New Global Energy Trends

New Global Energy Trends
Colette Lewiner, Energy & Utilities Global Leader
Capgemini
European Gas Supply Infrastructure Platt’s
Conference
October 10, 2011

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

Global demand for oil is increasing again

Primary factors driving demand are economic growth and increased
requirements in the developing world.

3

Reserve replacement and National Oil Companies
dominant control of resources are the two main issues

The 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

1109 Platt's Gas Conference.pptx 4

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?

5

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


6

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
under
construction

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


7

Agenda
• Oil supply
• Fukushima

 Short tem
 Longer term
• Energy Mix
 Gas
 Renewables
 Smart Grids
 Energy Prices

 Conclusions


8

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 to
electrical 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?


9

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 2015
Source: ENTSO-E – Capgemini analysis, EEMO13


10

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 bcm

Source: BP statistical review of world energy 2011 – Capgemini analysis, EEMO13


11

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?
12

Agenda
• Oil supply
• Fukushima

 Short tem
 Longer term
• Energy Mix
 Gas
 Renewables
 Smart Grids
 Energy Prices

 Conclusions


13

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
• 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


14

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.
15

Power plant’s consumption is the main cause for gas
demand growth
Previous 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
16

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

17

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

18

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

Gas is not a global market.
Very different regional pricing systems

Indexed prices Europe 4.4$/MBtu=10.6 €/MWh

Source: Focus Gaz September 2011

Spot gas markets prices are below long term continental European
prices(indexed on oil prices). For how long?

20

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 for
renewables. This trend could be reverted again by the public deficit problems

21

Renewable energies impact the grid management.
The Spanish Example
August 27, 2009 November 8, 2009

Source: Enagas, Outlook for LNG

Existing systems cannot predict output of wind power will be 24 to 48 h in
advance. The grid operators have to react to changes in power output on a
very short timeline. To date there are no good answers for massive storage.


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). Renewables
ICT (Information and Communication
Advanced
Technologies) systems investments: Metering
Cisco sees15-20 bn$ investment
opportunities to link smart grids with ICT Enhanced Power Grid
Plug-In Digital Communications and Control
systems over the next 7 years. John Hybrids
Chamber, Cisco CEO, says that it Smart Meters &
Control Building Automation
might 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

23

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 nuclear
phase 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

24

Agenda
• Oil supply
• Fukushima

 Short tem
 Longer term
• Energy Mix
 Gas
 Renewables
 Smart Grids
 Energy Prices

 Conclusions


25

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

26

Together. Free your energies

www.capgemini.com/energy

New Global Energy Trends

Recommended

Recommended

More Related Content

Similar to New Global Energy Trends

Similar to New Global Energy Trends (20)

More from Capgemini

More from Capgemini (20)

Recently uploaded

Recently uploaded (20)

New Global Energy Trends