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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 Smart Grids Conference Paris, France, May 24-26, 2011

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New Global Energy Trends

  1. 1. New Global Energy TrendsColette Lewiner Energy& Utilities Global leaderCapgeminiParis, 25 Mai 2011
  2. 2. AgendaRecent Energy trends • Oil • Nuclear • Gas • RenewablesEnergy Mix Evolution Consequences • Security of supply • Prices • CO2 emissions • Consumers behaviours changes • Smart gridsConclusions | 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
  4. 4. Reserve replacement and dominant control of resources by the National Oil Companies 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 Saudi, Iran, Iraq, Libya, Yemen, Algeria, Sudan, Oman … political upheaval may place significant global reserves at risk | Energy, Utilities & Chemicals Global Sector EUC Global Sector Kick-Off Meeting 2009 4
  5. 5. Oil Supply New Frontiers have their own challengesDeep water: Macondo BP accident … challenges todeepwater developments• US consumes < 25% of the world’s oil with 5% of the population, it produces only about 20% of its requirements ~ 5MBPD• 30% comes from the GOM alone and most of the new supply and the largest potential finds are to come from its deepwater field; slowed development could create a steep decline … 0.5 to 1MBPD in just a few yearsCanada oil sands• From a supply and geopolitical risk perspective the oil sands hold tremendous potential with 178 billion barrels of proven oil reserves, slightly less than Saudi Arabia;• While there is no chance of either a blowout or deepwater spill in oil sands, these developments have their own economic, operational and environmental challenges in addition to mounting political and social activist pressures. Heightened Regulatory Challenges, social unrest in key regions and increasingly Environmental Concerns are key issues | Energy, Utilities & Chemicals Global Sector 5
  6. 6. Fukushima accident first safety lessons learned The accident First safety lesson learnedExceptional circumstances: 9.0-magnitude Global warming could trigger moreundersea earthquake off the coast of Japan on frequent exceptional eventsMarch 11, 2011 triggering a tsunami that Need to design plant infrastructures fortravelled up to 10 km inland. really exceptional earthquakes andFukushima nuclear plant: with 6 boiling water tsunamisreactors (BWR) maintained by TEPCO has beenhit by the earthquake and tsunami: Simultaneous Natural Catastrophes have to be taken into account Reactors 4, 5 and 6 were shut down prior to the earthquake for maintenance. Spent fuel pools containment building Remaining reactors shut down automatically after Spent fuel management policy to be the earthquake. Grid electricity supply for cooling rethought purposes collapsed and then the tsunami Emergency measures to be revisited flooded the plant, knocking out emergency generators. Cooling systems redundancy to be re- 20km radius evacuation around the plant from assessed March 12 Radiological permanent assessment on Highest rating (level 7) on the International the site and around Nuclear Event Scale. Second level 7 rating in Crisis communication to be re-designed history, following Chernobyl Regulators have defined “nuclear safety tests” for existing plants. Will a global safety body be created? | Energy, Utilities & Chemicals Global Sector 6
  7. 7. Existing plants: inspections and additional investmentsIn Japan, nuclear operators haveannounced immediate measures Distribution of reactors under operations by agebeing taken as protection againstthe possibility of their facilitiesbeing struck by a tsunami among 35 32 33which: 30 Num ber of Units 24• Ensuring emergency power sources (e.g. 25 21 21 22 19 22 18 using vehicle-mounted power generator). 20 14 16 15 13 14 14 12• Diversifying and securing cooling function 9 1011 11 10 10 6 6 6 6 7 7• Build higher seawalls 5 4 5 4 4 3 4 5 4 5 5 2 3 2 2 3 1 1Restart of reactors stopped for 0maintenance are also postponed 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 Reactor Age (in years)Germany announced the closure ofits 7 oldest plants for 3 months.This temporary shutdown led to a Older plants will be especiallyspot wholesale electricity price scrutinized.increase According to Eurelectric, if all nuclearAdditional CAPEX and OPEX will plants older than 30 years would bepush nuclear electricity costs up. closed in Europe, the EU 27 wouldBy how much? However nuclear lose 14% of its generation should remaincompetitive | Energy, Utilities & Chemicals Global Sector 7
  8. 8. Nuclear new build: Some programs will be cancelled other delayed Worldwide, 439 reactors are in operation, 62 under construction and 484 planned or proposed (April 2011, World Nuclear Association) Overview of existing nuclear plants and project capacities (as of February 2011)The IEA cut by half their November 2010 projection of additional 360GW of new nuclear generating capacity by 2035. Nuclear Association Source: World | Energy, Utilities & Chemicals Global Sector 8
  9. 9. Life time extensions will be scrutinized Overview of the nuclear plants lifetime extension in Europe before the accident FISE: Life extension and uprating for Oskarshamn 3 to 60years approved in 2010 and expected to be completed in2013. Planned life extension to 60 years of Oscarshamn 2. FI: Fortum: 20 year lifetime extension of original 30 years decided in mid 2007 for 2 units at Loviisa. Operating sinceBE: Agreement in Oct. 2009: 10 year life extension 1977 and 1981 they will run until 2027 and 2030, subject toof the 3 oldest nuclear power reactors to 2025 to saf ety evaluations in 2015 and 2023.guard against energy shortages. TVO: Lif tetime xtension to 60 years of the two Olkiluoto Source: World Nuclear Association, Capgemini Research NOIn 2008, government installed a nuclear producer tax reactors operating since 1979 and 1982; subject to safetyof 250M€ per year till end of lifetime. Additional NL: Only plant to be evaluations every 10 years. Closure in 2039 and 2042.proposed taxes following life extension, have not shut in 2034 after a SEpassed as a law due to the political crisis in Belgium. conditional EE DE: End 2010, government agreed to a two-tier lifetime extension in 2006. extension of the German nuclear plants. 17 nuclear LV reactors to run 8-14 years longer than the 2020 deadlineUK: Last 4 operating Magnox reactors to beIE shut DK set by a prior government: Lifetime extension of nucleardown by end 2012, af ter life extension s of 9 LT units built before 1980 by 8 years to 40 years and of newermonths to 2 years. units by 14 years to 46 years. Operators to pay a “fuel-5 year lifetime extension of the Advanced Gas UK element tax” totaling €2.3 bn/year f or 6 years and a “eco-Reactors (AGR) Heysham 1 and Hartlepool until NL tax” of about €15bn.2019. PLPlant Lifetime Extension (PLEX) program could BE DE CZ: CEZ started in 2009 its project to extendenable extended lifetimes for all UK’s AGR LU Dukovany plant lifetime by10 years to 40 years.plants by 5 years and Sizewell B by 20 years. CZ Further extension to 50 years under SK consideration.FR: In July 2009 the Nuclear Safety Authority FR(ASN) approved EDFs safety case f or 40 year CH AT HU SK: Upgrade program on Bohunice units 3 & 4,operation of the 34 existing 900 MWe SI operating since 1984 & 1985 is under way with aunits. Each unit is subject to inspection during CR RO 40-year lifetime extension in view (to 2025).their 30-year outage. The first, Tricastin-1, got10-year extension to 2020. ES PT IT SI/CR: Slovenia shares the NPP Krško 696 MW BG reactor with Croatia; connected to the network inES: Government granted a 4 year life extension for the HU: In 2005, 20 year lif etimeSanta Maria de Garona plant to 2013. Almarez 1&2 and extension for the 4 reactors of 1981 and designed to run f or 40 years. In 2009,Vandellos 2 granted 10 year extension. In February 2011, Paks nuclear plant, operating NPP Krško submitted an application for lif etimeSpain’s Congress ratified a law allowing the 8 operating since 1982-87. Reactors to run GR extension of 20 years (to 2043).nuclear units to run for longer than 40 years until 2032-2037. Germany decided to suspend 2010 lifetime extension decision. | Energy, Utilities & Chemicals Global Sector 9
  10. 10. Political declarations Plant provisional New projects delayed or stopped: Safety inspections closure: of existing plants: China (assessment);Taiwan assessment, Italy All countries Germany (7 (stopped); Japan (review plans for new projects);Emerging nuclear oldest reactors) Switzerland (moratorium); UK (delayed)countries thathave the mostadvancedprograms:South America: Chile Uruguay Finland: 1Africa & Middle Russia: 10East: Egypt Canada: 2 Image Source: Le Figaro; IAEA Jordan Kuwait Morocco Nigeria France: 1 Slovakia: 2 Saudi Arabia Japan: 2 USA: 1 Tunisia Turkey Iran: 1 China: 27 South United Arab Korea: 5 Emirates Pakistan: 1 India: Taiwan: 2Europe: Belarus 5 Italy PolandAsia Bangladesh Indonesia Brazil: 1 Thailand Vietnam Number of reactors under Argentina: 1 construction | Energy, Utilities & Chemicals Global Sector 10
  11. 11. Fukushima is triggering a debate on present and future Energy MixMedia and some anti-nuclear groups are asking for anuclear phase out. Before asking ourselves if it isfeasible, one needs to ask if it is desirable. An Results of nuclear opinion survey in France (March 2011)immediate nuclear phase out is not possible while keepingthe lights on.A long term phase out is possible but needs to beassessed against the following criteria: • Sustained development: global warming and greenhouse gas emissions decrease • Security of supply • Electricity generation costs World electricity generation by type (New Policies Scenario) Source: IEA: World Energy Outlook 2010 Source: L’express, SIA, Opinion Way, Published April 2011 | Energy, Utilities & Chemicals Global Sector 11
  12. 12. 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, increasing production 4 fold since 1990 Global unconventional natural gas resources(300 bcm in 2008). in place (tcm) • The latest IEA report increases significantly the European unconventional gases reserves, •In France, reserves are estimated at 5 000 Gm (around 100 years of consumption). They are equally situated in two basins (North and South-East) • German reserves would 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 12
  13. 13. Gas will increase its market shareSuccess in unconventional gas production atcheap cost has allowed the US to become nearly Incremental Global Gas Demand in 2020 from Lowerself sufficient Nuclear Power GenerationNew gas liquefaction trains have beencommissioned in 2009 and 2010These factors combined with the economiccrisis, have created a gas bubble and loweredgas pricesThe EU gas market is oversupplied and has anoverhang between 10-30 billion cubic meters(bcm) to make up over the next few yearsHowever • Fukushima accident will deprive Japan of at least 9.7 GW of nuclear capacity • This capacity should be replaced by gas fired plants. Gas would be imported by pipelines from Russia notably but also be provided through LNG 40% nuclear generation decrease • The range of additional LNG consumption from leads to around 5% gas demand Japan is 5.4 bcm/y to 11.7 bcm/y. increase. • This new Japanese demand added to the Gas should increase its market share consequences of the 7 German nuclear plants closure should accelerate the EU market re- on the short and long term. balance | Energy, Utilities & Chemicals Global Sector 13
  14. 14. Will renewables increase their long term market share? EU Renewable energy objectiveThe RES growth is still behind what is neededto reach the 20% target in 2020Due to governments’ austerity plans,subsidies to renewable energies are being cutThe 2020 EU target will be difficult to meetChina is the biggest investor; in 2010 it spent30% more than in 2009 Investors ranking in 2009 (in $bn) Source: Eurostat, EEA, BP statistical report of world energy 2009, European Commission – Capgemini estimation, EEMO12 Will governments be able to reverse the trend and increase again their subsidies to renewables? | Energy, Utilities & Chemicals Global Sector 14
  15. 15. AgendaRecent Energy trends • Oil • Nuclear • Gas • RenewablesEnergy Mix Evolution Consequences • Security of supply • Prices • CO2 emissions • Consumers behaviours changes • Smart gridsConclusions | Energy, Utilities & Chemicals Global Sector 15
  16. 16. Security of supply could deteriorate Gas imports through pipelines and pipelines projects (2009) Projects of pipelines Main countries of Main exporting countries capacity increase destination for newIt is risky to rely too much on imported Total amount of gas Projects of new pipelines pipelines 99 TWh exported (planned or underOil and Gas: Major gas flows construction) GALSI Interconnection projects financially supported by the European Energy Built segments of Recovery Plan (EERP) Arab spring: limiting oil exportations Projects of pipelines capacity increase pipelines under construction Russia gas dependency: in 2030, NO FI Russian gas should provide 50% of 96 bcm SE (i.e. 1,034 TWh) EU gas demand m RUSSIA strea Skanled EE 115 bcm (i.e. 1,245 TWh) Nord LV IE DK Baltic pipe LT UK 12 bcm BBL (i.e. 131 TWh) NL NL PL 50 bcm BE DE (i.e. 536 TWh) LU CZ FR SK CH AT HU SI RO W hite stream am PT s t re BG uth ES IT So TAP cco GALSI GR Nabu Medgaz TGI am ed nsm nstre Tra Gree ALGERIA 30 bcm (i.e. 324 TWh) LIBYA 9 bcm (i.e. 99 TWh) Source: The Source: Eurogas, BP statistical review of world energy 2010 , companies web sites, GIE gte – Capgemini analysis, EEMO12 | Energy, Utilities & Chemicals Global Sector 16
  17. 17. Electricity generation costs Estimated costs of electricity in France: Regional ranges of levelised costs of electricity for 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 dependent on sites and construction Rate 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)Nuclear cost should increase after Fukushima accident as safety inspections will result in more Source: IEA: Projected Costs of Generating Electricity, 2010 Edition investments and in plants • Assumption: carbon price of USD 30/tCO2 availability decrease • Cost of CC(S) is still in the development stage (IEA study does not consider costs of transporting and storing the sequestered carbon in final deposits) | Energy, Utilities & Chemicals Global Sector 17
  18. 18. Consumption and CO2 emission evolutions Source: Eurostat, EEA, BP statistical report of world energy 2009, European Commission – Capgemini estimation, EEMO12 Primary Energy Consumption EU Energy efficiency objective In 2009, during the crisis, energy consumption and GHG emissions dropped In 2010 ETS sectors emissions projected to increase by 3,6% compared to 2009 (Deutsche Bank). Despite this increase the objective could be met. • However ETS markets are not predictable enough to stimulate long term CO2 free generation investments. This is why UK decided to set a carbon price floor. Starting in 2013 at £16 per ton, the tax-inclusive carbon price in 2030 will be at £70 per ton Energy savings objective will be difficult to meet. This is why EU Commission adopted the Energy Efficiency Plan 2011: • Focused on instruments to trigger renovation in buildings, to improve energy performance of the appliances and to foster EU Greenhouse gases emissions objective energy efficiency • For now only a strategy paper. Legislative proposals with concrete binding measures to follow.• Germany’s ETS emissions to strongly increase if their reactors are shutdown according to the Deutsche Bank: • If 7 oldest reactors permanently shut down while 10 others continue; Germany’s ETS emissions over 2011-20 would increase by 250Mt relative to the current forecasts. • If 7 oldest shut down and other 10 closed in line with the 2002 legislation, ETS emissions to increase by 370Mt. Phasing out nuclear would have a dramatic effect on CO2 emissions increase | Energy, Utilities & Chemicals Global Sector 18
  19. 19. Safer Nuclear Energy development is still important to meet the future sustainability challengesWorldwide challenges: Tight global energy demand and supply balance Long term global energy security of supply Climate Change issues calling for carbon free energy sources World energy-related CO2 emissions abatement Source: IEA, World Energy Outlook 2009 Safer nuclear with hydropower are the only carbon-free schedulable energy source able to produce large volume of electricity | Energy, Utilities & Chemicals Global Sector 19
  20. 20. Renewable Energies impact on the GridWind farms: dealing with variability is tough Existing systems cannot predict what the output of wind power will be 24 to 48 h in advance. New systems have to be installed to support this kind of forecasting Forecasting this output is critical, as it determines when to trigger dams or fossil plants to support days The grid operator has to be ready to react to changes in power output on a very short timelineTo date there are no good answers for massive storage Growth rate of renewable energy sources (2008 for Waste, hydro and Biomass and 2009 for Wind and Solar PV) These problems are the root cause of the 2007 blackout in Germany and North of France Source: Eur’Observer barometers – Capgemini analysis, EEMO12 | Energy, Utilities & Chemicals Global Sector 20
  21. 21. Wind Power: the Spanish Example August 27, 2009 November 8, 2009 Source: Enagas, Outlook for LNGMore flexible consumption patterns (i.e. demand response) wouldallow customers to take advantage of low costs generated by wind power sudden increase | Energy, Utilities & Chemicals Global Sector
  22. 22. Smart grid featuresA grid with more intelligence has to be designed in order to be able to • Manage a larger proportion of renewable unpredictable energies • Evolutions of customers behaviors (demand response, local generation) • Electricity consumption increase (in certain cases) • Aging infrastructures while it is very difficult to build new ones. • Deliver better electricity quality (less harmonics, less micro-cuts..)The future grid should be able to produce faster fault location and power restoration,hence lesser outage time and manage many small power generation sources.The system network architecture will need to change to incorporate multi-way powerflows, and will be much more intelligent than a series of radial lines that just openand close.The future data volumes will require large data communications bandwidth andcommunication network technologyThe key is to build a vision and architecture that allows Utilities to leverage today’s investment while maintaining flexibility as technology advances. | Energy, Utilities & Chemicals Global Sector 22
  23. 23. Europe: 80% of the population should benefit from smart metering by 2020 Electricity GasUncertainty created by thevalue chain unbundlinglead to an uncertain ROI.This explains the slowadoption in Europe.Country by countrysituation:• Italy and Sweden are leading the adoption of smart meters in Europe with full installation in 2009.• Large experiment in France (300,000 meters) launched in 2008. After return of experience, compulsory deployment of smart meters for 95% of citizens by 2016.• New legislation is expected in Netherlands, Ireland and Norway• The UK government decided to introduce similar requirements, but financing is unclear presently Source: ESMA, GEODE - Capgemini analysis, EEMO12 Total expenditure on smart metering will reach €2.8 billion by 2014. | Energy, Utilities & Chemicals Global Sector 5/27/2011 23
  24. 24. Smart Grid InvestmentsSmart grid investments Communication• Worldwide: from 2008-2015: Technologies 200bn$ (53bn$ in the US). Network Device and Events Ops Management (Pike Research source).• US stimulus grants: 3.4bn$• Europe: 1bn€ EU funds Back Office ApplicationsICT (Information andCommunication Technologies) Renewablessystems: Cisco sees15-20 bn$investment opportunities to link Advanced Meteringsmart grids with ICT systemsover the next 7 years Enhanced Power Grid Digital Communications and Control Plug-InJohn Chamber, Cisco CEO, Hybrids Smart Meters &says that it might be bigger Control Building Automationthan 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 24
  25. 25. Key success factors (1)• Smart grids implementation will necessitate new investments: • The transmission and distribution tariffs will have to increase and by consequence the electricity prices. • Regulators, governments and customers will have to accept these prices increases.• Industrial R&D is needed to develop new equipments (as large competitive storage) or improve existing ones (as HVDC connections).• Communication standards are crucial: • US is mobilized at the government (Department of Energy) and equipment manufactures levels • Europe is catching up • Equipments conceived with the internationally adopted standards will have a clear advantage | Energy, Utilities & Chemicals Global Sector 25
  26. 26. Key success factors (2)• Efforts on simulation and modelling are needed: • For the transmission grid there is a need to build a new European High Voltage grid management model. • On the distribution side, the retail market has to evolve and modelling is needed. Interesting experiences initiated by regulators and involving all stakeholders (Utilities, equipment manufacturers, IT service companies, local authorities..) have been launched in Victoria (Australia), Texas (USA) and France.• Next steps for Utilities: • Establish their vision on the technical, economical and management future models as smart grid implementation will change drastically their management mode. • Launch prototypes with part of the financing coming from the EU or Member States. | Energy, Utilities & Chemicals Global Sector 26
  27. 27. AgendaRecent Energy trends • Oil • Nuclear • Gas • RenewablesEnergy Mix Evolution Consequences • Security of supply • Prices • CO2 emissions • Consumers behaviours changes • Smart gridsConclusions | Energy, Utilities & Chemicals Global Sector 27
  28. 28. ConclusionThis last year’ events are putting once more Energyquestions in the spot light Energy Orb » (PG&E) gives visual indications to clients involved in energy demand • Energy consumption growth after the economic and management programs financial 2009 crisis • BP accident in Gulf of Mexico highlighting the deepwater production difficulties and strengthening regulations • Nuclear Fukushima plant accident stalling the nuclear « renaissance » • Middle East and Arab countries political instabilityThey will probably lead to: • Higher oil costs (and prices) • Decreased security of supply • Higher electricity prices as Utilities will have to invest in nuclear existing plants, use more costly energies (notably renewables) and invest in their grids • More Green Houses Gases emissions • Customers should change their behavior and increase their energy savings focus | Energy, Utilities & Chemicals Global Sector 28