New Global Energy TrendsColette Lewiner, Energy & Utilities Global LeaderCapgeminiEuropean Gas Supply Infrastructure Platt...
Agenda Recent Energy events   •   Oil supply   •   Fukushima Consequences on:   •   Security of supply           Short ...
Global demand for oil is increasing againPrimary factors driving demand are economic growth and increased               re...
Reserve replacement and National Oil Companies                   dominant control of resources are the two main issuesThe ...
Oil prices forecasts uncertainty is increased by                            speculation (a barrel is traded 35 times on th...
Fukushima accident first safety lessons learned                          The accident                                   Fi...
Political decisions                                                               New projects delayed or stopped:     Saf...
Agenda Recent Energy events   •   Oil supply   •   Fukushima Consequences on:   •   Security of supply           Short ...
The immediate German nuclear plants closure                                                             is threatening Eur...
Despite progress in interconnections, significant                                           bottlenecks remain. A more flu...
Russia is a dominant source for Europe Gas imports                                                                        ...
Utilities are selling their networks to investment funds                                                              Hong...
Agenda Recent Energy events   •   Oil supply   •   Fukushima Consequences on:   •   Security of supply           Short ...
Fukushima is triggering a debate on present and future                                           Energy Mix Media and som...
Unconventional gas has had a spectacular development                                            in the US• Unconventional ...
Power plant’s consumption is the main cause for gas                                                          demand growth...
Golden Age for Gas (GAS) June 2011 IEA Scenario                                                       2035 horizon New as...
Golden Age for Gas (GAS) Main comments   Positive trends for gas development:                                            ...
During the last three years the LNG market has                                            considerably changed            ...
Gas is not a global market.                           Very different regional pricing systems       Indexed prices Europe ...
Will renewables increase their long term market share?                      110%              2008                        ...
Renewable energies impact the grid management.                          The Spanish Example              August 27, 2009  ...
Smart Grid Investments New challenges have to be                Communication  addressed: renewable share                ...
Electricity generation costs will increase                                                         Regional ranges of leve...
Agenda Recent Energy events   •   Oil supply   •   Fukushima Consequences on:   •   Security of supply           Short ...
Conclusions                                                                              Energy Orb » (PG&E) gives visual...
Together. Free your energies  www.capgemini.com/energy
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New Global Energy Trends

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Presentation by Colette Lewiner, Global Leader Energy, Utilities & Chemicals Practice, Capgemini, held at the Platts Gas Conference, Belgium, October 2011

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New Global Energy Trends

  1. 1. New Global Energy TrendsColette Lewiner, Energy & Utilities Global LeaderCapgeminiEuropean Gas Supply Infrastructure Platt’sConferenceOctober 10, 2011
  2. 2. Agenda Recent Energy events • Oil supply • Fukushima Consequences on: • Security of supply  Short tem  Longer term  Investment in grids • Energy Mix  Gas  Renewables  Smart Grids  Energy Prices Conclusions | Energy, Utilities & Chemicals Global Sector 2
  3. 3. Global demand for oil is increasing againPrimary factors driving demand are economic growth and increased requirements in the developing world. | Energy, Utilities & Chemicals Global Sector 3
  4. 4. Reserve replacement and National Oil Companies dominant control of resources are the two main issuesThe Middle East and Africa account for about 2/3’s of Global Reserves  Projected production capacity decline: projected new production capacity to address current decline rates alone will be 45 to 50 MBPD (million barrels /day) by 2030 • more than twice the current Middle East production • ~ >half today’s global production will have to be replaced  About 80% of the projected increase in oil output to 2030 is to come from the National Oil Companies  Middle East remains Critical Libya, Yemen, Syria, Egypt, Sudan, Oman … political upheaval may place significant global reserves at risk | Energy, Utilities & Chemicals Global Sector 1109 Platts Gas Conference.pptx 4
  5. 5. Oil prices forecasts uncertainty is increased by speculation (a barrel is traded 35 times on the financial markets) Following the June 8th OPEC Oil prices decision not to increase output quotas, IEA decided on June 22nd to release 60m oil barrels of its 6 month worldwide consumption reserves This decision did not revert the oil prices trend However there is some consumption/ price elasticity • At the beginning of 2008 summer, Americans used less their cars for vacations and consumption started to decrease • Gasoline consumption decreased by 3% in France in June 2011 And ….trees don’t go to heaven. Source: Focus Gaz, July 1, 2011 Oil prices: a consequence of economy growth or a trigger to economic slowdown? | Energy, Utilities & Chemicals Global Sector 5
  6. 6. Fukushima accident first safety lessons learned The accident First safety lesson learned Exceptional circumstances: 9.0-magnitude  Need to design plant infrastructures for undersea earthquake off the coast of Japan on really exceptional earthquakes and March 11, 2011 triggering a tsunami that travelled up tsunamis to 10 km inland.  Simultaneous Natural Catastrophes have to Fukushima nuclear plant: with 6 boiling water be taken into account reactors (BWR) maintained by TEPCO has been hit by the earthquake and tsunami:  Spent fuel storage and management policy to be rethought  Reactors 4, 5 and 6 were shut down prior to the earthquake for maintenance.  Emergency measures to be revisited  Remaining reactors shut down automatically after the  Cooling systems redundancy to be re- earthquake. Grid electricity supply for cooling purposes assessed collapsed and then the tsunami flooded the plant,  Radiological permanent control on the site knocking out emergency generators. and around  20km radius evacuation around the plant from March 12  Crisis management and crisis  Highest rating (level 7) on the International Nuclear Event Scale. Second level 7 rating in communication to be re-designed history, following Chernobyl  Nuclear bodies and governance Tokyo Electric Power Company’s plan to achieve cold shutdown by early in 2012 “could be possible” according to the International Atomic Energy Agency Head | Energy, Utilities & Chemicals Global Sector 6
  7. 7. Political decisions New projects delayed or stopped: Safety inspections Plant closure: China, India, Taiwan (new projects assessment), India of existing plants: Germany (8 assessment;Japan (37 plants out of 54 stopped plants, All countries oldest reactors) possible phase out); Italy and Switzerland (moratorium); UK (confirmed with slight delay); France (confirmed, FL3 delayed) Finland: 1 Russia: 10 Canada: 2 Image Source: Le Figaro; IAEA France: 1 Slovakia: 2 Japan: 2 USA: 1 Iran: 1 China: 27 South Korea: 5 Pakistan: 1 India: Taiwan: 2 Number of reactors 5 underconstruction Brazil: 1 Before the accident, there were, 439 reactors in Before the accident, there were 439 reactors in operation, Argentina: 1 operation, 62 under construction and 484 62 under construction and 484 planned or planned or proposed. After? proposed | Energy, Utilities & Chemicals Global Sector 7
  8. 8. Agenda Recent Energy events • Oil supply • Fukushima Consequences on: • Security of supply  Short tem  Longer term  Investment in grids • Energy Mix  Gas  Renewables  Smart Grids  Energy Prices Conclusions | Energy, Utilities & Chemicals Global Sector 8
  9. 9. The immediate German nuclear plants closure is threatening European electricity security of supply 40% Overcapacity DK Technically impossible Source: ENTSO-E – Capgemini analysis, EEMO13 LU j 30% EE AT & LT LV ( Real margin at peak load [%] 20% ES & NL RO& BG( DE j 10% Increase of theoretical margin Secure areas IE & PT ( Increase of real margin GR& CH Decrease of theoretical margin IT j Decrease of real margin PL SI ( CZ NO HU & SK & Increase of theoretical margin 0% Decrease of real margin UK ( BE & Decrease of theoretical margin Increase of real margin FR -10% Fragile areas: theoretical overcapacity but lack of FI production availability at peak times SE California syndrome: lack of capacity -20% 10% 20% 30% 40% 50% 60% Theoretical margin [%] Presently, Germany is importing electricity from France. However, winter peaks due toelectrical heating (1° temperature less triggers additional 2300 MW need), put France in the red zone. During peak times France imports up to 8000 MW mainly from Germany. What will happen this winter? | Energy, Utilities & Chemicals Global Sector 9
  10. 10. Despite progress in interconnections, significant bottlenecks remain. A more fluid electricity grid would improve security of supply Countries Projects of interconnections Expected Capacity date increase 12% FI - SE Fennoscan submarine cable End of 2011 550 MW FI 14% SL-HU/HR Cirkovce - Heviz (HU) / Zerjavenec (HR) Short term n.c. NO IE - UK Woodland (IE) / Deeside (UK) 2012 500 MW DE - PL Vierraden (DE) / Krajnik (PL) 2012 n.c. SE 84% EE IE - UK Moyhill (IE) / Turleenan (UK) 2012 > 550 MW 26% LV FR - LU Moulaine (FR) / Belval (LU) 2012 n.c. IE 3% 41% DK 108% FR - IT Cornier (FR) / Piossasco (IT) 2012 600 MW 1% LT IE - UK Moyhill (IE) / Turleenan (UK) 2012 > 1,000 MW UK 21% 23% IT - AT Prati di Vizze (IT) / Steinach (AT) 2013 n.c. NL DE EE - FI Püssi (EE) / Anttila (FI) 2013 650 MW PL 25% BE 11% LU - BE Bascharage (LU) / Aubange (BE) 2013 n.c. 10% LU DE - NL Niederrhein (DE) / Doetinchem (NL) 2013 > 1,000 MW CZ 33% FR - ES Baixas (FR) / Sta.Llogaia (ES) 2014 > 1,000 MW SK 44% FR CH 24% AT HU 13% 12% 57% SI RO Level of interconnections 52% 8% 4% Below 10% EU threshold 82% PT ES IT 17% BG 17% Above 10% EU threshold 3% 4% Bottlenecks (> 80% occurrence of congestion) GR Cross-border interconnections commissioned in 11% 2010 and H1 2011 Projects of cross-border interconnections by 2015Source: ENTSO-E – Capgemini analysis, EEMO13 | Energy, Utilities & Chemicals Global Sector 10
  11. 11. Russia is a dominant source for Europe Gas imports Exporting country FI Importing country NORWAY 5 LNG imports (net) Piped gas: 96 bcm 47 Piped gas imports (net) LNG: 3 bcm 2 Total net imports (in bcm) EE SE Piped gas flows -3 LV 1 5 DK LNG flows IE LT Existing LNG terminal UK -36 3 38 DE TRINIDAD & TOB. NL PL 10 Russia LNG: 6 bcm Piped gas: 113 bcm BE 78 21 LU NIGERIA 12 LNG: 15 bcm 1 CZ FR OTHERS SK 6 LNG: 1.9 bcm CH AT 7 47 4 HU RO SI 1 8 2 PT IT 5 ES 2 BG 35 75 LNG Supply (18% in GR 2010) increase would 4 improve the European gas security of supply. ALGERIA LIBYA Piped gas: 35 bcm Piped gas: 9 bcm EGYPT QATAR LNG: 15 bcm LNG: 0.3 bcm LNG: 4 bcm LNG: 28 bcmSource: BP statistical review of world energy 2011 – Capgemini analysis, EEMO13 | Energy, Utilities & Chemicals Global Sector 11
  12. 12. Utilities are selling their networks to investment funds Hong Kong Utilities are divesting to restore their balance Consortium (headed by Li Ka-Shing) sheet and to comply with the 3rd EU directive Networks, having long term recurrent €885M revenues, are attractive for funds. £5.8bn • E.ON sold its electrical transmission grid to TenneT (NL) for €885m • Vattenfall Germany sold its electrical transmission £4bn €810M € 1.3bn grid to Elia (BE)/IFM for €810 m French nuclear • RWE Germany sold 75% of its transmission grid decommissioning Investor group (Amprion) to a financial investors group for 1.3bn€ fund led by • RTE, France transmission grid: 50% transferred to Commerzbank the French nuclear decommissioning fund • GRTGaz, French gas transportation grid: CDC and CNP should take 25% shares • ENI (IT) to sell stakes in two major pipelines (Transitgas and TENP). Value estimated at €1.5bn • ENEL sold 80% of its Endesa gas distribution grid to Goldman Sachs’ infrastructures funds for €800m • Enel Rete Gas, E.ON Rete Gas and G6 Rete Gas TENP (GDF Suez): Italy’s distribution networks were sold between 2009 and 2011 to F2i and partners funds €1.5bn • EDF Energy UK electrical distribution networks sold €800M to a Hong Kong consortium for £5.8 bn €800M €290M • E.ON sold its UK distribution electrical grid to PPL (US) for £4 bn How to incentivize private investment funds to meet the needed networks €480M investments? | Energy, Utilities & Chemicals Global Sector 12
  13. 13. Agenda Recent Energy events • Oil supply • Fukushima Consequences on: • Security of supply  Short tem  Longer term  Investment in grids • Energy Mix  Gas  Renewables  Smart Grids  Energy Prices Conclusions | Energy, Utilities & Chemicals Global Sector 13
  14. 14. Fukushima is triggering a debate on present and future Energy Mix Media and some anti-nuclear groups are asking for a Results of nuclear opinion survey in nuclear phase out. Before asking ourselves if it is France (March 2011) feasible, one needs to ask if it is desirable. An immediate nuclear phase out while keeping the lights on, is challenging. A long term phase out is possible but needs to be assessed against the following criteria: • Sustained development: global warming and greenhouse gas emissions decrease • Security of supply • Electricity generation costs World electricity generation by type (2010 Scenario) Source: L’express, SIA, Opinion Way, Published April 2011 Source: IEA: World Energy Outlook 2010 | Energy, Utilities & Chemicals Global Sector 14
  15. 15. Unconventional gas has had a spectacular development in the US• Unconventional gas accounts for 4% of the world total of proven gas reserves and for 12% of global production (2008).• The US account for 3/4 of global unconventional output, increasing production 4 fold since 1990 (300 bcm in 2008). • 12% of global production (2008). • The US account for 3/4 of global unconventional output, increasinglatest IEA report shows 1990 • The production 4 fold since Global unconventional natural gas resources(300 bcm in 2008). in place (tcm) significantly larger unconventional gas reserves in Europe • In France, reserves are estimated at 5000 Gm (around 100 years of consumption). They are equally situated in two basins (North and South-East) • German reserves amount to 20 times less and British reserves to 9 times less • Only Poland would have equivalent reserves to France. • It would be regrettable if French opposition to shale gas prevents its exploitation IEA World Energy Outlook 2009 Gas long term perspective has changed as IEA estimates now the total gas reserves to 250 years. | Energy, Utilities & Chemicals Global Sector 15
  16. 16. Power plant’s consumption is the main cause for gas demand growthPrevious assumptions: European Gas consumption decreased during the crisis by World primary Natural Gas Demand by sector and scenario 6.1% and increased again (in 2010) by 7.4%. The pre-Fukushima 2011-2016 growth was forecasted at 2.4% CAGR. The EU gas market was oversupplied and had an overhang between 10-30 billion cubic meters (bcm)More recently: Missing Libya* gas to Italy will lead to a 3 bcm EU gas overhang reduction in 2011 with a further1.1 bcm reduction in 2012 Fukushima accident consequences has generated additional short term demand**: • For Japan a 5 bcm/year • For Germany: 2.1bcm in 2014 and 4.2 bcm in 2015 • New forecast lead to European markets returning to physical balance by early 2014 versus 2015- 2020 previously forecasted. A second economic downturn would push gas consumption down again * If the Libyan outage lasts only until the end of 2011 **According to Deutsche Bank forecast. Source: World Energy Outlook 2011: Golden Age of Gas Report On the longer term, increased gas consumption for power plants will require more flexibility in storage and pipeline management | Energy, Utilities & Chemicals Global Sector 16
  17. 17. Golden Age for Gas (GAS) June 2011 IEA Scenario 2035 horizon New assumptions*: Primary Natural Gas Demand by region and scenario • Ambitious policy for gas use, implemented by China • Lower growth of nuclear power following the Fukushima accident • Ample availability of gas • Gas prices stays low and trigger more usages notably in road transports • 3.4% worldwide CAGR over the period. Main findings: • Gas consumption rises more than 50%, its World primary energy demand by fuel share reaches 25% in the global energy mix • Production growth equivalent to three times Russian production is required (40% from unconventional gas) • Trade between the main world regions doubles (up to 620bcm) evenly split between pipeline gas and LNG • Carbon emissions in the atmosphere reaches 650 ppm, equivalent to a long term temperature increase of 3.5° * Compared to WE2010 “new policies” scenario *policies scenario | Energy, Utilities & Chemicals Global Sector 17
  18. 18. Golden Age for Gas (GAS) Main comments Positive trends for gas development: World cumulative investment in gas-supply infrastructure by scenario • Large sovereign debts in Euro-zone and USA will lead to renewable funding decrease more room for gas • Japan new Prime Minister is in favor of a nuclear phase out more LNG • New EPA (Environment Protection Agency) regulation on air pollution (Cross State air Pollution Rule) could lead to 20% of US coal fired plants phase out. Replacement by gas?New legislations in other countries? Concerns • Assumed 3.4% worldwide CAGR over the period CO2 emissions in the GAS relative to the New Policies ,2035 could be ambitious • Huge investment needed, will they happen on time? • CO2 emissions are not compliant wit EU objectives. Would need CCS for gas plants Will it be ready at competitive costs? • Gas prices assumptions for unconventional gas are low (3 to 7$/MBtus). A few reasons for increase: environmental issues, massive coal to gas switch, sector consolidation, decreased exploration spending. This scenario needs to handled cautiously as its results are very sensitive to the assumptions. However the forecasted trends should be right | Energy, Utilities & Chemicals Global Sector 18
  19. 19. During the last three years the LNG market has considerably changed Pipeline and LNG terminals projects (2010) New liquefaction plants were commissioned: • Yemen: additional 6,7 Mt/y • Qatar: plant# 7: 7,8 M/y additional capacity … increasing worldwide liquefaction capacity to 594.1 bcm/y in 2010 (vs. 540.1 bcm/y end 2009). New re-gas terminals were commissioned in 2009 and early 2010 in Europe: • UK: South Hook LNG and Dragon LNG • Italy: Adriatic LNG (floating terminal) • France: Fos Cavaou The average European re-gas terminals utilization factor is only 50%: • ~ 30% in UK • ~ 75% in France • ~ 77% in Italy The 2009 economic crisis had an impact on the 30 re-gas terminal projects. Many projects were delayed or cancelled. With the LNG market quicker rebalance, new projects Return On Investment should improve, provided that there will not & Chemicals Global Sector | Energy, Utilities be a new economy slowdown in H2 2011/2012 19
  20. 20. Gas is not a global market. Very different regional pricing systems Indexed prices Europe 4.4$/MBtu=10.6 €/MWh Source: Focus Gaz September 2011Spot gas markets prices are below long term continental European prices(indexed on oil prices). For how long? | Energy, Utilities & Chemicals Global Sector 20
  21. 21. Will renewables increase their long term market share? 110% 2008 Solar PV Top 3 countries ranked by: 100% Capacity Growth (abs.) Growth (%) Source: Eur’Observer barometers – Capgemini analysis, EEMO13 Capacity installed* Growth** (absolute) DE DE SK 1. DE 1. SK 90% 2005 ES CZ FR 2. ES 2. FR CZ FR SI 3. CZ 3. SI 80% 2010 * Volume for wind, small hydro, geothermal and solar PV in MW and for biogas and biomass in TWh ** Relative growth additionally displayed for solar PV and 70% wind Growth (%) 60% 2007 2009 50% 2006 Biogas 40% DE DE Wind UK UK Capacity Growth (abs.) Growth (%) IT NL Small hydro DE ES RO 30% IT RO ES DE BG FR IT IT FR PL 2005 20% ES DE 2006 2009 2007 2008 2009 2010 Geothermal 10% 2009 + Biomass IT IT DE PL 2009 PT FR 2009 2009 FI SE 0% FR AT 0 SE NL 10 Municipal waste 20 30 40 50 60 70 80 90 100 110 120 130 140 150 DE UK Electricity production (TWh) FR NL IT FR Some governments have started to increase again their subsidies forrenewables. This trend could be reverted again by the public deficit problems | Energy, Utilities & Chemicals Global Sector 21
  22. 22. Renewable energies impact the grid management. The Spanish Example August 27, 2009 November 8, 2009 Source: Enagas, Outlook for LNGExisting systems cannot predict output of wind power will be 24 to 48 h inadvance. The grid operators have to react to changes in power output on avery short timeline. To date there are no good answers for massive storage. | Energy, Utilities & Chemicals Global Sector
  23. 23. Smart Grid Investments New challenges have to be Communication addressed: renewable share Technologies increase, decentralized generation, Network Device and new consumption patterns… Events Ops Management A grid with more intelligence has to be built requiring large investments Back Office Applications Worldwide Smart grid investments: from 2008-2015: 200bn$ (53bn$ in the US). (Pike Research source). RenewablesICT (Information and Communication AdvancedTechnologies) systems investments: MeteringCisco sees15-20 bn$ investmentopportunities to link smart grids with ICT Enhanced Power Grid Plug-In Digital Communications and Controlsystems over the next 7 years. John HybridsChamber, Cisco CEO, says that it Smart Meters & Control Building Automationmight be bigger than internet. Interface However it’s not going to happen overnight. A lot of regulatory and standardisation issues have to be worked out | Energy, Utilities & Chemicals Global Sector 23
  24. 24. Electricity generation costs will increase Regional ranges of levelised costs of electricity for Estimated costs of electricity in France: nuclear, coal, gas and onshore wind power plants • Nuclear: 45 €/MWh • Gas fired plants: 50 to 60 €/MWh (with today relatively low gas prices) • Hydropower: >50 €/MWh but highly 5% Discount Rate dependent on sites and construction conditions • On-shore wind: 80 to 90 €/MWh • Off-shore wind: 150 to 200 €/MWh (including grid connection) • Biomass: 130€/MWh but very variable according to production conditions. • Photovoltaic solar electricity from 300 €/MWh (farms) to 600 €/MWh (home roofs) Post Fukushima increased safety requests will result in nuclear energy cost increase. Following the nuclearphase out, German electricity base load wholesale prices to increase by 5-6 Source: IEA: Projected Costs of Generating Electricity, 2010 Edition €/MWh per year over 2012-15*. • Assumption: carbon price of USD 30/tCO2 • Cost of CC(S) is still in the development stage *Deutsche Bank Forecast | Energy, Utilities & Chemicals Global Sector 24
  25. 25. Agenda Recent Energy events • Oil supply • Fukushima Consequences on: • Security of supply  Short tem  Longer term  Investment in grids • Energy Mix  Gas  Renewables  Smart Grids  Energy Prices Conclusions | Energy, Utilities & Chemicals Global Sector 25
  26. 26. Conclusions Energy Orb » (PG&E) gives visual Recent events are putting Energy questions in the spot light indications to clients involved in energy demand management programs • Solid energy consumption growth after the economic and financial 2009 crisis • BP accident in Gulf of Mexico highlighting the deepwater production difficulties and strengthening regulations • Nuclear Fukushima plant accident slowing down the nuclear « renaissance » • Middle East and Arab countries political instability threatening oil and gas supply In the short term: the energy consumption (post 2009 economic crisis) growth could be stalled if the EU country’s debt problems lead to a second economy dip In the long term, we can expect: • Higher energy prices • Decreased security of supply • More Green Houses Gases emissions • Increased need for investments (Total EU investment needs in the electricity and gas sector in the next ten years: over 1 trillion €) Customers should increase their energy savings focus Governments and Regulators have a key role to play: • To make the needed investments happen • To implement a sound energy and CO2 savings policy | Energy, Utilities & Chemicals Global Sector 26
  27. 27. Together. Free your energies www.capgemini.com/energy

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