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Disruptive trends & Enel Green Power Strategy

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Overview on current market trends
Renewable energy outlook
EGP Strategic View

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Disruptive trends & Enel Green Power Strategy

  1. 1. 30th October 2015 Disruptive trends & Enel Green Power Strategy Amoroso Riccardo Head of Innovation and Sustainability at Enel Green Power
  2. 2. 2 Renewable energy outlook 3 EGP Strategic View 1 Overview on current market trends Agenda 1
  3. 3. Tcf Source: EIA, Annual Energy Outlook 2015, Dry Natural Gas Production US will become a net exporter of natural gas in the near future Shale gas on total gas production is forecasted to increase up to 55% Up to 2040 Shale gas leads the gas production in US NaturalGasProductioninUS Share of shale gas 2
  4. 4. US oil and gas production Source: World Energy Outlook 2012 The surge in unconventional oil & gas production had implications well beyond the US The Shale Revolution 3
  5. 5. Shale VS Conventional production Source: The Economist 4
  6. 6. Oil and gas collapsed in the last year losing almost the 50% of their 2014 value In August 2015 oil and gas prices reached respectively 43$/Bar and 2,8 $ per Mill. Btu 0 2 4 6 8 10 12 14 0 20 40 60 80 100 120 140 160 180 Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 WTI Oil Spot Price Henry Hub Gas Spot Price Oil Price ($ per Barrel) Gas Price ($ per Mill. Btu) Source: EIA Impact on Oil and Gas prices... Prices strongly impacted by commodities’ abundance V ?orL 5
  7. 7. Oil -51% Coal -60% Copper -25% Silver -14% ...and on other relevant commodities prices Prices reduction in last 12 months Note: Prices reduction refers to the Sep 2014-Sep 2015 period Source: Stowe Global Coal Index, Bloomberg Oct. 2015 Fateful combination: abundance of resource supply and economic downturn 6
  8. 8. Mil. of barrels per day Consumption Production Since 2006 oil consumption steadily declined This is likely the beginning of a long-term trend Source: EIA An unexpected demand trend The US case (1980-2014) 7
  9. 9. Historical demand GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 8
  10. 10. Historical demand 2010 Forecast GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 9
  11. 11. Historical demand 2010 Forecast GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion 2011 New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 10
  12. 12. Historical demand 2010 Forecast 2011 Forecast GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 11
  13. 13. Historical demand 2010 Forecast 2011 Forecast GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion 2012 New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 12
  14. 14. Historical demand 2010 Forecast 2011 Forecast 2012 ForecastGDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 13
  15. 15. Historical demand 2010 Forecast 2011 Forecast 2012 ForecastGDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion 2013 New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 14
  16. 16. Historical demand 2010 Forecast 2011 Forecast 2012 Forecast 2013 Forecast GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 15
  17. 17. Historical demand 2010 Forecast 2011 Forecast 2012 Forecast 2013 Forecast GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion 2014 New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 16
  18. 18. Historical demand 2010 Forecast 2011 Forecast 2012 Forecast 2013 Forecast 2014 Forecast GDP 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 150 170 190 210 230 250 270 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg New Energy Finance, Apr 2015 TWh AUD trillion The “New Normal”: electricity demand and GDP are following two different trajectory, is that a separation or a divorce? New trends in Electricity Market Australian national electricity market actual vs forecast electricity demand FY2004-FY2025 17
  19. 19. New trends in Electricity Market Electric consumption per unit of GDP versus GDP per capita, 1980-2012 GDP and Electricity demand increase correlation is breaking and new energy paradigms are emerging Source: Bloomberg New Energy Finance, Aug 2015 18
  20. 20. Green Revolution - Electrical Vehicles “Prices on electric cars will continue to drop until they’re within reach of the average family”, 19
  21. 21. Green Revolution - Electrical Vehicles “Prices on electric cars will continue to drop until they’re within reach of the average family”, The Washington Post, 1915 20
  22. 22. Green Revolution- Energy Storage TESLA: Power Wall and Gigafactory Increasing efforts and appetite in storage technology to drive costs down and deliver solutions in several market segments 21
  23. 23. HIVE home heating controls Residential energy storage Smart thermostats to reduce churn BEMS for DR and energy efficiency Digital Life connected home service 1m connected home customers Smart home platform (AT&T) Smart home hubs ??? Bundled electricity, entertainment and home automation HEMS platform DR and retail services Energy supply and services Virtual mobile operator – 80k customers Registered energy supplierBundled telecoms and energy supply Smart home partnerships/investment Smart lighting / home automation Bundled telecoms, electricity supply beginning in 2016 Bundled insurance, telecoms and energy Bundled electricity telecoms services HEM tools and DR IHD and smart thermostat program Home energy management Source: Bloomberg New Energy Finance, Apr 2015 New Players and Energy Services The Energy retail battlefield Market focus is moving from generation to other segments of the value chain 22
  24. 24. World GDP Growth Outlook 2014-2020 CAGR, April 2015 Strong > 5% Mid ~ 4% Low < 2,5% Global GDP will decline because of stagnating mature economies and slowing down of emerging economies Source: IMF Apr 2015 6% 4% Historical (2004-2014) Forecast (2014-2020) World’s GDP Historical Vs. Forecasted Growth (CAGR) 23
  25. 25. Emerging market indices - August 2015 Half of all emerging market indices were in bear territory, Emerging market stocks have fallen significantly, in many cases more than those in Europe and the US Source: BNEF October 2015 24
  26. 26. A Decade of Change From the old model… A simple and linear model Generation Transmission Distribution Retail Customer 25
  27. 27. A Decade of Change …to a new energy market paradigm Bulk Generation Transmission Distribution Retail Customer Distributed generation Demand response Storage Micro grids New entrants Link supply to load Focus on baseload Customer becomes producers Customers become active consumers Storage used to manage grids Customers go or remain off-grid Offer new products and services Become an active partcipant Engage with customers Actively manage the grid New market paradigm 26 Note: PWC Report: “The road ahead - Gaining momentum from energy transformation”, 2014
  28. 28. Agenda 2 Renewable energy outlook 3 EGP Strategic View 1 Overview on current market trends 27
  29. 29. The Renewable Energy escalation The evolution of renewable energy over the past decade has surpassed all expectations. Global installed capacity and production from all renewable technologies have increased substantially, and supporting policies have continued to spread to more countries in all regions of the world Source: REN 21, The first decade: 2004 – 2014; IRENA; BNEF; Enerdata; GlobalData; TSOs  2014 record year in additional Wind capacity (~ 50 GW)  Record year in terms of PV additional capacity (~40 GW)  Record year in terms of geothermal additional capacity (~ 1 GW)  Increasing n. of Countries with installed capacity higher >100MW: 37 for PV and 55 for Wind 2014 Key Facts Hydro Wind PVBiomass Total 850 GW 1.165 GW 370 GW 90 GW 175 GW 950 GW 1.815 GW 45 GW 3 GW50 GW 2004 2014 Renewable Installed Capacity by Technology, 2004 – 2014 28
  30. 30. Global electricity demand evolution (2014-2020) Changes in the power production mix until 2035 Renewable role in demand growth Source: Bloomberg New Energy Finance, “New Energy Outlook 2015”, Jun 2015 29 • Renewables are expected to grow steadily all over the World • Developing countries will account for over 60% of the global growth of electricity generation in 2035 • Renewables are expected to account for about 50% of future energy supply growth -1.000 0 1.000 2.000 3.000 4.000 5.000 Coal Gas Nucleare Rinnovabili Note: Countries are clustered based on average annual growth of electricity demand : Negative – demand decreases; Low – growth < 0.5% ; Medium – growth between 0.5% and 4%; High – growth > 4%. Cina India USA EU M.East Africa
  31. 31. 30 Evolution of incentive schemes in areas of interest 2010 – EGP Countries 2015 – EGP Countries/Areas of Interest 16 EGP countries of which 6 Tender/PPA 48 EGP Countries of Interest of which 29 with Tender/PPA Fixed Incentive Schemes (GC, Tariffs) Competitive Incentive Schemes (tender/PPA) Note: analysis based on EGP countries. Remuneration mechanisms refer to RES Utility-scale plants.
  32. 32. Renewable Energies NEX Clean Energy Index 2013-15 YTD Clean energy companies delivered a profit to their shareholders equal to 50% Note: Values as o 01 April 2015; Stowe, NEX and S&P 500 rebased to 100 on 01 Jan 2013 Source: Bloomberg New Energy Finance, Apr 2015 31
  33. 33. Source: IEA, Apr 2015; BNEF Apr 2015 Wind: 69-120 $ PV: 75-120 $ Europe PV: 85-89 $ Chile Wind: 48 $ PV: 75 $ US Wind: 54 $ PV: 81 $ Brazil PV: 88 $ India Wind: 52 $ PV: 66 $ South Africa Global prices reference (recent auctions outcome, $/MWh) Bid auction results are driving downwards RES costs making them increasingly competitive compared to fossil fuels Renewable Energies Increasing competitiveness of Renewable Sources 32 Wind: 36-40$ Egypt PV: 58 $ UAE
  34. 34. Job creation Energy independence and reduction of prices volatility Scalability and modular approach Environmental Sustainability Simplicity in Installation and Operation Competitiveness 1 2 3 6 5 4 The Green Revolution Success factors 33
  35. 35. The Energy field A competitive scenario 34 A complex scenario in which EGP competes with large utilities, YieldCos and new types of players Renewables Generation Competition between big utilities Entry of YieldCos The new competitive scenario Big Utilities launch new companies committed to develop renewable energy projects Focused on managing existing assets rather than creating true value
  36. 36. The Energy field YieldCos role 35 • Spin-off listed in stock exchange constituted by operating plants and characterized by a stable cash flow and high dividend • Yields exposed to rising interest rates and regulatory risks • Business focused more on financial management of existing assets than on creating value North America • From 2013 to 1H2015 YieldCos have collected $12bn in IPOs and increased their market value by 84 % • High volatility of their value: negative performance in recent months with falling securities up to 50 % of its value PerformanceYieldCos Europe Source: Bloomberg New Energy Finance, July 2015; Bloomberg platform
  37. 37. Agenda 2 Renewable energy outlook 3 EGP Strategic View 1 Overview on current market trends 36
  38. 38. Global player with a diversified footprint 2.1 GW in operation 0.4 GW in execution 0.1 GW contracted North America 10 MW in operation 0.5 GW in execution 0.7 GW contracted Africa 5.8 GW in operation 0.2 GW in execution Europe 2.0 GW in operation 1.8 GW in execution 0.6 GW contracted Latin America Expertise across 5 technologies Operations across 17 countries Industry leading load factor at 40% Highly efficient operations Enel Green Power today 0.2 GW in operation Asia 37
  39. 39. Deploying a global business model... …with a differentiated local approach Growth momentum and synergies with the Enel Group Latin America Steady growth with low risk profile North America Opportunities for divestment and aggregation Europe Prospective growth opportunities Asia-Pacific South Africa as a platform for growth in the Sub-Saharan area Africa Country of interestCountry of presence Country under screening 38
  40. 40.  Identification of projects  Screening of opportunities  Development and evaluation  CAPEX allocation  Realization of approved projects  Technology development  Acquisition integration  CAPEX expenditure  Operation of plants  Production optimization  Operational improvement  Generation of EBITDA Integrated business model Industrial and commercial approach to the value creation Business Development EPC Integrazione M&A Operation & Maintenance Financing Commercial offering 39
  41. 41. Financing Development Cost Opex (incl. Tax) Modules & BOP 31% 21% 45% 4% Solar 31% 19% 46% 4% Wind Turbines & BOP Opex (incl. Tx) Financing BOP 22% Modules 23% Turbine 35% BOP 11% Note: approximate values Development Cost Wind and Solar projects: NPV of cost breakdown 40
  42. 42. Competitive scenarios on the innovation field 41 New RES technologies Electrification in emerging markets Storage to improve RES dispatching Applying Storage to retail markets GeoHydroWind BiomassSolar Ocean High altitude wind MINIMIZZAZIONE SBILANCIAMENTI ENERGY SHIFTING CAPACITY BESS LIMITATA Ollagüe Powerhive Marcona Current portfolio Possible new entries D A B C
  43. 43. 42 EGP currently operates 5 technologies… GeoHydroWind BiomassSolar … and might add new ones  Wave energy  Thropospheric wind A New possible generation technologies from renewables
  44. 44. Clear sky day Cloudy day -100 0 100 200 300 400 500 600 700 800 16/03/201419:12 17/03/201400:00 17/03/201404:48 17/03/201409:36 17/03/201414:24 17/03/201419:12 18/03/201400:00 AverageOutputPower[kW] MaximumOutputPower [kW] MinimumOutputPower [kW] -100 100 300 500 700 900 1100 21/03/201419:12 22/03/201400:00 22/03/201404:48 22/03/201409:36 22/03/201414:24 22/03/201419:12 23/03/201400:00 AverageOutputPower[kW] MaximumOutputPower [kW] MinimumOutputPower [kW] PV power plant: • Large Variation in few minutes in case of cloudy days • Good average forecast Wind power plant: • Large amount on power changing within minutes • Potential On-Off behavior in case of strong wind • More challenging forecast compared to PV Time-window for energy release 0 100 200 300 400 500 600 700 800 900 1000 1 21 41 61 81 101 121 141 161 181 201 221 241 43 B Renewables: threat or opportunity
  45. 45. 44 B Global Market is expected to rapidly grow for utility scale ESS
  46. 46. • Primary regulation • Secondary regulation • Terziary regulation • Reactive supply and Voltage control Ancillary services • Curtailments: due to transmission: • constraints and generator flexibility, energy • storage helps to increase grid flexibility and • reduce curtailment. • Day/night Price Arbitrage (Energy-shift, peak-shaving) • Mitigate RES generation unbalance and reduce relevant penalties together with the improvement of weather forecast: • Day-ahead market • Intra-day market Unbalance 45 B Possible business models enabled by battery storage systems
  47. 47. UNBALANCING REDUCTION ENERGY SHIFTING Night Production 46 B Catania 1 Bess project – RES dispatchability 10 MW PV plant 1MW / 2MWh Battery Storage System Operative since Q3 2015
  48. 48. 47 LatAm Africa • OFF-GRID VILLAGES • SOLAR HOME SYSTEM • SOLAR LANTERN • NO ACCESS TO ELECTRICITY Example market Area Pacific USA, EU• HIGHLY CONNECTED ADVANCED GRID ∙ ∙ • MILDLY CONNECTED GRIDS ∙ Energy ‘Ladder’ Examples of EGP’s applications at the bottom of the piramid OLLAGÜE - Chile STATUS: IN OPERATIONS SIZE: • PV, 200 kWp 3Sun thin film modules • WIND TURBINE vertical axis, 30kWp • STORAGE NaNiCL2, 250 kW 520kWh • Diesel Generator as backup, 250kW Microgrids - Kenya STATUS: under negoziation SIZE: • 100 microgrids • Project size (PV only) 950 kW • Average generation capacity per site 9.5 kW • Max output capacity (PV + batteries) 2,400 kW MARCONA - Perù STATUS: approval at Inn. Committee SIZE • PV fix modules (crystalline): 63 kWp • Mini Wind system: 60 kW • Electrochemical Storage system (Li-ion): 70kW/70kWh • Diesel generator: 2x72 kWel Still today, 1.4 billions of people do not have adequate access to electricity therefore relying on oil lamps or, in the best cases, diesel generators. These conditions offer emerging business opportunities for green sustainable solutions, that can be tailored to meet specific requirements. C Innovative off-grid applications: electrification in emerging markets
  49. 49. MAIN EVIDENCES A full charge of the battery allows to sustain the community load during night in real operation conditions Possible further optimizations of the Energy management system, advanced weather forecast and nowcast technologies  the real time monitoring of the loads  looking to possible improvements of the generation set. 18:302:30 2 21 Typical day of operation (in wintertime) C Ollagüe Project -PERFORMANCE ANALYSIS
  50. 50. 49 Clients are beginning to seek energy independence trough stand-alone, cheap and green systems. This driver, coupled with an attractive design, is the base for the development of a residential market for batteries. Technological Partners Tesla Samsung LG Innovative Li-Ion storage systems for domestic usage are designed to maximize the self consumption from photovoltaic systems, but they can as well provide services such as back-up or, in the future, grid services through Virtual Power Plants D Retail storage technologies: selecting the most advanced solutions…
  51. 51. 50 General plant data Historical/real time production analysis Weather forecast Alerts Energy Saving New offers General plant data:  Activation date  Last access App functionalities Production monitoring:  Historical and real time production analysis (plant capacity)  Predictive analysis of plant production within 36/72 hrs Weather forecast:  Real time weather forecast to support predictive analysis on plant production Alerts:  Alerting system to inform the user about plant malfunctioning, production trend, battery level, etc. Customer support Customer support:  Customer assistance and quick response to the user through call centre and instant messaging with available operators Energy Saving:  Main suggestions on plant energy saving New offers:  Section that includes new commercial offers for the client PV Panel & storage Client App Usage/Consumption monitoring:  Historical and real time consumption information  Benchmark with other users’ consumptionProduction/Consumpti on monitoring PULLPUSH D … and implementing innovative mobile applications for monitoring the system’s production and consumption
  52. 52. 51 EGP First mover in key emerging markets High quality of its pipeline Strategic partnerships along the entire value chain Commercial synergies with Enel Development of Innovative Solutions Geographical and technological diversification EGP Industry Leader able to increase its own competitive advantage Final remarks Enel Green Power strengths

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