter
project that is also in trouble now as described above). Although no additional transportation pipelines are needed immediately, this shortsighted approach threatens longer-term security of supply.
Gas market fluidity is still much lower than for electricity: for example, in France it will not be until 2018 that the two gas zones are re-unified to form one gas marketplace.
Reverse flows have, to a certain extent, been developed. Ukraine (consuming about 50 bcm of natural gas per year) can now buy gas from Hungary and Poland (nearly 2 bcm was imported in 2013). Starting in September 2014 it should be able to receive 8 to 10 bcm per year from Slovakia. However, in retaliation against sanctions, Moscow is seeking to prevent European countries from re-exporting Russian gas to Ukraine, threatening to deepen the energy crisis Ukraine faces this winter.
Existing gas storage facilities are not currently fully used. Europe needs more underground gas storage but the current economic conditions don’t provide the right incentives for building those facilities. Notably, the summer-winter price spreads have decreased and the incentive to purchase gas at lower prices in summer for winter consumption has weakened. This price spread decrease is directly linked to the decreasing use of gas-fired plants in winter (see above regarding the power market chaotic situation).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
As already stated in our 2009 EEMO,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
As already stated in our 2009 EEMO, and as was recently confirmed in May
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and as was recently confirmed in May , in order to diversify its
Co
pyr i
gh
t ©
Cap
gem
ini
2014
, in order to diversify its gas supplies Europe has several levers:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
gas supplies Europe has several levers:imports,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
imports,alternative
Co
pyr i
gh
t ©
Cap
gem
ini
2014
alternative gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
gas pipelines,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
pipelines,storage,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
storage,gas
Co
pyr i
gh
t ©
Cap
gem
ini
2014
gas market
Co
pyr i
gh
t ©
Cap
gem
ini
2014
market fluidity,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
fluidity,shale
Co
pyr i
gh
t ©
Cap
gem
ini
2014
shale gas,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
gas,• Increase
Co
pyr i
gh
t ©
Cap
gem
ini
2014
• Increase energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy efficiency.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
efficiency.
However, the present gas market crisis
Co
pyr i
gh
t ©
Cap
gem
ini
2014
However, the present gas market crisis does not provide the right economic
Co
pyr i
gh
t ©
Cap
gem
ini
2014
does not provide the right economic incentives for implementation of these
Co
pyr i
gh
t ©
Cap
gem
ini
2014
incentives for implementation of these levers. For example, LNG imports,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
levers. For example, LNG imports, accounting for only 20% of Europe’s
Co
pyr i
gh
t ©
Cap
gem
ini
2014
accounting for only 20% of Europe’s total gas supplies, have decreased in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
total gas supplies, have decreased in Europe (-28% over 2012). This is mainly
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Europe (-28% over 2012). This is mainly due to the Europe-Asia price differential
Co
pyr i
gh
t ©
Cap
gem
ini
2014
due to the Europe-Asia price differential in favor of Asia
Co
pyr i
gh
t ©
Cap
gem
ini
2014
in favor of AsiaDuring the summer, gas consumption
Co
pyr i
gh
t ©
Cap
gem
ini
2014
During the summer, gas consumption is low; Ukraine has roughly six months’
Co
pyr i
gh
t ©
Cap
gem
ini
2014
is low; Ukraine has roughly six months’ reserves and thanks to a mild winter
Co
pyr i
gh
t ©
Cap
gem
ini
2014
reserves and thanks to a mild winter and decreasing gas consumption, the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and decreasing gas consumption, the European countries gas stocks were
Co
pyr i
gh
t ©
Cap
gem
ini
2014
European countries gas stocks were
Co
pyr i
gh
t ©
Cap
gem
ini
2014
As a retaliation measure, the EC
Co
pyr i
gh
t ©
Cap
gem
ini
2014
As a retaliation measure, the EC threatens to apply sanctions and could
Co
pyr i
gh
t ©
Cap
gem
ini
2014
threatens to apply sanctions and could disrupt the South Stream pipeline
Co
pyr i
gh
t ©
Cap
gem
ini
2014
disrupt the South Stream pipeline (Gazprom’s project to bypass Ukraine
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(Gazprom’s project to bypass Ukraine by moving gas through the Black Sea)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by moving gas through the Black Sea)
project that is also in trouble now
Co
pyr i
gh
t ©
Cap
gem
ini
2014
project that is also in trouble now as described above). Although no
Co
pyr i
gh
t ©
Cap
gem
ini
2014as described above). Although no
additional transportation pipelines are
Co
pyr i
gh
t ©
Cap
gem
ini
2014additional transportation pipelines are
needed immediately, this shortsighted
Co
pyr i
gh
t ©
Cap
gem
ini
2014
needed immediately, this shortsighted approach threatens longer-term
Co
pyr i
gh
t ©
Cap
gem
ini
2014
approach threatens longer-term security of supply.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
security of supply.
Gas market fluidity is still much lower
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Gas market fluidity is still much lower than for electricity: for example, in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
than for electricity: for example, in France it will not be until 2018 that the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
France it will not be until 2018 that the two gas zones are re-unified to form
Co
pyr i
gh
t ©
Cap
gem
ini
2014
two gas zones are re-unified to form one gas marketplace.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
one gas marketplace.
Reverse flows have, to a certain extent,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Reverse flows have, to a certain extent, been developed. Ukraine (consuming
Co
pyr i
gh
t ©
Cap
gem
ini
2014
been developed. Ukraine (consuming about 50 bcm of natural gas per year)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
about 50 bcm of natural gas per year) can now buy gas from Hungary and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
can now buy gas from Hungary and Poland (nearly 2 bcm was imported in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Poland (nearly 2 bcm was imported in
10 A Strategic Overview of the European Energy Markets
lower than the actual figures30. Annual subsidies to renewables grew from €3 billion in 2005 to €23 billion in 2014. The related EEG tax rose from €53/MWh in 2013 to €62.4/MWh in 2014 and German residential customers pay twice as much as French ones.
This situation, and projected cost increases, pushed the new coalition government to review subsidies for renewables. The central element of the new law, which took effect in August 2014, is the winding down of the feed-in tariff, which will be phased out entirely by 2018 and replaced with a competitive tendering system. In the name of cutting costs, the average incentive per kilowatt-hour will drop significantly for new installations built after 2014. Moreover, caps will be put on the different renewable energy sectors, prescribing quantities over which the feed-in tariff will no longer apply. In addition, the new law will spread the additional costs to more customers by reducing the number of exempted industrial customers. All these measures should limit surcharges on renewables. The law has still to be approved at EU level.
FranceThe Energy Bill aimed at creating a new energy model for France was presented on June 18, 2014 by the Minister of Energy, Ségolène Royal. Many discussions will take place at different levels before Parliamentary adoption, probably late in 2014.
The bill aims to change the country’s energy balance by reducing the share of nuclear energy and dependence on fossil fuels31, making the country more frugal in its energy use, and developing renewable energy sources.
The bill sets very ambitious targets: energy consumption reduction of 50%
by 2050 (compared to 2012), a 40% decrease in greenhouse gas emissions (GHG) by 2030 (compared to 1990), and a 32% RES share in final energy consumption by 2030.
To achieve the energy efficiency goal, two main levers will be used: • Improvingbuildings’energy
efficiency with a 30% tax break and other incentives and regulations,
• Promotingelectricvehiclesbysettinga target of seven million vehicle-recharging points by 2030.
The goal of reducing the share of nuclear to 50% of electricity production by 2025 (compared with 75% today) is reaffirmed in the bill. But many strategic choices have been postponed.
Although the law limits nuclear capacity to today’s level of 63.1 GW, it avoids specific mention of Fessenheim’s32 closure. However, the capacity cap should force a decision on closures as a 1,600 MW EPR33 at Flamanville is due to come on stream in 2016 raising the overall capacity of the nuclear fleet. However, the present draft leaves all interpretations open, at least regarding the administrative procedure and timetable. Also, it does not oppose extension of nuclear plants’ lifetimes, which, if safety permits, which is recommended by the “Cour Des Comptes”34.
Under the proposed law, EDF will have, following the multi-annual plans established by the Minister of Energy, responsibility for recommending how to meet the target of a maximum 50% share for nuclear energy in electricity generation by 2025. Those recommendations have to be “consistent with the objectives of the law” and “approved by the State”.
“We have to find a clear balance between the aims set by the state and
Energy transition
GermanyThe German energy transition Energiewende is facing many challenges. In May 2011, following the Fukushima accident, Germany took a very quick and political decision to immediately shut down nine reactors and to phase out the eight remaining reactors by 2022. It set very ambitious targets for the RES share of electricity generation to reach 80% by 2050 and for CO2 emissions reduction (a decrease in the range of 80-95% compared to 1990). To meet these objectives, very generous feed-in tariffs were set. Renewable energies generated 81 TWh in the first half of 2014, accounting for 31% of German electricity generation, and the government’s 2020 objective of a 35% share should be met. However when the 2011 decision was taken, the government had not forecast the grid issues, the difficulties of mastering the fast growth in renewables and the related costs.
The large nuclear plants located in the south of the country (where a large part of the industrial needs are located) are being replaced by decentralized solar PV installations and wind farms (situated in the North of the country). The cost of grid overhaul linked to energy transition will represent around €60 billion over the next 10 years, but the most dramatic issue is that there has been hardly any construction of the necessary new transmission lines. Offshore wind farms aren’t yet connected to the grid, although the capital costs have already been spent.
Renewables, especially solar energy, grew in an uncontrolled way. For example, 2008 forecasts for solar PV generation in 2012 were four times
30 Source RWE
31 It called for a 30% reduction in fossil fuel consumption by 2030
32 Fessenheim is the oldest of the French nuclear plants located near the German border
33 EPR: European Pressurized Reactor
34 French General Accounting office
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by 2050 (compared to 2012), a 40%
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by 2050 (compared to 2012), a 40% decrease in greenhouse gas emissions
Co
pyr i
gh
t ©
Cap
gem
ini
2014decrease in greenhouse gas emissions
(GHG) by 2030 (compared to 1990),
Co
pyr i
gh
t ©
Cap
gem
ini
2014(GHG) by 2030 (compared to 1990),
and a 32% RES share in final energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and a 32% RES share in final energy consumption by 2030.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
consumption by 2030.
To achieve the energy efficiency goal,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
To achieve the energy efficiency goal, two main levers will be used:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
two main levers will be used: • Improving
Co
pyr i
gh
t ©
Cap
gem
ini
2014
• Improving buildings’
Co
pyr i
gh
t ©
Cap
gem
ini
2014
buildings’
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the feed-in tariff, which will be phased
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the feed-in tariff, which will be phased out entirely by 2018 and replaced with
Co
pyr i
gh
t ©
Cap
gem
ini
2014
out entirely by 2018 and replaced with a competitive tendering system. In the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
a competitive tendering system. In the name of cutting costs, the average
Co
pyr i
gh
t ©
Cap
gem
ini
2014
name of cutting costs, the average incentive per kilowatt-hour will drop
Co
pyr i
gh
t ©
Cap
gem
ini
2014
incentive per kilowatt-hour will drop significantly for new installations built
Co
pyr i
gh
t ©
Cap
gem
ini
2014
significantly for new installations built after 2014. Moreover, caps will be
Co
pyr i
gh
t ©
Cap
gem
ini
2014
after 2014. Moreover, caps will be put on the different renewable energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
put on the different renewable energy sectors, prescribing quantities over
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sectors, prescribing quantities over which the feed-in tariff will no longer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
which the feed-in tariff will no longer apply. In addition, the new law will
Co
pyr i
gh
t ©
Cap
gem
ini
2014
apply. In addition, the new law will spread the additional costs to more
Co
pyr i
gh
t ©
Cap
gem
ini
2014
spread the additional costs to more customers by reducing the number
Co
pyr i
gh
t ©
Cap
gem
ini
2014
customers by reducing the number of exempted industrial customers. All
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of exempted industrial customers. All these measures should limit surcharges
Co
pyr i
gh
t ©
Cap
gem
ini
2014
these measures should limit surcharges on renewables. The law has still to be
Co
pyr i
gh
t ©
Cap
gem
ini
2014
on renewables. The law has still to be approved at EU level.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
approved at EU level.
France
Co
pyr i
gh
t ©
Cap
gem
ini
2014
FranceThe Energy Bill aimed at creating a new
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The Energy Bill aimed at creating a new energy model for France was presented
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy model for France was presented on June 18, 2014 by the Minister
Co
pyr i
gh
t ©
Cap
gem
ini
2014
on June 18, 2014 by the Minister of Energy, Ségolène Royal. Many
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of Energy, Ségolène Royal. Many
Co
pyr i
gh
t ©
Cap
gem
ini
2014
efficiency with a 30% tax break and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
efficiency with a 30% tax break and other incentives and regulations,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
other incentives and regulations,• Promoting
Co
pyr i
gh
t ©
Cap
gem
ini
2014
• Promotinga target of seven million vehicle-
Co
pyr i
gh
t ©
Cap
gem
ini
2014
a target of seven million vehicle-recharging points by 2030.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
recharging points by 2030.
The goal of reducing the share of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The goal of reducing the share of nuclear
Co
pyr i
gh
t ©
Cap
gem
ini
2014
nuclear
energy transition will represent around
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy transition will represent around 60 billion over the next 10 years, but
Co
pyr i
gh
t ©
Cap
gem
ini
2014
60 billion over the next 10 years, but the most dramatic issue is that there
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the most dramatic issue is that there has been hardly any construction
Co
pyr i
gh
t ©
Cap
gem
ini
2014
has been hardly any construction of the necessary new transmission
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of the necessary new transmission lines. Offshore wind farms aren’t yet
Co
pyr i
gh
t ©
Cap
gem
ini
2014
lines. Offshore wind farms aren’t yet connected to the grid, although the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
connected to the grid, although the capital costs have already been spent.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
capital costs have already been spent.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
, especially solar energy,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
, especially solar energy, grew in an uncontrolled way. For
Co
pyr i
gh
t ©
Cap
gem
ini
2014
grew in an uncontrolled way. For example, 2008 forecasts for solar PV C
op
yr i
gh
t ©
Cap
gem
ini
2014
example, 2008 forecasts for solar PV generation in 2012 were four times C
op
yr i
gh
t ©
Cap
gem
ini
2014
generation in 2012 were four times
11
the way we see itUtilities
EDF’s interests,” declared Ségolène Royal (the French state holds 85% of EDF’s capital).
However, the nuclear share reduction and the possible closure of nuclear plants before the end of their lifetime will erode France’s credibility as a nuclear generating country and could handicap French nuclear export projects.
The law is also unclear on the major topic of funding. The transition is expected to require another €20-30 billion per year of investments for transport infrastructure, renewable energy, and buildings renovation. In times of budget shortages, France would have to be brave to commit funds immediately for a return on investment in 15-20 years!
The energy transition law will also have a big impact on French electricity costs. Today, thanks to nuclear energy, French electricity is 30% cheaper than the European average.
Even if in the future, the costs of existing nuclear plants will increase to €60/MWh35, they are still cheaper than fossil fuel fired plants costs (at €70- 90/MWh) and the cheapest renewable, onshore wind, which costs are around €73/MWh36 (without allowing for the impact of renewables on the grid, which can double the total cost – see above).
According to UFE37, the reduction of the nuclear share in the electricity mix should trigger an electricity cost increase of €30-40/MWh, in addition to a similar increase linked to former environmental commitments (the Grenelle de l’environnement).
These increases will affect customers, especially residential customers whose standard of living are already eroding.
It will also have a major impact on the survival of French industry, especially energy-intensive sectors facing international competition. These sectors are already struggling with European electricity prices twice as high as in the USA38 and gas three times as high (while they were at the same price level ten years ago).
Climate change
The first lessons from the fifth IPCC report39 are clear: global warming is unequivocal; human activity almost certainly accounts for most of the warming observed since the mid-twentieth century; and our planet will probably be exposed in coming years to more violent and more extreme weather.
The IEA40 estimates that the global temperature increase could reach 3.6°C to 5.3°C in 2020, which is well over the 2°C threshold that nations have undertaken to comply with. Moreover, the global CO2 emissions level has surged in 2013 at its fastest rate for 30 years.
To stand any chance of limiting our planet’s increase in temperature by the end of this century to 2°C, profound changes in economic models and lifestyles will be essential, and emissions will need to be reduced by 40-70% before 2050. This is a formidable challenge.
While developed countries are managing to stabilize their emissions,
the IEA estimates that 75% of increased CO2 emissions between now and 2050 will come from developing countries, with India and China alone accounting for almost 50% of this increase.
Trying to recreate a new Kyoto Protocol, which would impose a mandatory emissions reduction on all countries by 2030, would not be acceptable in the eyes of Americans, who reject any idea of a new Kyoto, the Senate would not authorize the ratification of. Nor is it acceptable in the eyes of developing countries that refuse to allow Western countries to limit their necessary development.
However, we are witnessing some improvements from the two major players: the US and China.
The US plays a pivotal role in these discussions for many reasons:• Itisthesecondlargestemitterof
CO2 after China (14% share in 2012, well behind China at 27%). It would be impossible to persuade emerging countries to curb emissions if the US were not to join in,
• Itsemissionsperheadareroughlydouble those of leading Western European economies or Japan,
• TheUShasunsurpassedscientificand technology resources that are essential for tackling the challenge of combining low emissions with prosperity41.
There is encouraging news from the US. For example, CO2 emissions have decreased recently thanks to cheap shale gas replacing coal in power plants42 and to new automotive emissions reduction regulations. In June 2014, The President’s Climate Action Plan was published; its goal is to
35 Cour des Comptes report published in May 2014; EDF’s investments in maintenance to extend nuclear reactors lifetime beyond 40 years are estimated at €55 billion investments over the next ten years
36 “Energies 2050” report 2012
37 UFE: Union Française de l’Electricité, 2013 study
38 The US energy prices have decreased thanks to the shale gas boom
39 IPCC: Intergovernmental Panel on Climate Change Fifth Assessment Report (AR5)
40 International Energy Agency’s report “Redrawing the Energy-Climate Map”, June 2013
41 Martin Wolf, Financial Times, July 2014
42 In 2012, US carbon dioxide emissions reached their 1992 level despite increasing population and a (somewhat) growing economy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the IEA estimates that 75% of increased
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the IEA estimates that 75% of increased emissions between now and 2050
Co
pyr i
gh
t ©
Cap
gem
ini
2014 emissions between now and 2050
will come from developing countries,
Co
pyr i
gh
t ©
Cap
gem
ini
2014will come from developing countries,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
which can double the total cost – see
Co
pyr i
gh
t ©
Cap
gem
ini
2014
which can double the total cost – see
, the reduction of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
, the reduction of the nuclear share in the electricity
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the nuclear share in the electricity mix should trigger an electricity cost
Co
pyr i
gh
t ©
Cap
gem
ini
2014
mix should trigger an electricity cost 30-40/MWh, in addition
Co
pyr i
gh
t ©
Cap
gem
ini
2014
30-40/MWh, in addition to a similar increase linked to former
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to a similar increase linked to former environmental commitments (the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
environmental commitments (the Grenelle de l’environnement).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Grenelle de l’environnement).
The first lessons from the fifth IPCC
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The first lessons from the fifth IPCC are clear: global warming is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
are clear: global warming is unequivocal; human activity almost
Co
pyr i
gh
t ©
Cap
gem
ini
2014
unequivocal; human activity almost certainly accounts for most of the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
certainly accounts for most of the warming observed since the mid-
Co
pyr i
gh
t ©
Cap
gem
ini
2014
warming observed since the mid-twentieth century; and our planet
Co
pyr i
gh
t ©
Cap
gem
ini
2014
twentieth century; and our planet will probably be exposed in coming
Co
pyr i
gh
t ©
Cap
gem
ini
2014
will probably be exposed in coming years to more violent and more
Co
pyr i
gh
t ©
Cap
gem
ini
2014
years to more violent and more extreme weather.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
extreme weather.
estimates that the global
Co
pyr i
gh
t ©
Cap
gem
ini
2014
estimates that the global temperature increase could reach
Co
pyr i
gh
t ©
Cap
gem
ini
2014
temperature increase could reach 3.6°C to 5.3°C in 2020, which is well
Co
pyr i
gh
t ©
Cap
gem
ini
2014
3.6°C to 5.3°C in 2020, which is well over the 2°C threshold that nations
Co
pyr i
gh
t ©
Cap
gem
ini
2014
over the 2°C threshold that nations have undertaken to comply with.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
have undertaken to comply with. Moreover, the global CO
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Moreover, the global COlevel has surged in 2013 at its fastest
Co
pyr i
gh
t ©
Cap
gem
ini
2014
level has surged in 2013 at its fastest rate for 30 years.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
rate for 30 years.
To stand any chance of limiting our
Co
pyr i
gh
t ©
Cap
gem
ini
2014
To stand any chance of limiting our planet’s increase in temperature
Co
pyr i
gh
t ©
Cap
gem
ini
2014
planet’s increase in temperature by the end of this century to 2°C,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by the end of this century to 2°C,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
with India and China alone accounting
Co
pyr i
gh
t ©
Cap
gem
ini
2014
with India and China alone accounting for almost 50% of this increase.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for almost 50% of this increase.
Trying to recreate a new Kyoto Protocol,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Trying to recreate a new Kyoto Protocol, which would impose a mandatory
Co
pyr i
gh
t ©
Cap
gem
ini
2014
which would impose a mandatory emissions reduction on all countries
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emissions reduction on all countries by 2030, would not be acceptable in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by 2030, would not be acceptable in the eyes of Americans, who reject any
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the eyes of Americans, who reject any idea of a new Kyoto, the Senate would
Co
pyr i
gh
t ©
Cap
gem
ini
2014
idea of a new Kyoto, the Senate would not authorize the ratification of. Nor is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
not authorize the ratification of. Nor is it acceptable in the eyes of developing
Co
pyr i
gh
t ©
Cap
gem
ini
2014
it acceptable in the eyes of developing countries that refuse to allow Western
Co
pyr i
gh
t ©
Cap
gem
ini
2014
countries that refuse to allow Western countries to limit their necessary
Co
pyr i
gh
t ©
Cap
gem
ini
2014
countries to limit their necessary development.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
development.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Cour des Comptes report published in May 2014; EDF’s investments in maintenance to extend nuclear reactors lifetime beyond 40 years are estimated at €55
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Cour des Comptes report published in May 2014; EDF’s investments in maintenance to extend nuclear reactors lifetime beyond 40 years are estimated at €55 billion investments over the next ten years
Co
pyr i
gh
t ©
Cap
gem
ini
2014
billion investments over the next ten years
Co
pyr i
gh
t ©
Cap
gem
ini
2014
“Energies 2050” report 2012Co
pyr i
gh
t ©
Cap
gem
ini
2014
“Energies 2050” report 2012
UFE: Union Française de l’Electricité, 2013 studyCo
pyr i
gh
t ©
Cap
gem
ini
2014
UFE: Union Française de l’Electricité, 2013 study
12 A Strategic Overview of the European Energy Markets
43 EPA: Environmental Protection Agency
44 http://www.chinadaily.com.cn/opinion/2012-11/19/content_15942603.htm –
45 Copenhagen Climate Change Conference, December 2009
46 CERNA: Centre d’Economie Industrielle (Ecole des Mines de Paris)
47 In its broadest sense, fuel poverty is defined as the proportion of people unable to afford a proper indoor thermal comfort. Fuel poverty is also often defined as the proportion of people whose energy budget exceeds 10% of their revenue
reduce CO2 emissions by more than 1,000 million tons per year, or 3% of global emissions from the burning of fossil fuels in 2012.
The transfer of low-carbon technologies raises obvious intellectual property rights concerns for the states providing them. The CERNA46 study addresses this dilemma facing developed countries and finds that benefits would exist for both recipients and providers of the technologies.
Only certain emerging countries (China, Mexico and South Africa) are already recipients of technology transfer from developed countries. However, India, the other developing Asian countries, and Africa receive insufficient technology transfer in view of their potential to reduce GHG emissions. The least developed countries, in particular, are practically left out of such transfers.
Energy efficiency
Our planet’s energy resources are limited; in order to allow developing countries to grow their energy consumption, developed countries need to curb their energy consumption.
There is also growing societal pressure to decrease household energy bills. In view of the present economic crisis and energy price increases, a growing number of consumers are at risk of fuel poverty47. Their share of the total consumer base varies in Europe between 15 and 50%. As an example, 3.8 million French households (compared to 31 million in total) dedicate more than 10% of their budget to energy spending. With energy prices forecast to grow, the only solution is to decrease consumption.
cut GHG emissions by 17% below 2015 levels by 2020. This is why the EPA43 has proposed a new regulation aimed at limiting emissions from coal plants.
Also, China needs to react quickly as it is confronted to the problem of excessive pollution in certain cities that creates health problems and hampers the country development.
In 2012, “the 18th National Congress of the Communist Party of China (CPC) wrote ecological civilization construction into the CPC constitution for the first time”44. However, given insufficient development and a lack of accompanying social side effects, tackling pollution in China, as in many other developing countries, requires more determination and courage than required from developed countries. One of China’s goals is to reduce CO2 emissions per unit of gross domestic product by 40-45% from 2005 levels by 2020. “The Chinese people have to tighten their belts to achieve this target” said Zou Ji, director of the Program of Energy and Climate Economics at Renmin University of China. It is estimated that to meet the goal, China needs to invest $78 billion annually, the equivalent of $166 per family.
Before the “Le Bourget” (France) Climate conference in 2015, negotiations between the EU and the two major emitters, China and the US (and between the two latter countries), will be crucial.
The transfer of low-carbon technologies is an important lever to moderate GHG emissions by developing countries. It is the role of the Technology Mechanism, created in 200945. For example, refurbishment of existing coal-fired power stations, worldwide, using the best technologies available, would
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emissions by more than
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emissions by more than 1,000 million tons per year, or 3% of
Co
pyr i
gh
t ©
Cap
gem
ini
20141,000 million tons per year, or 3% of
global emissions from the burning of
Co
pyr i
gh
t ©
Cap
gem
ini
2014global emissions from the burning of
fossil fuels in 2012.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
fossil fuels in 2012.
The transfer of low-carbon technologies
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The transfer of low-carbon technologies raises obvious intellectual property
Co
pyr i
gh
t ©
Cap
gem
ini
2014
raises obvious intellectual property rights concerns for the states providing
Co
pyr i
gh
t ©
Cap
gem
ini
2014
rights concerns for the states providing them. The CERNA
Co
pyr i
gh
t ©
Cap
gem
ini
2014
them. The CERNAthis dilemma facing developed
Co
pyr i
gh
t ©
Cap
gem
ini
2014
this dilemma facing developed countries and finds that benefits would
Co
pyr i
gh
t ©
Cap
gem
ini
2014
countries and finds that benefits would exist for both recipients and providers
Co
pyr i
gh
t ©
Cap
gem
ini
2014
exist for both recipients and providers of the technologies.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of the technologies.
Only certain emerging countries (China,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Only certain emerging countries (China, Mexico and South Africa) are already
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Mexico and South Africa) are already recipients of technology transfer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
recipients of technology transfer insufficient development and a lack
Co
pyr i
gh
t ©
Cap
gem
ini
2014
insufficient development and a lack of accompanying social side effects,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of accompanying social side effects, tackling pollution in China, as in many
Co
pyr i
gh
t ©
Cap
gem
ini
2014
tackling pollution in China, as in many other developing countries, requires
Co
pyr i
gh
t ©
Cap
gem
ini
2014
other developing countries, requires more determination and courage than
Co
pyr i
gh
t ©
Cap
gem
ini
2014
more determination and courage than required from developed countries.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
required from developed countries. One of China’s goals is to reduce CO
Co
pyr i
gh
t ©
Cap
gem
ini
2014
One of China’s goals is to reduce COemissions per unit of gross domestic
Co
pyr i
gh
t ©
Cap
gem
ini
2014
emissions per unit of gross domestic product by 40-45% from 2005 levels
Co
pyr i
gh
t ©
Cap
gem
ini
2014
product by 40-45% from 2005 levels “The Chinese people have to
Co
pyr i
gh
t ©
Cap
gem
ini
2014
“The Chinese people have to tighten their belts to achieve this target”
Co
pyr i
gh
t ©
Cap
gem
ini
2014
tighten their belts to achieve this target”said Zou Ji, director of the Program
Co
pyr i
gh
t ©
Cap
gem
ini
2014
said Zou Ji, director of the Program of Energy and Climate Economics
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of Energy and Climate Economics at Renmin University of China. It is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
at Renmin University of China. It is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
estimated that to meet the goal, China
Co
pyr i
gh
t ©
Cap
gem
ini
2014
estimated that to meet the goal, China needs to invest $78 billion annually, the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
needs to invest $78 billion annually, the equivalent of $166 per family.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
equivalent of $166 per family.
Before the “Le Bourget” (France)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Before the “Le Bourget” (France) Climate conference in 2015,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Climate conference in 2015, negotiations between the EU and the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
negotiations between the EU and the two major emitters, China and the US
Co
pyr i
gh
t ©
Cap
gem
ini
2014
two major emitters, China and the US (and between the two latter countries),
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(and between the two latter countries),
13
the way we see itUtilities
problem lies in existing buildings, and is made more complex by the different objectives of owners and tenants.
Encouraging individuals to invest in modernizing their homes. Many incentives exist including financial subsidies (household premium tax credit, reduced VAT, Energy Efficiency certificates). However, they are not sufficient. At the end of 2013, in the general framework of the Public Energy Debate, the French government launched a “renovation passport” in order to overcome difficulties such as:• Fewstructuredand“end-to-end”
energy efficiency offers and,• Energypricelevelsthatdonotgive
sufficient financial return on energy efficiency works.
Various financial incentives for energy efficiency will be provided by France’s new Energy Bill; however, the funding announced seems too low to have a significant impact.
Devices Smart meter deployment. The EC’s third package of legislative proposals for electricity and gas markets requires Member States to ensure implementation of smart meters. This implementation may be subject to a long-term cost-benefit analysis (CBA). Where the CBA is positive, there is a rollout target of at least 80% market penetration for electricity by 2020. To date, Member States have committed to rolling out close to 200 million smart meters for electricity and 45 million for gas by 2020 for a total potential investment of €45 billion52.
By 2020, it is expected that almost 72% of European consumers will have a smart meter for electricity while 40% will have one for gas.
These factors underline the importance of energy efficiency, sometimes called invisible energy, and measured in negawatts.
Energy intensity (measured in toe48 to produce €1 million of GDP49) has improved in the last 20 years, especially in the industrial sector. In France, for example, in 1981, 122 toe of energy use was needed to produce €1 million of GDP. The figure was no more than 85 in 2012, which corresponds to an improvement of 30% in energy intensity50.
However, there is still room for progress, especially in the transportation and building sectors.
In the housing sector, progress can be achieved through a combination of different factors:
Public awareness. In Japan, after the tsunami, a target of 15% reduction in electricity consumption was reached for summer 2011, and electricity demand fell by more than 4 GW (16.6 GW in summer 2010 and 12.5 GW in summer 2011), thus avoiding a blackout. In 2014 also, an energy savings campaign has been launched before the summer.
On peak demand days in France, RTE’s51 Ecowatt alerts ask consumers (notably in Brittany) to curb their demand during peak hours and they get a positive response.
However, in ordinary circumstances cultural habits take time to change.
Regulation. In a certain way new buildings are easier to deal with as low energy consumption regulations apply. Regulation also has an impact when property is bought and sold, as an energy audit is required from the seller, making the new owner aware of future energy expenses. The main
Smart meters are the norm in Italy and Sweden. Finland completed its deployment of 5.1 million smart meters by the end of 2013, becoming the third European country to finalize the mass rollout.• InSpain,Endesa,Iberdrolaand
Gas Natural Fenosa are ordering devices for an installation program that should see 70% of households equipped by 2016 and universal adoption by 2018,
• InFrance,thedecisiontodeployelectricity smart meters (cost estimated between €5 and €7 billion for the 35 million meters) was taken in early July 2013 with a first phase of three million meters to be installed by 2016. In August 2013, the French government approved deployment of 11 million gas smart meters to take place during the 2016-2022 period,
• IntheUK,59millionelectricityandgas smart meters will be deployed by 2030.
Estimates vary across EU Members but the cost of a smart metering system averages between €77 and €766 per customer for electricity (for gas, it ranges between €100 and €268 per customer), while the meters deliver benefits per metering point of €160 for gas and €309 for electricity on average.
On energy savings, the estimates also vary widely with, on average, 3% energy savings. The peak load shifting varies greatly from 0.75% (UK) and 1% (Poland) to 9.9% in Ireland.
For greater energy savings, smart meters should be combined with incentive tariffs such as time-of-use tariffs. The emergence of smart household devices should increase overall energy savings efficiency.
48 Toe: ton of oil equivalent
49 GDP: Gross Domestic Product
50 But the weight of services in the French value added increased from 64% in 1980 to 79% in 2012, while the share of industry has declined from 24% to 12.5% over the same period.
51 RTE: Réseau de Transport d’Electricité, the French TSO
52 Cost-benefit analysis & state of play of smart metering deployment in the EU-27 (commission staff document June 18, 2014)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Smart meters are the norm in Italy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Smart meters are the norm in Italy and Sweden. Finland completed its
Co
pyr i
gh
t ©
Cap
gem
ini
2014and Sweden. Finland completed its
Co
pyr i
gh
t ©
Cap
gem
ini
2014
not
Co
pyr i
gh
t ©
Cap
gem
ini
2014
not give
Co
pyr i
gh
t ©
Cap
gem
ini
2014
givesufficient financial return on energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sufficient financial return on energy
Various financial incentives for energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Various financial incentives for energy efficiency will be provided by France’s
Co
pyr i
gh
t ©
Cap
gem
ini
2014
efficiency will be provided by France’s new Energy Bill; however, the funding
Co
pyr i
gh
t ©
Cap
gem
ini
2014
new Energy Bill; however, the funding announced seems too low to have a
Co
pyr i
gh
t ©
Cap
gem
ini
2014
announced seems too low to have a significant impact.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
significant impact.
Smart meter deployment.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Smart meter deployment.third package of legislative proposals
Co
pyr i
gh
t ©
Cap
gem
ini
2014
third package of legislative proposals for electricity and gas markets
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for electricity and gas markets requires Member States to ensure
Co
pyr i
gh
t ©
Cap
gem
ini
2014
requires Member States to ensure implementation of smart meters. This
Co
pyr i
gh
t ©
Cap
gem
ini
2014
implementation of smart meters. This implementation may be subject to a
Co
pyr i
gh
t ©
Cap
gem
ini
2014
implementation may be subject to a long-term cost-benefit analysis (CBA).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
long-term cost-benefit analysis (CBA). Where the CBA is positive, there is a
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Where the CBA is positive, there is a rollout target of at least 80% market
Co
pyr i
gh
t ©
Cap
gem
ini
2014
rollout target of at least 80% market penetration for electricity by 2020. To
Co
pyr i
gh
t ©
Cap
gem
ini
2014
penetration for electricity by 2020. To
However, in ordinary circumstances
Co
pyr i
gh
t ©
Cap
gem
ini
2014
However, in ordinary circumstances cultural habits take time to change.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
cultural habits take time to change.
In a certain way new
Co
pyr i
gh
t ©
Cap
gem
ini
2014
In a certain way new buildings are easier to deal with as
Co
pyr i
gh
t ©
Cap
gem
ini
2014
buildings are easier to deal with as low energy consumption regulations
Co
pyr i
gh
t ©
Cap
gem
ini
2014
low energy consumption regulations apply. Regulation also has an impact
Co
pyr i
gh
t ©
Cap
gem
ini
2014
apply. Regulation also has an impact when property is bought and sold, as
Co
pyr i
gh
t ©
Cap
gem
ini
2014
when property is bought and sold, as an energy audit is required from the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
an energy audit is required from the seller, making the new owner aware
Co
pyr i
gh
t ©
Cap
gem
ini
2014
seller, making the new owner aware of future energy expenses. The main
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of future energy expenses. The main
deployment of 5.1 million smart meters
Co
pyr i
gh
t ©
Cap
gem
ini
2014deployment of 5.1 million smart meters
by the end of 2013, becoming the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
by the end of 2013, becoming the third European country to finalize the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
third European country to finalize the mass rollout.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
mass rollout.Spain,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Spain, Endesa,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Endesa, Iberdrola
Co
pyr i
gh
t ©
Cap
gem
ini
2014
IberdrolaGas Natural Fenosa are ordering
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Gas Natural Fenosa are ordering devices for an installation program
Co
pyr i
gh
t ©
Cap
gem
ini
2014
devices for an installation program that should see 70% of households
Co
pyr i
gh
t ©
Cap
gem
ini
2014
that should see 70% of households equipped by 2016 and universal
Co
pyr i
gh
t ©
Cap
gem
ini
2014
equipped by 2016 and universal adoption by 2018,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
adoption by 2018,• In
Co
pyr i
gh
t ©
Cap
gem
ini
2014
• In France,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
France,electricity smart meters (cost
Co
pyr i
gh
t ©
Cap
gem
ini
2014
electricity smart meters (cost estimated between
Co
pyr i
gh
t ©
Cap
gem
ini
2014
estimated between
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Toe: ton of oil equivalentCo
pyr i
gh
t ©
Cap
gem
ini
2014
Toe: ton of oil equivalent
14 A Strategic Overview of the European Energy Markets
53 Financial Times special report June 24, 2014
54 http://ec.europa.eu/programmes/horizon2020/en/h2020-section/secure-clean-and-efficient-energy
Internet of Things. This sector is developing rapidly. It is estimated that in France, in 2020 each household will have around 150 connected objects. Smart home appliances, embedded with sensors that connect them to the user’s smart phone or tablet, promise to revolutionize our approach to energy use – and make the smart home a reality53.
Nothing has highlighted these changes better than Google’s $3.2 billion acquisition in January 2014 of Nest Labs, a start-up that offers smart thermostats and alarms for the home. Users can turn up or switch off their heating from anywhere using a smartphone.
Apple is working on a software platform that will turn the iPhone into a remote control for light security systems and other appliances. Samsung recently unveiled its Smart Home range of washing machines, refrigerators and TVs that can be controlled from its mobile phones and watches.
This new trend, while forcing Utilities to rethink their business models (see below), should enhance energy savings as it gives customers a direct sense of the energy (and money) they’re spending.
Preparing for the future
In Europe, Research and Development (R&D) efforts are promoted at two levels: Member States research and EU funding. The EU funds projects through various types of initiative: project funding; partnerships between public institutions such as the European Energy Research Alliance (EERA) founded by leading European research institutes; public-private partnerships such as Joint Technology Initiatives (JTIs) involving industry, research
communities, and public authorities; and industry-led initiatives such as European Industrial Initiatives (EIIs). The funding recipients have to comply with EU rules (for example, on the number of EU Member States involved and the inclusion of new EU Member States).
The amount of EU spending on energy research is difficult to assess. It is probably comparable with US spending, which is mainly led by the Department of Energy, but much more dispersed and probably less effective.
The Lisbon Strategy was adopted for a ten-year period in 2000 by the European Council. It broadly aimed to make Europe, by 2010, the most competitive and dynamic knowledge-based economy in the world.
It was heavily based on the economic concepts of: • Innovationasthevehiclefor
economic change, • Theknowledgeeconomy,• Socialandenvironmentalrenewal.
Translating the Lisbon Strategy goals into concrete measures led to the extension of the Framework Programmes (FPs) for Research and Technological Development. The Seventh Framework Programme (FP7) bundled all research-related EU initiatives together under a common roof; it ended in 2013, and was followed by Horizon 2020 (previously named FP8).
Horizon 2020 is the biggest EU Research and Innovation program ever, with nearly €80 billion of funding available over seven years (2014 to 2020), in addition to the private investment that this money will attract.
Within Horizon 202054, the Energy Challenge is designed to support the transition to a reliable, sustainable and competitive energy system.C
op
yr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
home. Users can turn up or switch
Co
pyr i
gh
t ©
Cap
gem
ini
2014
home. Users can turn up or switch
Co
pyr i
gh
t ©
Cap
gem
ini
2014
home. Users can turn up or switch
Co
pyr i
gh
t ©
Cap
gem
ini
2014
home. Users can turn up or switch off their heating from anywhere using
Co
pyr i
gh
t ©
Cap
gem
ini
2014
off their heating from anywhere using
Co
pyr i
gh
t ©
Cap
gem
ini
2014
off their heating from anywhere using
Co
pyr i
gh
t ©
Cap
gem
ini
2014
off their heating from anywhere using
Apple is working on a software platform
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Apple is working on a software platform
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Apple is working on a software platform
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Apple is working on a software platform that will turn the iPhone into a remote
Co
pyr i
gh
t ©
Cap
gem
ini
2014
that will turn the iPhone into a remote
Co
pyr i
gh
t ©
Cap
gem
ini
2014
that will turn the iPhone into a remote
Co
pyr i
gh
t ©
Cap
gem
ini
2014
that will turn the iPhone into a remote control for light security systems and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
control for light security systems and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
control for light security systems and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
control for light security systems and other appliances. Samsung recently
Co
pyr i
gh
t ©
Cap
gem
ini
2014
other appliances. Samsung recently
Co
pyr i
gh
t ©
Cap
gem
ini
2014
other appliances. Samsung recently
Co
pyr i
gh
t ©
Cap
gem
ini
2014
other appliances. Samsung recently unveiled its Smart Home range of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
unveiled its Smart Home range of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
unveiled its Smart Home range of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
unveiled its Smart Home range of washing machines, refrigerators and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
washing machines, refrigerators and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
washing machines, refrigerators and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
washing machines, refrigerators and TVs that can be controlled from its
Co
pyr i
gh
t ©
Cap
gem
ini
2014
TVs that can be controlled from its
Co
pyr i
gh
t ©
Cap
gem
ini
2014
TVs that can be controlled from its
Co
pyr i
gh
t ©
Cap
gem
ini
2014
TVs that can be controlled from its mobile phones and watches.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
mobile phones and watches.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
mobile phones and watches.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
mobile phones and watches.
This new trend, while forcing Utilities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
This new trend, while forcing Utilities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
This new trend, while forcing Utilities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
This new trend, while forcing Utilities to rethink their business models
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to rethink their business models
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to rethink their business models
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to rethink their business models (see below), should enhance energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(see below), should enhance energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(see below), should enhance energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
(see below), should enhance energy savings as it gives customers a direct
Co
pyr i
gh
t ©
Cap
gem
ini
2014
savings as it gives customers a direct
Co
pyr i
gh
t ©
Cap
gem
ini
2014
savings as it gives customers a direct
Co
pyr i
gh
t ©
Cap
gem
ini
2014
savings as it gives customers a direct sense of the energy (and money)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sense of the energy (and money)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sense of the energy (and money)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sense of the energy (and money) they’re spending.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
they’re spending.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
they’re spending.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
they’re spending.
P
Co
pyr i
gh
t ©
Cap
gem
ini
2014
P
Co
pyr i
gh
t ©
Cap
gem
ini
2014
P
Co
pyr i
gh
t ©
Cap
gem
ini
2014
P
communities, and public authorities;
Co
pyr i
gh
t ©
Cap
gem
ini
2014
communities, and public authorities;
Co
pyr i
gh
t ©
Cap
gem
ini
2014
communities, and public authorities;
Co
pyr i
gh
t ©
Cap
gem
ini
2014
communities, and public authorities; and industry-led initiatives such as
Co
pyr i
gh
t ©
Cap
gem
ini
2014and industry-led initiatives such as
Co
pyr i
gh
t ©
Cap
gem
ini
2014and industry-led initiatives such as
Co
pyr i
gh
t ©
Cap
gem
ini
2014and industry-led initiatives such as
European Industrial Initiatives (EIIs). The
Co
pyr i
gh
t ©
Cap
gem
ini
2014European Industrial Initiatives (EIIs). The
Co
pyr i
gh
t ©
Cap
gem
ini
2014European Industrial Initiatives (EIIs). The
Co
pyr i
gh
t ©
Cap
gem
ini
2014European Industrial Initiatives (EIIs). The
funding recipients have to comply with
Co
pyr i
gh
t ©
Cap
gem
ini
2014
funding recipients have to comply with
Co
pyr i
gh
t ©
Cap
gem
ini
2014
funding recipients have to comply with
Co
pyr i
gh
t ©
Cap
gem
ini
2014
funding recipients have to comply with EU rules (for example, on the number
Co
pyr i
gh
t ©
Cap
gem
ini
2014
EU rules (for example, on the number
Co
pyr i
gh
t ©
Cap
gem
ini
2014
EU rules (for example, on the number
Co
pyr i
gh
t ©
Cap
gem
ini
2014
EU rules (for example, on the number of EU Member States involved and the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of EU Member States involved and the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of EU Member States involved and the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
of EU Member States involved and the inclusion of new EU Member States).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
inclusion of new EU Member States).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
inclusion of new EU Member States).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
inclusion of new EU Member States).
The amount of EU spending on
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The amount of EU spending on
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The amount of EU spending on
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The amount of EU spending on energy research is difficult to assess.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy research is difficult to assess.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy research is difficult to assess.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy research is difficult to assess. It is probably comparable with US
Co
pyr i
gh
t ©
Cap
gem
ini
2014
It is probably comparable with US
Co
pyr i
gh
t ©
Cap
gem
ini
2014
It is probably comparable with US
Co
pyr i
gh
t ©
Cap
gem
ini
2014
It is probably comparable with US spending, which is mainly led by the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
spending, which is mainly led by the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
spending, which is mainly led by the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
spending, which is mainly led by the Department of Energy, but much more
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Department of Energy, but much more
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Department of Energy, but much more
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Department of Energy, but much more dispersed and probably less effective.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
dispersed and probably less effective.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
dispersed and probably less effective.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
dispersed and probably less effective.
The Lisbon Strategy was adopted
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The Lisbon Strategy was adopted
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The Lisbon Strategy was adopted
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The Lisbon Strategy was adopted for a ten-year period in 2000 by the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for a ten-year period in 2000 by the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for a ten-year period in 2000 by the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for a ten-year period in 2000 by the
15
the way we see itUtilities
It is structured around seven specific objectives and research areas:• Reducingenergyconsumptionand
carbon footprint,• Low-cost,low-carbonelectricity
supply,• Alternativefuelsandmobileenergy
sources,• Asingle,smartEuropeanelectricity
grid,• Newknowledgeandtechnologies,• Robustdecisionmakingandpublic
engagement, and,• Marketuptakeofenergyand
ICT innovation.
The cost of this initiative is estimated at €9 billion over ten years. A budget of around €6 billion has been allocated to non-nuclear energy research for 2014-2020.
The first work program will be split into the following focus areas:• Energyefficiency:researchand
demonstration activities within this area will focus on buildings, industry, heating and cooling, energy-related products and services, integration of ICT, and cooperation with the telecom sector,
• LowCarbonTechnologies:researchactivities within this area will cover solar PV power, concentrated solar power, wind energy, ocean energy, hydro power, geothermal energy, renewable heating and cooling, energy storage, bio-fuels and alternative fuels, and carbon capture and storage,
• SmartCities&Communities:sustainable development of urban areas is a challenge of key importance. It requires new, efficient, and user-friendly technologies and services, particularly in the areas of energy, transport and ICT. However, these solutions need integrated approaches, in terms both of R&D leading to advanced technological
solutions and of deployment. The focus on technologies for smart cities will result in commercial-scale solutions with a high market potential.
In all programs, data collection, processing and usage are essential technologies, demonstrating that digital technologies are key enablers for the future.
It must be hoped that all these numerous projects will be monitored in a coherent and sound way and that they will bring more economic growth and competiveness to Europe.
Utilities
The Utilities are in a difficult situation and must adapt to changes in their business environment and customer demands.
For consumers, residential or commercial, electricity and gas have become commodities; the consumer now expects services, including energy management, from the supplier.
Consumers have also become producers on the basis of solar and wind energies, which are decentralized and intermittent. This phenomenon is no longer marginal – Germany now has around 6.35 million prosumers55. Some communities wish to manage their own energy and even become self-sufficient by combining decentralized generation, energy savings, new devices such as smart meters, and up-to-date information and communication technologies. There are many European Smart City Models involving companies from various sectors: construction, IT and telecom, electrical equipment manufacturers, service companies, regulators and Utilities.
These concepts are certainly well suited to isolated regions with no or limited grid access. They represent a threat for Utilities but also open new opportunities for them.
New competitors are emerging. Traditionally, competition came from foreign Utilities wanting to conquer new markets in order to compensate for the loss of clients in their domestic market. But now competitors from different sectors are trying to penetrate the electricity and gas retail markets: for example, Magyar Telekom sells electricity and gas to residential and business customers; Marks and Spencer (M&S), the UK retailer, has teamed up with Scottish and Southern Energy (SSE) to offer energy packages with the promise of M&S vouchers for those who make the switch.
Under these pressures, Utilities have to become more reactive and flexible, and improve their competitiveness. To achieve these new goals, they will have to embed digital technologies and mobility in their business models.
With a growing share of renewables in electricity generation, grid management will have to become smarter, with a dual flow of electrons and Megabytes on the grid (see above). Also, the exchange of information by digital means will profoundly change the operation and maintenance of the network business (remote reading of meters, maintenance workers equipped with mobile terminals, etc). This digital revolution will only be efficient if internal processes are transformed and collaborators move to new work habits.
The client relationship is evolving quickly and new digital technologies will have to be widely used. For example, GDF Suez launched “Happ’e”, a 100% online supplier offering electricity with
55 Financial Times, June 24, 2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
These concepts are certainly well suited
Co
pyr i
gh
t ©
Cap
gem
ini
2014
These concepts are certainly well suited
Co
pyr i
gh
t ©
Cap
gem
ini
2014
These concepts are certainly well suited
Co
pyr i
gh
t ©
Cap
gem
ini
2014
These concepts are certainly well suited to isolated regions with no or limited
Co
pyr i
gh
t ©
Cap
gem
ini
2014to isolated regions with no or limited
Co
pyr i
gh
t ©
Cap
gem
ini
2014to isolated regions with no or limited
Co
pyr i
gh
t ©
Cap
gem
ini
2014to isolated regions with no or limited
grid access. They represent a threat for
Co
pyr i
gh
t ©
Cap
gem
ini
2014grid access. They represent a threat for
Co
pyr i
gh
t ©
Cap
gem
ini
2014grid access. They represent a threat for
Co
pyr i
gh
t ©
Cap
gem
ini
2014grid access. They represent a threat for
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
alternative fuels, and carbon capture
Co
pyr i
gh
t ©
Cap
gem
ini
2014
alternative fuels, and carbon capture
Co
pyr i
gh
t ©
Cap
gem
ini
2014
alternative fuels, and carbon capture
Co
pyr i
gh
t ©
Cap
gem
ini
2014
alternative fuels, and carbon capture
Communities:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Communities:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Communities:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Communities:sustainable development of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sustainable development of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sustainable development of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
sustainable development of urban areas is a challenge of key
Co
pyr i
gh
t ©
Cap
gem
ini
2014
urban areas is a challenge of key
Co
pyr i
gh
t ©
Cap
gem
ini
2014
urban areas is a challenge of key
Co
pyr i
gh
t ©
Cap
gem
ini
2014
urban areas is a challenge of key importance. It requires new, efficient,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
importance. It requires new, efficient,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
importance. It requires new, efficient,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
importance. It requires new, efficient, and user-friendly technologies and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and user-friendly technologies and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and user-friendly technologies and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and user-friendly technologies and services, particularly in the areas of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
services, particularly in the areas of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
services, particularly in the areas of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
services, particularly in the areas of energy, transport and ICT. However,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy, transport and ICT. However,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy, transport and ICT. However,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy, transport and ICT. However, these solutions need integrated
Co
pyr i
gh
t ©
Cap
gem
ini
2014
these solutions need integrated
Co
pyr i
gh
t ©
Cap
gem
ini
2014
these solutions need integrated
Co
pyr i
gh
t ©
Cap
gem
ini
2014
these solutions need integrated approaches, in terms both of R&D
Co
pyr i
gh
t ©
Cap
gem
ini
2014
approaches, in terms both of R&D
Co
pyr i
gh
t ©
Cap
gem
ini
2014
approaches, in terms both of R&D
Co
pyr i
gh
t ©
Cap
gem
ini
2014
approaches, in terms both of R&D leading to advanced technological C
op
yr i
gh
t ©
Cap
gem
ini
2014
leading to advanced technological Co
pyr i
gh
t ©
Cap
gem
ini
2014
leading to advanced technological Co
pyr i
gh
t ©
Cap
gem
ini
2014
leading to advanced technological
they will bring more economic growth
Co
pyr i
gh
t ©
Cap
gem
ini
2014
they will bring more economic growth
Co
pyr i
gh
t ©
Cap
gem
ini
2014
they will bring more economic growth
Co
pyr i
gh
t ©
Cap
gem
ini
2014
they will bring more economic growth
The Utilities are in a difficult
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The Utilities are in a difficult
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The Utilities are in a difficult
Co
pyr i
gh
t ©
Cap
gem
ini
2014
The Utilities are in a difficult and must adapt to changes
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and must adapt to changes
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and must adapt to changes
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and must adapt to changes in their business environment and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
in their business environment and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
in their business environment and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
in their business environment and customer demands.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
customer demands.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
customer demands.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
customer demands.
For consumers, residential or
Co
pyr i
gh
t ©
Cap
gem
ini
2014
For consumers, residential or
Co
pyr i
gh
t ©
Cap
gem
ini
2014
For consumers, residential or
Co
pyr i
gh
t ©
Cap
gem
ini
2014
For consumers, residential or commercial, electricity and gas have
Co
pyr i
gh
t ©
Cap
gem
ini
2014
commercial, electricity and gas have
Co
pyr i
gh
t ©
Cap
gem
ini
2014
commercial, electricity and gas have
Co
pyr i
gh
t ©
Cap
gem
ini
2014
commercial, electricity and gas have become commodities; the consumer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
become commodities; the consumer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
become commodities; the consumer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
become commodities; the consumer now expects services, including energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
now expects services, including energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
now expects services, including energy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
now expects services, including energy management, from the supplier.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
management, from the supplier.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
management, from the supplier.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
management, from the supplier.
Consumers have also become
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Consumers have also become
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Consumers have also become
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Consumers have also become producers on the basis of solar and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
producers on the basis of solar and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
producers on the basis of solar and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
producers on the basis of solar and wind energies, which are decentralized
Co
pyr i
gh
t ©
Cap
gem
ini
2014
wind energies, which are decentralized
Co
pyr i
gh
t ©
Cap
gem
ini
2014
wind energies, which are decentralized
Co
pyr i
gh
t ©
Cap
gem
ini
2014
wind energies, which are decentralized and intermittent. This phenomenon is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and intermittent. This phenomenon is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and intermittent. This phenomenon is
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and intermittent. This phenomenon is no longer marginal – Germany now has
Co
pyr i
gh
t ©
Cap
gem
ini
2014
no longer marginal – Germany now has
Co
pyr i
gh
t ©
Cap
gem
ini
2014
no longer marginal – Germany now has
Co
pyr i
gh
t ©
Cap
gem
ini
2014
no longer marginal – Germany now has around 6.35 million prosumers
Co
pyr i
gh
t ©
Cap
gem
ini
2014
around 6.35 million prosumers
Co
pyr i
gh
t ©
Cap
gem
ini
2014
around 6.35 million prosumers
Co
pyr i
gh
t ©
Cap
gem
ini
2014
around 6.35 million prosumerscommunities wish to manage their own
Co
pyr i
gh
t ©
Cap
gem
ini
2014
communities wish to manage their own
Co
pyr i
gh
t ©
Cap
gem
ini
2014
communities wish to manage their own
Co
pyr i
gh
t ©
Cap
gem
ini
2014
communities wish to manage their own
Utilities but also open new opportunities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Utilities but also open new opportunities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Utilities but also open new opportunities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Utilities but also open new opportunities
New competitors are emerging.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
New competitors are emerging.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
New competitors are emerging.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
New competitors are emerging.Traditionally, competition came from
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Traditionally, competition came from
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Traditionally, competition came from
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Traditionally, competition came from foreign Utilities wanting to conquer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
foreign Utilities wanting to conquer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
foreign Utilities wanting to conquer
Co
pyr i
gh
t ©
Cap
gem
ini
2014
foreign Utilities wanting to conquer new markets in order to compensate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
new markets in order to compensate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
new markets in order to compensate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
new markets in order to compensate for the loss of clients in their domestic
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for the loss of clients in their domestic
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for the loss of clients in their domestic
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for the loss of clients in their domestic market. But now competitors from
Co
pyr i
gh
t ©
Cap
gem
ini
2014
market. But now competitors from
Co
pyr i
gh
t ©
Cap
gem
ini
2014
market. But now competitors from
Co
pyr i
gh
t ©
Cap
gem
ini
2014
market. But now competitors from different sectors are trying to penetrate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
different sectors are trying to penetrate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
different sectors are trying to penetrate
Co
pyr i
gh
t ©
Cap
gem
ini
2014
different sectors are trying to penetrate the electricity and gas retail markets:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the electricity and gas retail markets:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the electricity and gas retail markets:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the electricity and gas retail markets: for example, Magyar Telekom sells
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for example, Magyar Telekom sells
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for example, Magyar Telekom sells
Co
pyr i
gh
t ©
Cap
gem
ini
2014
for example, Magyar Telekom sells electricity and gas to residential and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
electricity and gas to residential and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
electricity and gas to residential and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
electricity and gas to residential and business customers; Marks and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
business customers; Marks and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
business customers; Marks and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
business customers; Marks and
16 A Strategic Overview of the European Energy Markets
56 Particularly significant in view of Utilities’ high levels of debt
57 Magritte is an association of 11 large European Utilities CEOs aimed at lobbying the European Commission
a price discount of 5 to 10% aiming to win 20-30,000 clients in 2014.
Utilities are also enhancing their client relationships by adding new services including energy diagnosis, building insulation improvement, and efficiency services via smart meters and connected devices. For example, British Gas (UK) recently launched a service called Hive Active Heating enabling its customers to remotely control their heating and hot water. Potential savings could be £150 per year per household.
Utilities have or are developing Services Business Units that are not capital intensive56 and have few entry barriers. These Business Units can represent a significant portion of the workforce (78,000 employees in GDF Suez from a total of 138,000).
Others increase their presence through acquisitions: for instance, EDF acquired Dalkia France (13,000 employees) in late 2013.
Finally, Utilities want to continue to expand outside Europe. Some are already international: • GDFSuezisthemostdiverse
(number one in the Middle East, number two in Brazil),
• 40%ofEnel’sturnovercomesfrom developing countries, and the objective is to reach 50% in 2017,
• Only6%ofE.ON’sturnoverisgenerated abroad (Turkey, Russia, Brazil) but its ambitions are strong.
There are many risks to manage: local country knowledge, political instability, local regulations, fluctuating exchange rates etc, but in counterpart these regions have more attractive growth than Europe where growth is stalled.
Conclusion
Compared to the previous period and following wide-ranging lobbying57, the EC is realizing that reforms are needed to restore sustained electricity and gas markets in Europe.
It has embarked on changes such as setting a single CO2 emissions reduction objectives for 2030 (instead of three distinct objectives); reducing funding for renewables and relating it to market conditions; creating a market stability reserve to manage the ETS market in line with the European economy; and accepting implementation of capacity markets in Member States (with different designs allowed).
However, more profound reforms are needed and the present situation of chaotic wholesale markets, with negative wholesale prices and increasing prices for retail customers, is likely to prevail in coming years.
A market design overhaul is needed, and the new EC will have to adopt a pragmatic position and implement new rules for the electricity and gas markets. With hindsight, the initial approach, derived from the telecommunications market, was not well suited to those parts of the Utilities value chain (such as generation and transportation) that are long-term, heavy investment industries. That liberal approach, based on enhancing competition, was better suited to retail businesses.
In-depth reforms are therefore urgently needed in order to restore stable market conditions and ensure that lights will stay on.
This winter, security of supply is already threatened in certain European countries (for example, Belgium). In one or two years, this could be the case in others, such as France.
17
the way we see itUtilities
In the longer term, investments are needed: by 2035, Europe will need to invest $2,200 billion in electricity infrastructure alone. With the present uncertain situation and the difficult financial environment for Utilities, these investments could be delayed and security of the electricity supply could be at risk in the long term also.
Energy transition plans continue to be developed in several European countries. Germany, which started its plan in 2011, is encountering many difficulties, and the lessons learned there should be taken into account by other Member States (such as France) adopting new energy bills. One drawback of these energy transition plans is the impact of electricity retail price increases on the residential, tertiary and industrial sectors.
The competitiveness of European industries is a key factor in the region’s economy. Tax exemptions related to renewables’ and grid costs have been implemented in Germany and could be extended to other countries. The problem with those exemptions is that the burden of cost increases is greater for non-exempted sectors, including residential customers. If special energy price discounts for fuel-poor consumers are added, the burden becomes even heavier for others.
Adoption of new technologies like fracking should (as in the US) decrease oil and gas costs, boost the energy-intensive industrial sector, and improve energy independence.
Security of the energy supply is a permanent objective that we, in the EEMO, have constantly stressed. This year the Ukraine-Russia crisis has been an eye-opener for security of the European gas supply, and could lead to supply cuts if the EU-Russia relationship stays tense.
The EU is committed to a well-funded R&D program (Horizon 2020), and many Member States are increasing their investments in R&D. In the longer term, these efforts should help improve the overall performance of European companies and the quality of day-to-day life for European citizens.
A recurring theme in the R&D priority actions is collecting, understanding and adequately using big data. This is a reflection of the digital world we are entering.
Utilities should take advantage of this revolution, especially in the grid management and customer relationship parts of their value chain. They must continue to transform themselves. Becoming true “Digital Utilities” will enable them to be more adaptive and competitive, and become the winners in these difficult markets.
Paris, September 15, 2014.
Colette Lewiner
Energy and Utilities Advisor to Capgemini Chairman
112 Team and Authors
Electricity InfrastructuresYann de Saint [email protected]
Aurélien [email protected]
Electricity Wholesale MarketsWandrille [email protected]
Jean-Nicolas [email protected]
Gas MarketsUpstream GasFlorent [email protected]
Abhinay [email protected]
Gas InfrastructuresSafae El [email protected]
Gas Wholesale MarketsLouis [email protected]
Customer TransformationSylvain [email protected]
Cédric [email protected]
Gabriel de la [email protected]
Thibaut [email protected]
Energy Transition Markets and TrendsAlain [email protected]
Katia [email protected]
Yann de Saint [email protected]
Benjamin [email protected]
Companies’ OverviewStrategy and organizational challengesPhilippe Vié[email protected]
Paul [email protected]
Topic BoxesAre the European regulatory principles obsolete in regard to energy transition?Alain [email protected]
Wandrille [email protected]
Going off grid will be possible sooner than expectedAlain [email protected]
Benjamin [email protected]
Distribution Network Operators – a business in full transformationPierre [email protected]
The German Energiewende – a role model for the European energy market?Cemil [email protected]
Daniel [email protected]
New Spanish regulation based on a smart meter model shakes the whole retail marketAntonio Alonso [email protected]
Oscar Somarriba [email protected]
Alternative propulsion technologies: time to join the market?Alain [email protected]
Yann de Saint [email protected]
Acknowledgements to Sofía Polo Payá, Parvathy Nair, Sweta Pai, Ingrid Pinchot, Sam Connatty, Camilla Carlsson and Stéphane Tchirieff.
Report SponsorPhilippe Vié+33 1 49 67 42 [email protected]
Project DirectorSopha Ang+33 1 49 00 22 [email protected]
Our partners
European Energy Policy insights CMS Bureau Francis LefebvreMr Christophe Barthélemy+33 1 47 38 55 [email protected]
Switching insights VaasaETTChristophe Dromacque+358 (0)4 4906 [email protected]
Anna Bogacka+358 (0)4 4906 [email protected]
Finance and Valuation insights NatixisIvan Pavlovic+33 1 58 55 82 [email protected]
Philippe Ourpatian+33 1 58 55 05 [email protected]
Energy Regulation and Policies OverviewSustainability and Climate Change TargetsAlain [email protected]
Alexandre [email protected]
Electricity MarketsElectricity GenerationGrégoire Lejetté[email protected]
Nicolas Pré[email protected]
Mélanie [email protected]
Thibaut [email protected]
Team and AuthorsC
op
yr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Gas Wholesale Markets
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Gas Wholesale MarketsLouis Brun-Ney
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Louis [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Customer Transformation
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Customer TransformationSylvain Canu
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Sylvain [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Cédric Vialle
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Cédric [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Gabriel de la Marnierre
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Gabriel de la [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Thibaut Vandorpe
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Thibaut [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014Are the European regulatory principles
Co
pyr i
gh
t ©
Cap
gem
ini
2014Are the European regulatory principles
obsolete in regard to energy transition?
Co
pyr i
gh
t ©
Cap
gem
ini
2014obsolete in regard to energy transition?
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Wandrille Vallet
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Wandrille [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Going off grid will be possible sooner than
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Going off grid will be possible sooner than expected
Co
pyr i
gh
t ©
Cap
gem
ini
2014
expectedAlain Chardon
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Alain [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Benjamin Henniaux-Vergnhes
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Benjamin [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
benjamin.henniaux-vergnhes@[email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Distribution Network Operators – a
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Distribution Network Operators – a business in full transformation
Co
pyr i
gh
t ©
Cap
gem
ini
2014
business in full transformationPierre Lorquet
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Pierre Lorquet
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Sustainability and Climate Change Targets
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Sustainability and Climate Change Targets
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Electricity Generation
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Electricity Generation
Co
pyr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Nicolas Prévitali
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Nicolas Pré[email protected]
op
yr i
gh
t ©
Cap
gem
ini
2014
[email protected]@capgemini.comCo
pyr i
gh
t ©
Cap
gem
ini
2014
Mélanie BertiauxCo
pyr i
gh
t ©
Cap
gem
ini
2014
Mélanie [email protected]
Co
pyr i
gh
t ©
Cap
gem
ini
2014
113
the way we see itUtilities
About CMS Bureau Francis LefebvreCMS Bureau Francis Lefebvre is one of the leading business law firms in France (Paris, Lyon, Strasbourg) and North Africa (Algiers, Casablanca). Its organisation based on the active assistance by specialist lawyers and its recognised know-how for over 85 years ensure that companies are provided with reliable and sound advice relating to their strategic and tactical decisions at national and international level.
CMS Bureau Francis Lefebvre is a member of CMS, the organisation of 10 major independent European law firms providing businesses with legal and tax services across Europe and beyond. Operating in 49 business centres around the world, CMS has over 750 partners, more than 2,800 legal and tax advisers and a total complement of over 5,000 staff.
Implantation in 30 countries:
European countries: Albania, Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, France, Germany, Hungary, Italy, Luxembourg, The Netherlands, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Switzerland, Turkey, Ukraine and United Kingdom
Outside Europe: Algeria, Brazil, China, Morocco, Turkey and United Arab Emirates
More information at [email protected] and www.cms-bfl.com
About VaasaETTVaasaETT is a research and advisory consultancy dedicated to customer related issues in the energy industry. VaasaETT advises its clients based on empirical evidence brought about from extensive research in the area of customer behavior and competitive market behavior (including smart energy offerings, demand response, energy efficiency, smart home, smart grid). VaasaETT’s unique collaborative approach enables it to draw on an extensive network of several thousand energy practitioners around the world who can contribute to its research activities or take part in industry events it organizes allowing VaasaETT to integrate global knowledge and global best practice into its areas of expertise. VaasaETT’s truly global focus is reflected by research and strategic support having been provided to a diverse array of organizations on 5 continents including for instance 28 of the Fortune Global 500 companies, the European Commission, Government and public research bodies in Europe, Japan, the UAE, the Middle East and Australia.
More information at www.vaasaett.com
About NatixisNatixis is the corporate, investment and financial services arm of Groupe BPCE, the 2nd-largest banking group in France with 36 million clients spread over two retail banking networks, Banque Populaire and Caisse d’Epargne.
With more than 16,000 employees, Natixis has a number of areas of expertise that are organized into three main business lines: Wholesale Banking, Investment Solutions & Insurance, and Specialized Financial Services.
A global player, Natixis has its own client base of companies, financial institutions and institutional investors as well as the client base of individuals, professionals and small and medium-size businesses of Groupe BPCE’s banking networks.
Listed on the Paris stock exchange, it has a solid financial base with a CETa capital under Basel 3(1) of €13.2 billion, a Basel 3 CETa Ratio(1) of 11.2% and quality long-term ratings (Standard & Poor’s: A / Moody’s: A2 / Fitch Ratings: A).
(a) Based on CRR-CRD4 rules published on June 26, 2013, including the Danish compromise - no phase-in except for DTAs on loss carry-forwards
Figures as at June 30, 2014
More information at www.natixis.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
member of CMS, the organisation of 10
Co
pyr i
gh
t ©
Cap
gem
ini
2014
member of CMS, the organisation of 10 major independent European law firms
Co
pyr i
gh
t ©
Cap
gem
ini
2014
major independent European law firms providing businesses with legal and tax
Co
pyr i
gh
t ©
Cap
gem
ini
2014
providing businesses with legal and tax services across Europe and beyond.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
services across Europe and beyond. Operating in 49 business centres
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Operating in 49 business centres around the world, CMS has over 750
Co
pyr i
gh
t ©
Cap
gem
ini
2014
around the world, CMS has over 750 partners, more than 2,800 legal and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
partners, more than 2,800 legal and tax advisers and a total complement of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
tax advisers and a total complement of
Implantation in 30 countries:
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Implantation in 30 countries:
European countries: Albania, Austria,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
European countries: Albania, Austria, Belgium, Bosnia and Herzegovina,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Bulgaria, Croatia, Czech Republic, France, Germany, Hungary, Italy,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
France, Germany, Hungary, Italy, Luxembourg, The Netherlands, Poland,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Luxembourg, The Netherlands, Poland, Portugal, Romania, Russia, Serbia,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Switzerland,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Slovakia, Slovenia, Spain, Switzerland, Turkey, Ukraine and United Kingdom
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Turkey, Ukraine and United Kingdom
Outside Europe: Algeria, Brazil, China,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Outside Europe: Algeria, Brazil, China,
VaasaETT is a research and advisory
Co
pyr i
gh
t ©
Cap
gem
ini
2014VaasaETT is a research and advisory
consultancy dedicated to customer
Co
pyr i
gh
t ©
Cap
gem
ini
2014consultancy dedicated to customer
related issues in the energy industry.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
related issues in the energy industry. VaasaETT advises its clients based
Co
pyr i
gh
t ©
Cap
gem
ini
2014
VaasaETT advises its clients based on empirical evidence brought about
Co
pyr i
gh
t ©
Cap
gem
ini
2014
on empirical evidence brought about from extensive research in the area of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
from extensive research in the area of customer behavior and competitive
Co
pyr i
gh
t ©
Cap
gem
ini
2014
customer behavior and competitive market behavior (including smart
Co
pyr i
gh
t ©
Cap
gem
ini
2014
market behavior (including smart energy offerings, demand response,
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy offerings, demand response, energy efficiency, smart home, smart
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy efficiency, smart home, smart grid). VaasaETT’s unique collaborative
Co
pyr i
gh
t ©
Cap
gem
ini
2014
grid). VaasaETT’s unique collaborative approach enables it to draw on an
Co
pyr i
gh
t ©
Cap
gem
ini
2014
approach enables it to draw on an extensive network of several thousand
Co
pyr i
gh
t ©
Cap
gem
ini
2014
extensive network of several thousand energy practitioners around the world
Co
pyr i
gh
t ©
Cap
gem
ini
2014
energy practitioners around the world who can contribute to its research
Co
pyr i
gh
t ©
Cap
gem
ini
2014
who can contribute to its research
More information at www.natixis.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
More information at www.natixis.com
114 European Energy Markets Observatory
About the European Energy Markets ObservatoryInitiated in 2002, Capgemini’s European Energy Markets Observatory (EEMO) is an annual report that tracks progress in establishing an open and competitive electricity and gas market in EU-28 (plus Norway and Switzerland) and the progress in reaching the EU’s 3x20 climate change objectives. The report looks at all segments of the value chain and analyzes leading-edge energy themes to identify key trends in the electricity and gas industries.
The analysis is made by a team of consultants and regional experts of Capgemini Consulting, the global strategy and transformation consulting organization of the Capgemini Group. Their in-depth knowledge combined with sector news crunching provide an insightful analysis which is enriched by the expertise from our selected partners: Natixis, VaasaETT and CMS Bureau Francis Lefebvre.
About Capgemini ConsultingCapgemini Consulting is the global strategy and transformation consulting organization of the Capgemini Group, specializing in advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,600 talented individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the digital economy and our leadership in business transformation and organizational change.
Our Expertise and Unique Approach in the Utilities and Energy Sector
Capgemini Consulting helps clients formulate operational strategies, implement wide business transformations and optimize organizations and processes through dedicated operational management initiatives.
Our areas of expertise in the Utilities and energy sector include:• DigitalUtilitiesTransformation• SmartEnergy(includingimplementationofsmartinfrastructures)• Powergeneration• Power&gasinfrastructuresandregulatedactivities• Energyretailincludingenergyservices• Cleantechnologies• Waterdistribution,collectionandtreatment• UpstreamanddownstreamOil&Gas• DigitalAssetLifecycleManagement
Our 800+ professionals operating in 12 major geographies include consulting professionals and experts in specific value chain segments and industry issues. We deliver consulting services to 60% of the leading Utilities companies, and to 50% of the leading Oil and Gas companies worldwide.
We are recognized for our professional commitment and leadership, our intellectual curiosity, and our ability to innovate.
Find out more at:
www.capgemini-consulting.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014Initiated in 2002, Capgemini’s European Energy Markets Observatory (EEMO) is an annual report that tracks progress in
Co
pyr i
gh
t ©
Cap
gem
ini
2014Initiated in 2002, Capgemini’s European Energy Markets Observatory (EEMO) is an annual report that tracks progress in
establishing an open and competitive electricity and gas market in EU-28 (plus Norway and Switzerland) and the progress in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
establishing an open and competitive electricity and gas market in EU-28 (plus Norway and Switzerland) and the progress in reaching the EU’s 3x20 climate change objectives. The report looks at all segments of the value chain and analyzes leading-edge
Co
pyr i
gh
t ©
Cap
gem
ini
2014
reaching the EU’s 3x20 climate change objectives. The report looks at all segments of the value chain and analyzes leading-edge
, the global strategy and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
, the global strategy and transformation consulting organization of the Capgemini Group. Their in-depth knowledge combined with sector news crunching
Co
pyr i
gh
t ©
Cap
gem
ini
2014
transformation consulting organization of the Capgemini Group. Their in-depth knowledge combined with sector news crunching provide an insightful analysis which is enriched by the expertise from our selected partners: Natixis, VaasaETT and CMS Bureau
Co
pyr i
gh
t ©
Cap
gem
ini
2014
provide an insightful analysis which is enriched by the expertise from our selected partners: Natixis, VaasaETT and CMS Bureau
is the global strategy and transformation consulting organization of the Capgemini Group, specializing in
Co
pyr i
gh
t ©
Cap
gem
ini
2014
is the global strategy and transformation consulting organization of the Capgemini Group, specializing in advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus
Co
pyr i
gh
t ©
Cap
gem
ini
2014
advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,600 talented
Co
pyr i
gh
t ©
Cap
gem
ini
2014
on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,600 talented individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the
Co
pyr i
gh
t ©
Cap
gem
ini
2014
individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the digital economy and our leadership in business transformation and organizational change.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
digital economy and our leadership in business transformation and organizational change.
Our Expertise and Unique Approach in the Utilities and Energy Sector
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Our Expertise and Unique Approach in the Utilities and Energy Sector
Capgemini Consulting helps clients formulate operational strategies, implement wide business transformations and optimize
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Capgemini Consulting helps clients formulate operational strategies, implement wide business transformations and optimize organizations and processes through dedicated operational management initiatives.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
organizations and processes through dedicated operational management initiatives.
infrastructures)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
infrastructures)
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Our 800+ professionals operating in 12 major geographies include consulting professionals and experts in specific value chain
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Our 800+ professionals operating in 12 major geographies include consulting professionals and experts in specific value chain segments and industry issues. We deliver consulting services to 60% of the leading Utilities companies, and to 50% of the leading
Co
pyr i
gh
t ©
Cap
gem
ini
2014
segments and industry issues. We deliver consulting services to 60% of the leading Utilities companies, and to 50% of the leading
We are recognized for our professional commitment and leadership, our intellectual curiosity, and our ability to innovate.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
We are recognized for our professional commitment and leadership, our intellectual curiosity, and our ability to innovate.
www.capgemini-consulting.com
Co
pyr i
gh
t ©
Cap
gem
ini
2014
www.capgemini-consulting.com
115115
the way we see itUtilities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
ST-
9/14
Rightshore® is a registered trademark belonging to Capgemini. The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved.
About CapgeminiWith more than 130,000 people in over 40 countries, Capgemini is one of the world’s foremost providers of consulting, technology and outsourcing services. The Group reported 2013 global revenues of EUR 10.1 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 Experience™, and draws on Rightshore®, its worldwide delivery model.
Capgemini Consulting is the global strategy and transformation consulting organization of the Capgemini Group, specializing in advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,600 talented individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the digital economy and our leadership in business transformation and organizational change.
Learn more about us at
www.capgemini.com/utilities
© Shutterstock.com/ shooarts & Peshkova (Cover & page 4), Bloomua & SGM (page 68), esbobeldijk (page 78).
© Thinkstock.com/ (iStock collection) , djedzura (page 18), Janka Dharmasena (page 28), Pashalgnatov (page 50), shironosov (page 84).
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
About Capgemini
Co
pyr i
gh
t ©
Cap
gem
ini
2014
About CapgeminiWith more than 130,000 people in over 40 countries, Capgemini is one of
Co
pyr i
gh
t ©
Cap
gem
ini
2014
With more than 130,000 people in over 40 countries, Capgemini is one of the world’s foremost providers of consulting, technology and outsourcing
Co
pyr i
gh
t ©
Cap
gem
ini
2014
the world’s foremost providers of consulting, technology and outsourcing services. The Group reported 2013 global revenues of EUR 10.1 billion.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
services. The Group reported 2013 global revenues of EUR 10.1 billion. Together with its clients, Capgemini creates and delivers business and
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Together with its clients, Capgemini creates and delivers business and technology solutions that fit their needs and drive the results they want.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
technology solutions that fit their needs and drive the results they want. A deeply multicultural organization, Capgemini has developed its own
Co
pyr i
gh
t ©
Cap
gem
ini
2014
A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative Business Experience™, and draws on
Co
pyr i
gh
t ©
Cap
gem
ini
2014
way of working, the Collaborative Business Experience™, and draws on , its worldwide delivery model.
Co
pyr i
gh
t ©
Cap
gem
ini
2014
, its worldwide delivery model.
Capgemini Consulting is the global strategy and transformation consulting
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Capgemini Consulting is the global strategy and transformation consulting organization of the Capgemini Group, specializing in advising and supporting
Co
pyr i
gh
t ©
Cap
gem
ini
2014
organization of the Capgemini Group, specializing in advising and supporting enterprises in significant transformation, from innovative strategy to execution
Co
pyr i
gh
t ©
Cap
gem
ini
2014
enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus on results. With the new digital economy
Co
pyr i
gh
t ©
Cap
gem
ini
2014
and with an unstinting focus on results. With the new digital economy creating significant disruptions and opportunities, our global team of over
Co
pyr i
gh
t ©
Cap
gem
ini
2014
creating significant disruptions and opportunities, our global team of over 3,600 talented individuals work with leading companies and governments
Co
pyr i
gh
t ©
Cap
gem
ini
2014
3,600 talented individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the digital
Co
pyr i
gh
t ©
Cap
gem
ini
2014
to master Digital Transformation, drawing on our understanding of the digital economy and our leadership in business transformation and organizational
Co
pyr i
gh
t ©
Cap
gem
ini
2014
economy and our leadership in business transformation and organizational
Learn more about us at
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Learn more about us at
www.capgemini.com/utilities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
www.capgemini.com/utilities
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Co
pyr i
gh
t ©
Cap
gem
ini
2014
Shutterstock.com/ Co
pyr i
gh
t ©
Cap
gem
ini
2014
Shutterstock.com/ Co
pyr i
gh
t ©
Cap
gem
ini
2014
shooarts & Peshkova (Cover & page 4), Bloomua & SGM (page 68), esbobeldijk (page 78).Co
pyr i
gh
t ©
Cap
gem
ini
2014
shooarts & Peshkova (Cover & page 4), Bloomua & SGM (page 68), esbobeldijk (page 78).Shutterstock.com/ shooarts & Peshkova (Cover & page 4), Bloomua & SGM (page 68), esbobeldijk (page 78).Shutterstock.com/ Co
pyr i
gh
t ©
Cap
gem
ini
2014
Shutterstock.com/ shooarts & Peshkova (Cover & page 4), Bloomua & SGM (page 68), esbobeldijk (page 78).Shutterstock.com/
(iStock collection) , djedzura (page 18), Janka Dharmasena (page 28), Pashalgnatov (page 50), Co
pyr i
gh
t ©
Cap
gem
ini
2014
(iStock collection) , djedzura (page 18), Janka Dharmasena (page 28), Pashalgnatov (page 50),