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12August2014
2014 BLACK & VEATCH STRATEGIC DIRECTIONS:
U.S. ELECTRIC INDUSTRY
DEAN OSKVIG
PRESIDENT & CEO
ENERGY
JOHN CHEV...
AGENDA
Industry Overview
Change is Accelerating
Industry Shifts
Markets & Economics
Technology
Policy
Crossroads
2
INDUSTRY
OVERVIEW
3
Change is accelerating
TOP 10 INDUSTRY ISSUES
REFLECT SHIFTING PRIORITIES
12 August 2014
4
USEA |
BIGGEST THREATS TO LONG-TERM MODEL
12 August 2014
5
USEA |
Environmental Regulation Aging Infrastructure
BALANCE OF REGULATION AND OPERATIONS
IS CRITICAL TO SUSTAINABILITY
12 August 2014
6
USEA |
Regulatory imperatives and oper...
HOW CAN THE INDUSTRY BEGIN TO TACKLE
CURRENT AND EMERGING ISSUES?
12 August 2014
7
USEA |
TECHNOLOGY
INDUSTRY SHIFTS
8
Markets & Economics
EVOLVING MARKETS AND ECONOMICS
DRIVE INDUSTRY SHIFTS
12 August 2014
9
USEA |
Slow demand growth is challenging capital
inv...
COMPLIANCE COSTS ARE TOP OF MIND
12 August 2014
10
USEA |
Market forces impact long term planning
Compliance
Costs
Fuel Po...
23%
14%
51%
12%
NATURAL GAS REVOLUTION TO RESHAPE
POWER SECTOR
12 August 2014
11
USEA |
Shale gas revolution impacts power...
REPLACEMENT MAY NOT BE ONE TO ONE
12 August 2014
12
USEA |
REGULATION, FIXED COSTS AND NEW
GENERATION TO DRIVE RATE INCREASES
12 August 2014
13
USEA |
Rate structures will need to e...
FORMAL ASSET MANAGEMENT PROGRAMS
CAN HELP UTILITIES STRETCH CAPITAL
12 August 2014
14
USEA |
Risk-based approaches are key...
12 August 2014
15
USEA |
Almost 70% of survey respondents have been in
the electric industry for more than 20 years
13%
18...
MASS RETIREMENTS LOOM CREATING NEW
CHALLENGES FOR OPERATORS
12 August 2014
16
USEA |
Focus on STEM education and craft tra...
INDUSTRY SHIFTS
17
Technology
Distributed generation is having a profound
impact on utility planning
RISE OF DG RESHAPING
CUSTOMER PROFILES
12 August 20...
NET METERING CREATES REVENUE
CHALLENGES FOR MANY UTILITIES
12 August 2014
19
USEA |
Current solar incentives can lead to h...
GROWTH IN NON-UTILITY SOLAR ASSETS IS
DRIVING REVIEWS OF DG POLICIES
12 August 2014
20
USEA |
New approach requires fair d...
HIGH HOPES THAT ENERGY STORAGE WILL
SMOOTH POWER FLOWS
12 August 2014
21
USEA |
70%
51%
41%
Meet peak capacity requirement...
ADVANCED METERING CREATING MORE
INTELLIGENT NETWORKS
12 August 2014
22
USEA |
Electric Grid catching up to telecom and ISPs
UTILITIES EMBRACING DATA,
BUT ROOM TO GROW
12 August 2014
23
USEA |
Electric Utilities lag retail / banking sectors in
use...
VALUE FOUND IN AMI AND DATA
ANALYTICS ACROSS THE ORGANIZATION
12 August 2014
24
USEA |
Growing recognition of the role of ...
TECHNOLOGY IS CHANGING THE UTILITY-
CUSTOMER RELATIONSHIP
12 August 2014
25
USEA |
Consumers are becoming more active in h...
UTILITIES SLOWLY EMBRACING RESIDENTIAL
DEMAND-SIDE MANAGEMENT
12 August 2014
26
USEA |
Utilities are engaging customers to...
INDUSTRY SHIFTS
27
Policy
FEDERAL POLICIES ARE DRIVING CHANGES
IN THE FUEL MIX AND INVESTMENT MODEL
12 August 2014
28
USEA |
CYBER SECURITY POLICIES DIRECTED AT
PROTECTING CRITICAL INFRASTRUCTURE
12 August 2014
29
USEA |
New technology can increas...
PHYSICAL ASSET SECURITY GAINS PROFILE,
WILL FUNDING FOLLOW?
12 August 2014
30
USEA |
Coverage of attacks are on the rise
A...
CROSSROADS
31
UTILITIES MUST EVOLVE IN ORDER
TO THRIVE
12 August 2014
32
USEA |
CAPACITY MODEL
ENERGY MODEL
www.bv.com
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Black & Veatch Strategic Directions: U.S. Electric Industry

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The 2014 Black & Veatch Strategic Directions: U.S. Electric Industry report examines the accelerated pace of change affecting the U.S. electric utility industry with a focus on the market, technology, and regulatory drivers of change. The report provides an analysis of key issues including reliability, emerging and consumer technologies, renewables integration and infrastructure development while offering a look ahead at industry prospects.

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Black & Veatch Strategic Directions: U.S. Electric Industry

  1. 1. 12August2014 2014 BLACK & VEATCH STRATEGIC DIRECTIONS: U.S. ELECTRIC INDUSTRY DEAN OSKVIG PRESIDENT & CEO ENERGY JOHN CHEVRETTE PRESIDENT MANAGEMENT CONSULTING &
  2. 2. AGENDA Industry Overview Change is Accelerating Industry Shifts Markets & Economics Technology Policy Crossroads 2
  3. 3. INDUSTRY OVERVIEW 3 Change is accelerating
  4. 4. TOP 10 INDUSTRY ISSUES REFLECT SHIFTING PRIORITIES 12 August 2014 4 USEA |
  5. 5. BIGGEST THREATS TO LONG-TERM MODEL 12 August 2014 5 USEA | Environmental Regulation Aging Infrastructure
  6. 6. BALANCE OF REGULATION AND OPERATIONS IS CRITICAL TO SUSTAINABILITY 12 August 2014 6 USEA | Regulatory imperatives and operational needs impact capital allocation OPERATIONAL NEEDS REGULATORY IMPERATIVES • Infrastructure upgrades • Changing workforce • Customer demand • Reliability • Emissions standards • Security mandates
  7. 7. HOW CAN THE INDUSTRY BEGIN TO TACKLE CURRENT AND EMERGING ISSUES? 12 August 2014 7 USEA | TECHNOLOGY
  8. 8. INDUSTRY SHIFTS 8 Markets & Economics
  9. 9. EVOLVING MARKETS AND ECONOMICS DRIVE INDUSTRY SHIFTS 12 August 2014 9 USEA | Slow demand growth is challenging capital investment 6% 26% 43% 14% 6% DecliningFlatGrowing slowly, not at historical rate Returning to historical growth rates Surpassed historical growth rate
  10. 10. COMPLIANCE COSTS ARE TOP OF MIND 12 August 2014 10 USEA | Market forces impact long term planning Compliance Costs Fuel Policy Economic Regulation Environmental Regulation Reliability
  11. 11. 23% 14% 51% 12% NATURAL GAS REVOLUTION TO RESHAPE POWER SECTOR 12 August 2014 11 USEA | Shale gas revolution impacts power producers Plan for Natural Gas Fueled Generation Planning to build I don’t know No Facilities under construction
  12. 12. REPLACEMENT MAY NOT BE ONE TO ONE 12 August 2014 12 USEA |
  13. 13. REGULATION, FIXED COSTS AND NEW GENERATION TO DRIVE RATE INCREASES 12 August 2014 13 USEA | Rate structures will need to evolve Estimated cost of 50GW of replacement NGCC
  14. 14. FORMAL ASSET MANAGEMENT PROGRAMS CAN HELP UTILITIES STRETCH CAPITAL 12 August 2014 14 USEA | Risk-based approaches are key to future capital planning
  15. 15. 12 August 2014 15 USEA | Almost 70% of survey respondents have been in the electric industry for more than 20 years 13% 18% 26% 43% SYSTEMS AREN’T THE ONLY THING GETTING OLDER … Less than 10 years 11-20 years 21-30 years More than 30 years
  16. 16. MASS RETIREMENTS LOOM CREATING NEW CHALLENGES FOR OPERATORS 12 August 2014 16 USEA | Focus on STEM education and craft training Yes No I don’t know Organization Impacted by Workforce Retirements 68% 24% 8%
  17. 17. INDUSTRY SHIFTS 17 Technology
  18. 18. Distributed generation is having a profound impact on utility planning RISE OF DG RESHAPING CUSTOMER PROFILES 12 August 2014USEA | 18 Anticipated DG Market Share % Responding More than 20% 5% 11-20% 14% 6-10% 43% Approximately 5% (current market share) 12% Less than 5% 15%
  19. 19. NET METERING CREATES REVENUE CHALLENGES FOR MANY UTILITIES 12 August 2014 19 USEA | Current solar incentives can lead to higher rates for on-grid customers No Subsidy Net Benefit Subsidy 46% 18% 8% Utility Leaders’ View of Net Metering
  20. 20. GROWTH IN NON-UTILITY SOLAR ASSETS IS DRIVING REVIEWS OF DG POLICIES 12 August 2014 20 USEA | New approach requires fair distribution of costs among all customers 34% 20% 7% 6% Currently reviewing net metering Actively working to change net metering tariffs Allowing "virtual net metering" Using a "value of solar" rate structure
  21. 21. HIGH HOPES THAT ENERGY STORAGE WILL SMOOTH POWER FLOWS 12 August 2014 21 USEA | 70% 51% 41% Meet peak capacity requirements Renewables integration Frequency regulation BULK STORAGE DISTRIBUTED STORAGE PURPOSE OF ENERGY STORAGE
  22. 22. ADVANCED METERING CREATING MORE INTELLIGENT NETWORKS 12 August 2014 22 USEA | Electric Grid catching up to telecom and ISPs
  23. 23. UTILITIES EMBRACING DATA, BUT ROOM TO GROW 12 August 2014 23 USEA | Electric Utilities lag retail / banking sectors in use of big data 40% 34% 17% 8% Yes, in place Assessing / in development No I don't know
  24. 24. VALUE FOUND IN AMI AND DATA ANALYTICS ACROSS THE ORGANIZATION 12 August 2014 24 USEA | Growing recognition of the role of data across the organization Smart Network | Smart Information | Smart Utility | Smart Integrated Infrastructure
  25. 25. TECHNOLOGY IS CHANGING THE UTILITY- CUSTOMER RELATIONSHIP 12 August 2014 25 USEA | Consumers are becoming more active in home energy management Programmable, controllable thermostats Direct load control In-home displays Pricing signals to connected devices
  26. 26. UTILITIES SLOWLY EMBRACING RESIDENTIAL DEMAND-SIDE MANAGEMENT 12 August 2014 26 USEA | Utilities are engaging customers to meet efficiency goals 25% 14% 3% 36% Subsidy / Incentive Programs Smart Thermostats Other Nothing
  27. 27. INDUSTRY SHIFTS 27 Policy
  28. 28. FEDERAL POLICIES ARE DRIVING CHANGES IN THE FUEL MIX AND INVESTMENT MODEL 12 August 2014 28 USEA |
  29. 29. CYBER SECURITY POLICIES DIRECTED AT PROTECTING CRITICAL INFRASTRUCTURE 12 August 2014 29 USEA | New technology can increase system risk Security systems currently do not integrate across environments 48% Integrated security systems with proper segmentation, monitoring and redundancies 32% I don’t know 20%
  30. 30. PHYSICAL ASSET SECURITY GAINS PROFILE, WILL FUNDING FOLLOW? 12 August 2014 30 USEA | Coverage of attacks are on the rise Attacks / Threats Investment Need % View   42%   46%
  31. 31. CROSSROADS 31
  32. 32. UTILITIES MUST EVOLVE IN ORDER TO THRIVE 12 August 2014 32 USEA | CAPACITY MODEL ENERGY MODEL
  33. 33. www.bv.com

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