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The 10 Most Critical Trends that will Shape the Global Power Energy Industry till 2020

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  • 1. Annual Global Power and Energy Outlook 2011 Top 10 Market Trends and Their Impact
  • 2. The 10 Most Critical Trends that Will Shape the Global Power Energy Industry till 2020 Source: Frost & Sullivan Power Demand Growth Annual Power and Energy Outlook: Top 10 Market Trends (World), 2011 New Age for Natural Gas Clean Coal Commercial-isation Power Plant Decommissioning Smart Energy Nuclear Power Energy Efficiency Energy Storage Continued Investment in Renewables Market Liberalisation Annual Power and Energy Outlook Top 10 Market Trends for the Decade
  • 3. Annual Power and Energy Outlook Top 10 Trends for the Decade - 1. Power Demand Growth Power Demand Growth 2010 2020 2015 Why is this important? Electricity demand growth is one of the key indicators in determining likely power plant investment. Exceptional or high growth leads to a build up in pressure on the power generation infrastructure, as reserve margins fall, and countries can ultimately face electricity shortages or rationing, but more usually in mature regions such as Europe, they become dependent on imports, which are usually expensive.
    • Key Impact/Opportunities
    • The investment focus in Europe and North America is on replacing/retrofitting the existing installed base; capacity expansion will largely be driven by investment in renewables. The demand for retrofits and refurbishments, as well as replacement capacity, means that there are still attractive opportunities in the conventional power sector for established participants.
    • Although European and North American electricity demand will continue to increase at approximately 1% p.a., the industrial demand is likely to be stable overall and will decline in some countries. This is due to the continuing trend for companies to relocate labour-intensive and energy-intensive production to lower cost countries/regions. Once this demand is gone, it is rarely replaced.
    • 3) China and India will be the key markets in terms of volume of power equipment orders, but opportunities for Western manufacturers in both markets will be limited due to the presence of competitive local participants. Joint ventures, licencing and partial acquisition of local participants will continue to be the routes for Western manufacturers to play a role in the market.
    Annual Power and Energy Outlook: Growth in Electricity Demand (World), 2010-2030 Low demand in West offset by boom in the Middle East Big expansion of electric/hybrid vehicles Global electrification reaches 80% Non-OECD countries surpass OECD China becomes largest consumer 1 Source: International Energy Agency, Frost & Sullivan
  • 4. Annual Power and Energy Outlook Top 10 Trends for the Decade - 1. Power Demand Growth (Contd…) Power Demand Growth 2010 2020 2015
    • Key Impact/Opportunities (Contd …)
    • Chinese power demand will continue to increase, but the growth will stabilise. India, which still has an estimated 400 to 500 million people without access to electricity, is the key market for electrification and growth rates there could well increase above the current 5%-6% per annum of the past few years.
    • Gradual adoption of electrical vehicles in developed economies will partially counter-balance the long-term decline in industrial demand, particularly in Europe. Electric vehicles will have a major impact in curbing pollution and will offer an alternative energy storage solution, however they require substantial investment to be made in the electricity infrastructure. Electric vehicles will not be confined to Europe; it is expected that China, India, Turkey, Brazil and other key developing nations will also encourage their adoption to try and mitigate soaring oil demand.
    Annual Power and Energy Outlook: Capacity Expansion Forecasts (China and India), 2010, 2020 and 2030 Low demand in West offset by boom in the Middle East Big expansion of electric/hybrid vehicles Global electrification reaches 80% Non-OECD countries surpass OECD China becomes largest consumer Source: Frost & Sullivan
  • 5. Annual Power and Energy Outlook Top 10 Trends for the Decade - 2. New Age for Natural Gas New Age for Natural Gas 2010 2020 2015 Why is this important? The growth in unconventional gases, particularly shale gas and specifically in the United States, will continue to have a massive impact on the demand and supply balance, driving new investment in gas-fired generation and creating demand for equipment suppliers, exploration companies and project developers.
    • Key Impact/Opportunities
    • The growth in unconventional gas creates interesting opportunities for exploration equipment companies and, at a later stage, for infrastructure equipment companies, as the new gas finds will need to be connected to the existing gas network. It will also create demand for exploration project development expertise, which will be a particular boost for those companies that operate in markets with few new oil & gas finds, such as the North Sea.
    • 2) Transporting gas through pipelines will continue to be important, with new investment to link population centres with gas fields. In Europe, there are several mega pipeline projects that would generate billions of dollars in orders for raw material suppliers such as steel pipe manufacturers, as well as construction workers and project developers. Smaller-scale projects to link neighbouring countries will also lead to greater tradability of gas and therefore more transparency in pricing.
    CCGT favourite generation technology Shale gas boom in the United States Growth in global pipeline network Massive boost in LNG availability Gas demand peaks in OECD but keeps growing elsewhere 2 Annual Power and Energy Outlook: Shale Gas Reserves (Selected Regions), 2011 Source: Lambert Energy
  • 6. Annual Power and Energy Outlook Top 10 Trends for the Decade - 2. New Age for Natural Gas (Contd …) New Age for Natural Gas 2010 2020 2015 Key Impact/Opportunities (Contd …) 3) A substantial volume of LNG capacity has come online in the past 2 years and significantly boosts global capacity. The current gas glut is deterring investment in new import terminals, but in the longer term, traded volumes of LNG will increase. LNG provides greater energy security and can be utilised as gas storage capacity if there is no immediate demand for the cargo. Opportunities will continue to arise for equipment suppliers and project developers. 4) The low price of gas is likely to drive new investment in gas-fired plant. The Middle East is currently the key market, but Europe and North America will both become attractive markets, as their economies recover, and developing economies will also offer opportunities in the longer term. The continued growth in the use of gas for power generation will boost demand for gas storage equipment such as tanks, degassifiers and compressors. CCGT favourite generation technology Shale gas boom in the United States Growth in global pipeline network Massive boost in LNG availability Gas demand peaks in OECD but keeps growing elsewhere Annual Power and Energy Outlook: LNG Capacity Expansion (World), 2009-2013 This chart shows the increase in LNG export capacity from 2009 and what is scheduled to come online in the next two years till 2013. Qatar is by far the most important participant; with little domestic demand, the country is keen to export. New participants entering the market are Algeria and Australia, the latter of which will be a key participant in the future. Source: OECD
  • 7. Annual Power and Energy Outlook Top 10 Trends for the Decade - 3. Clean Coal Commercialisation Clean Coal Commercial-isation 2010 2020 2015 Key Impact/Opportunities 1) The average efficiency rate of coal-fired plants globally is set to increase significantly over the next five years, as ultra supercritical technology becomes the standard, replacing older sub critical coal-fired units. A large volume of capacity will also be refurbished and upgraded, with boiler-related equipment such as economisers, reheaters and superheaters installed to maximise the potential efficiency, creating further opportunities for these equipment sub-suppliers. 2) The commercial viability of carbon capture is yet to be conclusively determined, but the technology is proven in the oil & gas sector and there is a general agreement that it is feasible for the power generation sector. The focus for the next decade will be on demonstration projects, including construction of utility-scale projects. Scottish Power, owned by Iberdrola, remains committed to constructing a 300MW unit at the Longannet power station. Annual Power and Energy Outlook: The Development of Coal Technology (World), 2010, 2020 and 2030 Time 2010 2020 CO 2 Emissions per KWh Average worldwide EU average State of the art Technology 700°C Technology CCS technology Efficiency 32%-35% 38% 45% 50% CO 2 emissions 1,116g CO 2 /KW 881g CO 2 /KWh 743g CO 2 /KWh 669g CO 2 /KWh Fuel consumption 480g coal/KWh 379g coal/KWh 320g coal/KWh 288g coal/KWh Why is this important? Coal’s long-term future in many global markets depends on reducing the carbon emissions released during the combustion process. Technological advancement will increase the efficiency and cut emissions, but carbon capture and storage is the solution that can have a dramatic impact. Commercial CCS viability established and large-scale development commences Ultra supercritical technology becomes prevalent globally Carbon capture and storage pilot plants 3 Source: Frost & Sullivan 2030
  • 8. Annual Power and Energy Outlook Top 10 Trends for the Decade - 3. Clean Coal Commercialisation (Contd …) Clean Coal Commercial-isation 2010 2020 2015 Key Impact/Opportunities (Contd …) 3) Capturing the carbon is one issue – it then also has to be transported and ultimately stored. For transportation, pipelines, transportation by road or ocean tankers are the three possible options, with pipelines the most likely option for many regions, including Europe. The initial network will be limited to the demonstration projects, but a massive investment would be needed in the longer term. The IEA estimates that Europe, for example, could need anywhere from 30,000 to 150,000 metres of pipelines, specifically designated for transporting carbon. This is yet another boost for pipeline-associated companies (in Europe, for example, companies already stand to benefit from investment to link Europe’s gas grid and potential connect new unconventional gas finds). 4) Storage would either be under the ocean or beneath the ground, usually in depleted oil and gas reservoirs. This assumes that local authorities and governments give the necessary approval, something that will become more of an issue at the end of the decade and into the 2020s. In the case of all the points related to CCS, the opportunities for this decade are limited. Investing in CCS now is being done by the big participants on the expectation of substantial business post-2020. Annual Power and Energy Outlook: Cost Component Percentages of a Coal Plant with CCS (World), 2011 Source: Frost & Sullivan Commercial CCS viability established and large-scale development commences Ultra supercritical technology becomes prevalent globally Carbon capture and storage pilot plants Percentage
  • 9. Annual Power and Energy Outlook Top 10 Trends for the Decade - 4. Power Plant Decommissioning Power Plant Decommissioning 2010 2020 2015 Key Impact/Opportunities 1) The obvious impact of decommissioning is that it creates a need for new plants. Frost & Sullivan estimates that approximately 200GW of installed plant in Europe, the Middle East and Africa will be closed between 2011 and 2020, and this has to be replaced. In Europe gas-fired plant is expected to account for the largest percentage, given the short-to-medium term challenges faced by coal in relation to carbon emissions and pricing. New nuclear is expected to partially fill the gap left behind by coal station closures and also to replace existing nuclear plants. In light of the events in Japan (occurring as this document is being finalised), the level of new nuclear may be less than anticipated at the start of 2011, but this will become clearer when the full impact of the Fukushima situation is known. If the result is countries scaling back their nuclear investment programmes, this would result in more coal-fired plant equipment sales in Asia and gas-fired plant sales in Europe. For example, if Germany decides to proceed with its 2002 shutdown programme, this will likely provide a boost to gas plant equipment suppliers in particular, as gas accounts for a relatively small percentage of the German installed base (15 %). The key point is that closed thermal and nuclear plants will need replacing with similar plants to guarantee baseload power. Annual Power and Energy Outlook: Likely Decommissioning (Selected Regions), 2010-2020 Why is this important? A substantial number of plants in Europe and North America will reach the end of their operating lifetime over the next decade, and there will also be closures of some plants in other regions. This creates not only demand for new plants and therefore new equipment sales, but also demand related to safely decommissioning sites in some cases restoring the land or use for other purposes. First of substantial wave of gas-fired plant closures Closure of substantial coal-fired capacity in Europe to comply with the Large Combustion Plant Directive Gradual closure of nuclear-fired power stations in Europe and North America 4 Source: Frost & Sullivan
  • 10. Annual Power and Energy Outlook Top 10 Trends for the Decade - 4. Power Plant Decommissioning (Contd …) Power Plant Decommissioning 2010 2020 2015 Key Impact/Opportunities (Contd …) 2) Decommissioning a plant can be a complex and expensive process; in the case of coal and gas-fired plants, the plants would generally be dismantled and then the site would either be returned to greenfield or more likely be used again for a new thermal plant. It does depend on country and local regulations. The most expensive by far for decommissioning is nuclear; nuclear.info.net estimates that in the United States, it costs $300 million (€214 million) per reactor. For France and Sweden, the estimates are 10 to 15 % of the construction cost (approximately €300 to €450 million). Given the complex nature of nuclear projects, the reality could be far higher than both of these. The money to carry out this work is supposed to be set aside in a fund over the course of the plants lifetime, but there is concern that these funds will not be sufficient when the time comes. These decommissioning projects will create good opportunities for waste disposal firms and EPC contractors that specialise in plant shutdowns or have the capabilities to enter this segment of the market. Annual Power and Energy Outlook: Estimated Decommissioning Costs for Nuclear Power Plants (Selected Regions), 2011 First of substantial wave of gas-fired plant closures Closure of substantial coal-fired capacity in Europe to comply with the Large Combustion Plant Directive Gradual closure of nuclear-fired power stations in Europe and North America Source: nuclearinfo.net
  • 11. 5 Annual Power and Energy Outlook Top 10 Trends for the Decade - 5. Smart Energy Smart Energy 2010 2020 2015
    • Key Impact/Opportunities
    • The smart energy concept has re-invigorated mature segments of the power sector and offers significant opportunities for participants in related sectors. Transmission and distribution was considered a low growth segment five years ago, but smart energy requires substantial upgrades to be carried out on the existing grid infrastructure. Utilities need greater information on the volumes of electricity being transported across the system and this is done through the installation of equipment such Phasor Measurement Units (PMUs). PMUs provide a real time view of a particular part of the grid at any one time. A large number of them, combined with sensors, give a comprehensive, simultaneous view of the grid. This enables faults and outages to be detected quickly and ultimately minimised, as utilities can more accurately implement preventative maintenance. Massive investment in these technologies will take place over the next decade.
    • Another growth area for power equipment companies is sub-station automation. The current system (essentially the way in which the central hub talks to substations) is largely based on conventional serial bus technologies such as SCADA. The future shift is toward IP-based systems that rely on Ethernet switches and intelligent electronic devices (IEDs). This requires substantial investment in new technology.
    Annual Power and Energy Outlook: Smart Grid Revenue Forecasts (World), 2009-2017 Why is this important? The deployment of digital intelligence in power grids, buildings and networks has the potential to make a huge impact on the efficiency of energy generation, transmission, distribution and usage. Smart meters taking off in the United States and Europe Smart meters reach most consumers in developed world Direct load control of smart appliances via remote management Peak shaving through energy efficiency and promotion of embedded generation Source: Frost & Sullivan
  • 12. Annual Power and Energy Outlook Top 10 Trends for the Decade - 5. Smart Energy (Contd …) Smart Energy 2010 2020 2015
    • Key Impact/Opportunities (Contd …)
    • The installation of smart meters over the course of the decade will enable the creation of Home Area Networks (HANs), where computerised home appliances could be operated remotely by utility companies. A smart system will give home owners detailed data on how much each appliance uses and as the pricing mechanisms that utilities use become more sophisticated, home owners can set parameters for utility companies to enable them to determine when an appliance should be turned on. Home owners could chose to keep control and have remote access instead, probably through a smartphone application). The development of HANs creates a specific opportunity for smartphone application developers/mobile phone companies, but also for appliance manufacturers that could offer products that are HAN ready.
    • The level of data that needs to be transmitted, processed, stored and integrated brings IT companies into the energy space. Companies are investing in smart offerings, trying to understand the requirements and define what applications need to be developed and integrated. Frost & Sullivan expects to see a combination of organic growth by the big participants, along with acquisitions of small specialists by the large equipment manufacturers.
    Annual Power and Energy Outlook: Smart Grid Revenue Forecast Splits (World), 2010 and 2017 Europe and North America currently dominate investment in smart infrastructure, with 47 % and 35 % of revenues, respectively, in 2010. By 2017, this will have changed markedly; global investment will have increased by 150 % and the Rest-of-World will account for 40 % of the total. Smart meters taking off in the United States and Europe Smart meters reach most consumers in developed world Direct load control of smart appliances via remote management Peak shaving through energy efficiency and promotion of embedded generation Source: Frost & Sullivan
  • 13. Annual Power and Energy Outlook Top 10 Trends for the Decade - 6. Nuclear Power Nuclear Power 2010 2020 2015 Key Impact/Opportunities 1) Nuclear reactor safety has always been the priority for all those involved in the nuclear sector. However, the accident in Fukushima will push governments and nuclear bodies to delay and review existing projects and evaluate any potential flaws in the design approach. Backup systems and fail safe circuits are the prime target of investigations, although the vast majority of reactors are very unlikely to suffer earthquakes of the magnitude seen in Japan. Other risks, however, include tornados, terrorist attacks, cyber hijacking and equipment failure due to abnormal wear. The private sector opportunities here are very limited as this work would be carried out by public sector bodies. 2) Nuclear plant life extensions are a key driver for low electricity prices across the United States, Europe and other nuclear regions. As the operational costs of nuclear power plants are low compared to coal plants, or gas plants per MWh produced, a well-maintained nuclear plant can normally expect a life extension of 10 years beyond its original design life. As cost issues of new reactors continue to impend new construction, an increase in the prevalence of life extensions is highly likely, bringing opportunities for projects to replace key pieces of equipment. Annual Power and Energy Outlook: Number of Reactors Planned and Under Construction (World), 2011 Fukushima Accident Start of UK nuclear build 2 nd Wave of Gen III+ construction 442 reactors in operation More than 480 reactors operational Source: PRIS, Frost & Sullivan Global Safety Reviews 65 reactors under construction Finalised construction of ITER 6
  • 14. Annual Power and Energy Outlook Top 10 Trends for the Decade - 6. Nuclear Power (Contd …) 2010 2020 2015 Key Impact/Opportunities (Contd …) 3) Reactor pressure vessels (RPVs) are one of the critical plant equipment elements with a 1:1 ratio to each reactor. Since 2005, the number of pressure vessel orders rose from an average of 4 per year between 2000 and 2006 to over 13 between 2007 and 2010. For an average construction project, RPVs are ordered 1 year after construction has begun. The number of orders, therefore, give an accurate view of the market activity, the likely date of operation for each reactor and highlight possible constraints along the supply chain, as only a limited number of companies can manufacture nuclear RPVs. Despite Fukushima, and increased scepticism, the average number of orders per year is likely to continue to grow until at least 2014. Annual Power and Energy Outlook: Nuclear Pressure Vessel Orders, with Breakdown of Demand by Country (World), 2007-2014 Source: McCoys, Frost & Sullivan Nuclear Power Fukushima Accident Start of UK nuclear build 2 nd Wave of Gen III+ construction 442 reactors in operation More than 480 reactors operational Global Safety Reviews 65 reactors under construction Finalised construction of ITER
  • 15. Annual Power and Energy Outlook Top 10 Trends for the Decade – 7. Energy Efficiency Energy Efficiency 2010 2020 2015
    • Key Impact/Opportunities
    • Green buildings have a vital role to play in the reduction of carbon emissions and improving the environment. A smart and green building can conserve resources, use energy efficiently and create a healthy occupied environment. Green buildings essential bring together a range of home efficiency concepts, along with a greater use of micro-generation technologies such as solar thermal, photovoltaic cells and heat pumps. There is also better monitoring and control of energy-intensive systems such as HVAC and lighting. Green buildings create opportunities for manufacturers of building automation systems, energy-efficient lighting, green HVAC systems and integrated security solutions. It should be noted that this does not just apply to new buildings; some of these technologies can be incorporated into the existing housing stock.
    • Large-scale deployment of compact fluorescent lights (CFLs) can help reduce peak electricity demand and improve power shortages in developing nations. High-quality CFLs are four to five times more efficient than incandescent bulbs and last substantially longer. Other technologies such as organic light emitting diode (OLED) lighting will further improve energy efficiency in the lighting sector.
    Annual Power and Energy Outlook: Conceptual Drawing of a Green Building (World), 2011 Why is this important? Increasing energy efficiency is vital for reducing consumption, because if done well, it enables people to continue acting close to their normal behaviour and yet per capita consumption falls. Government efforts to increase energy efficiency in the past have not always been successful, but the technology now exists to make improvements easier to achieve. 7 Global coverage for energy- efficient lighting Green buildings become norm in developed world Grid investments lay foundations for supergrids and reduce T&D losses Global penetration of micro- renewables and micro-CHP Source: Frost & Sullivan
  • 16. Annual Power and Energy Outlook Top 10 Trends for the Decade – 7. Energy Efficiency (Contd …) Energy Efficiency 2010 2020 2015 Key Impact/Opportunities (Contd …) 3) Increased investment in grid infrastructure, as part of the smart energy concept, will boost the growth of more energy-efficient distributed generation (DG) technologies such as micro-generation, micro-combined heat and power (CHP) plants, biomass boilers, solar thermal panels, geothermal energy and heat pumps. Micro-CHP is expected to expand strongly in Europe and Asian countries such as Japan and South Korea in the near term; however, North America also holds good opportunities. Besides the increased efficiencies, DG has the advantage that transmission losses are minimised, because the electricity is generated close to where it is ultimately used by the consumer. Source: splendidaparna.com Global coverage for energy- efficient lighting Green buildings become norm in developed world Grid investments lay foundations for supergrids and reduce T&D losses Global penetration of micro- renewables and micro-CHP Annual Power and Energy Outlook: Energy-efficient Micro-Grid (World), 2011
  • 17. Annual Power and Energy Outlook Top 10 Trends for the Decade – 8. Energy Storage Energy Storage 2010 2020 2015
    • Key Impact/Opportunities
    • With increasing cost reductions in advanced battery technologies and storage solutions, systems are starting to provide attractive returns when taking into account the benefits they bring. Examples include allowing renewable energy generated off-peak to be sold on-peak, increasing capacity credit, peak-shaving, increasing T&D asset utilisation, deferring costs of upgrades and so on. With these monetised advantages becoming clearer, utility/grid-scale energy storage deployment is inevitable .
    • New participants will enter the market with new ideas and new business models. Expect the arrival of spotters of strategic energy storage locations that will study best locations for energy storage deployment and develop energy storage projects in the same way as developers did in the wind and solar renewable energy markets. New business concepts will also emerge with storage-as-a-service being offered to utilities that do not want to invest in their own storage assets.
    Annual Power and Energy Outlook: Forecast Revenue Growth of the Energy Storage Market (World), 2001-2017 Why is this important? Energy storage is a rising star in tomorrow’s electricity generation and distribution landscape. It is a key enabling component of the future smart electricity grid as it allows intermittent renewable energy deployment, helps ease bottlenecks on the grid, improves power quality, provides back-up power supply and defers the cost of upgrading or expanding generation capacity and transmission systems. 8 Grid-scale energy storage such as pumped storage and CAES takes off Improved existing battery technologies emerge such as Li-ion, Nickel-Zinc and Molten Salt Energy storage market reaches $50 billion
  • 18. Global Power and Energy Outlook Top 10 Trends for the Decade – 8. Energy Storage (Contd …) Energy Storage 2010 2020 2015
    • Key Impact/Opportunities (Contd …)
    • With alternative vehicles fast increasing penetration of the automotive market, lithium-ion battery manufacturers will witness tremendous opportunities arising for their products. By 2016, approximately 50 % of revenues will come from this application. This will spur accelerated developments in lithium-based batteries (for example, lithium-manganese) and will most likely spill and benefit other applications, possibly notably through battery re-use/recycling schemes.
    • With such impending transformations in store for the battery markets, the market participants will re-think their strategies, and lots of momentum is expected in the form of industry consolidation, alliances, price pressures, shifts in bargaining power and so on. Exciting times ahead for the energy storage market!
    Annual Power and Energy Outlook: Energy Storage Market Size by Technology (World), 2016 Grid-scale energy storage such as pumped storage and CAES takes off Improved existing battery technologies emerge such as Li-ion, Nickel-Zinc and Molten Salt Energy storage market reaches $50 billion Why is this important? For the first time in 2016, revenues from lithium-ion batteries will outstrip lead-acid battery revenues leading to profound transformations in the competitive landscape, supply chain, as well as application markets.
  • 19. Annual Power and Energy Outlook Top 10 Trends for the Decade – 9. Continued Investment in Renewables Continued Investment in Renewables 2010 2020 2015
    • Key Impact/Opportunities
    • The renewables sector offers a huge range of potentially attractive opportunities; the challenge for any investor is to assess and determine which are the best. With different electricity prices and feed-in tariffs from country to country, investors need to either develop strong competencies in monitoring and assessing opportunities or rely on external help. The investment situation has been made more complex in the past two years with the unexpected reduction in feed-in tariffs for some successful schemes (largely due to the pressure the recession has put on public finances). To ensure further investment in the future, it is vital that governments provide clarity and stability for potential investors.
    Annual Power and Energy Outlook: Installed Capacity Growth in Wind and Other Renewables (World), 2010, 2020 and 2030 Why is this important? Investment in renewables slowed sharply in 2009, as finance for projects dried up in many regions and the low price for conventional fuels deterred investors. Since then, the global economy has improved significantly, and the oil price has increased and is likely to stay above $100 per barrel for a prolonged period. Investors are turning again to renewable energy, aware that many governments have binding targets for increasing the share of the installed base that is held by renewables. 9 Renewables achieve grid parity in some European markets European countries encourage investment to reach 2020 EU targets Strong renewable growth in developed economies backed by subsidies and regulation Private equity investors re-focus back on renewable projects Commercialisation of energy storage technologies drives growth Note: Other renewables includes solar, biomass, geothermal and marine Source: IEA, Frost & Sullivan
  • 20. Annual Power and Energy Outlook Top 10 Trends for the Decade – 9. Continued Investment in Renewables (Contd …) Continued Investment in Renewables 2010 2020 2015
    • Key Impact/Opportunities (Contd …)
    • The planned large-scale expansion of renewable energy sources requires a much greater investment in the power grid. In Europe, for example, the planned European supergrid connects and integrates geographically dispersed wind and hydro generating units across Europe. With each experiencing a different phase of the region’s weather system, electricity is produced wherever the wind blows or it rains and is transported to regions of demand, ensuring a much more reliable and predictable source of energy. Initiative such as Desertec are designed to import power from solar farms in North Africa and the Middle East to much of continental Europe (although the viability of this project must have been damaged by the recent political unrest in the region). Supergrids are also planned for the United States and China.
    Renewables achieve grid parity in some European markets European countries encourage investment to reach 2020 EU targets Strong renewable growth in developed economies, backed by subsidies and regulation Private equity investors re-focus back on renewable projects Commercialisation of energy storage technologies drives growth Annual Power and Energy Outlook: Proposed Northern European Offshore Grid (World), 2011 Source: Airtricity
  • 21. Annual Power and Energy Outlook Top 10 Trends for the Decade – 10. Market Liberalisation Market Liberalisation 2010 2020 2015 Key Impact/Opportunities 1) Liberalised markets demand flexible power generation infrastructure capable of responding to electricity price changes on traded exchanges in the shortest possible time frame. This will benefit gas turbine technology, which is the most flexible in terms of its short start-up times and ability to respond to load changes. There is also a boost for the service market as equipment suffers greater strain from flexible generating modes. 2) As the EU completes its liberalised power market and as market liberalisation expands from the developed countries to the developing regions, such countries will also develop a more diverse fuel mix. Electricity market liberalisation tends to go hand in hand with liberalisation of energy markets in general, with gas market liberalisation for instance acting as a driver for lower gas prices and better fuel availability, thus again spurring the growth of gas-fired power generation. Annual Power and Energy Outlook: Liquidity on the Wholesale Electricity Spot Market (Europe), 2011 Why is this important? Liberalised electricity markets offer greater opportunities for investors, both local and foreign, as an ever-greater number of countries moves away from state-ownership of assets along the electricity value chain. 10 Focus on emerging markets retail liberalisation Growing trans-regional power trading Most power generation markets fully liberalised Towards a global emissions trading system Source: European Commission
  • 22. Annual Power and Energy Outlook Top 10 Trends for the Decade – 10. Market Liberalisation (Contd …) Market Liberalisation 2010 2020 2015
    • Key Impact/Opportunities (Contd …)
    • Electricity markets are becoming increasingly interconnected, with the pioneering development of multi-country power exchanges such as Nordpool paving the way for other such exchanges around the world. Over the longer term, the market liberalisation will also boost interconnection with far-off regions such as the Sahara desert to export solar-generated power to Europe.
    • 4) The market liberalisation also boosts a more efficient operation of emissions trading schemes. The operational schemes are the Kyoto Protocol, the European Emissions Trading System (EU ETS) as well as smaller schemes in New Zealand, parts of the United States and Japan’s capital of Tokyo. Future schemes are planned for areas such as Australia, Western United States and South Korea. All these schemes will become increasingly interlinked and integrated over time.
    Annual Power and Energy Outlook: Priority Corridors for Electricity and Gas (Europe), 2011 Focus on emerging markets retail liberalisation Growing trans-regional power trading Most power generation markets fully liberalised Towards a global emissions trading system Source: EC DG Energy