new global energy trends
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European Gas Supply Infrastructure Platt’s
Conference
October 10, 2011
New Global Energy Trends Colette Lewiner, Energy & Utilities Global Leader
Capgemini
| Energy, Utilities & Chemicals Global Sector
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
Primary factors driving demand are economic growth and increased requirements in the developing world.
Global demand for oil is increasing again
3
| Energy, Utilities & Chemicals Global Sector
Reserve replacement and National Oil Companies dominant control of resources are the two main issues
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
1109 Platt's Gas Conference.pptx 4
The Middle East and Africa account for about 2/3’s
of Global Reserves
Libya, Yemen, Syria, Egypt, Sudan, Oman … political upheaval may place significant global reserves at risk
| Energy, Utilities & Chemicals Global Sector
Oil prices forecasts uncertainty is increased by speculation (a barrel is traded 35 times on the financial markets)
Following the June 8th OPEC
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.
5
Oil prices: a consequence of economy growth or a trigger to economic slowdown?
Oil prices
Source: Focus Gaz, July 1, 2011
| Energy, Utilities & Chemicals Global Sector
Fukushima accident first safety lessons learned
Need to design plant infrastructures for really exceptional earthquakes and tsunamis
Simultaneous Natural Catastrophes have to be taken into account
Spent fuel storage and management policy to be rethought
Emergency measures to be revisited
Cooling systems redundancy to be re-assessed
Radiological permanent control on the site and around
Crisis management and crisis communication to be re-designed
Nuclear bodies and governance
6
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
Exceptional circumstances: 9.0-magnitude undersea earthquake off the coast of Japan on March 11, 2011 triggering a tsunami that travelled up to 10 km inland.
Fukushima nuclear plant: with 6 boiling water reactors (BWR) maintained by TEPCO has been hit by the earthquake and tsunami:
Reactors 4, 5 and 6 were shut down prior to the earthquake for maintenance.
Remaining reactors shut down automatically after the earthquake. Grid electricity supply for cooling purposes collapsed and then the tsunami flooded the plant, knocking out emergency generators.
20km radius evacuation around the plant from March 12
Highest rating (level 7) on the International Nuclear Event Scale. Second level 7 rating in history, following Chernobyl
The accident First safety lesson learned
| Energy, Utilities & Chemicals Global Sector
Political decisions
China: 27
Number of reactors
under construction
Russia: 10
India: 5
South Korea: 5
Slovakia: 2
Taiwan: 2
Canada: 2
Japan: 2
Iran: 1
Argentina: 1
Brazil: 1
Pakistan: 1
Finland: 1
France: 1
USA: 1
7
Plant closure: Germany (8
oldest reactors)
New projects delayed or stopped: China, India, Taiwan (new projects assessment), India assessment;Japan (37 plants out of 54 stopped plants, possible phase out); Italy and Switzerland (moratorium); UK (confirmed with slight delay); France (confirmed, FL3 delayed)
Safety inspections of existing plants:
All countries
Image S
ourc
e: L
e F
igaro
; IAE
A
Before the accident, there were, 439 reactors in operation,
62 under construction and 484 planned or proposed
Before the accident, there were 439 reactors in
operation, 62 under construction and 484 planned or proposed. After?
| Energy, Utilities & Chemicals Global Sector
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
The immediate German nuclear plants closure is threatening European electricity security of supply
DE
FR
IT
ES
UK
SE
PLNO
NL
AT
BE
CH
FI
CZ
PT
RO
DK
GR
BG
HU
IE
SK
LT
SI
LV
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-20%
-10%
0%
10%
20%
30%
40%
10% 20% 30% 40% 50% 60%
Re
al m
arg
in a
t p
ea
k lo
ad
[%
]
Theoretical margin [%]
Increase of theoretical marginIncrease of real margin
Decrease of theoretical marginDecrease of real margin
Increase of theoretical marginDecrease of real margin
Decrease of theoretical marginIncrease of real margin
Technically impossible
California syndrome: lack of capacity
Fragile areas:theoretical overcapacity but lack of
production availability at peak times
Overcapacity
Secure areas
Sourc
e: E
NT
SO
-E –
Capgem
ini a
naly
sis
, EE
MO
13
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
| Energy, Utilities & Chemicals Global Sector
10
IE
NL DE
CH
SE
DK
NO
FI
EE
LT
LV
PL
SK
CZ
AT
HU
SI
UK
PT ES IT
GR
FR
LU
BE
BG
RO Level of interconnections Below 10% EU threshold Above 10% EU threshold Bottlenecks (> 80% occurrence of congestion) Cross-border interconnections commissioned in 2010 and H1 2011 Projects of cross-border interconnections by 2015
Countries Projects of interconnections Expected
date
Capacity
increase
FI - SE Fennoscan submarine cable End of 2011 550 MW
SL-HU/HR Cirkovce - Heviz (HU) / Zerjavenec (HR) Short term n.c.
IE - UK Woodland (IE) / Deeside (UK) 2012 500 MW
DE - PL Vierraden (DE) / Krajnik (PL) 2012 n.c.
IE - UK Moyhill (IE) / Turleenan (UK) 2012 > 550 MW
FR - LU Moulaine (FR) / Belval (LU) 2012 n.c.
FR - IT Cornier (FR) / Piossasco (IT) 2012 600 MW
IE - UK Moyhill (IE) / Turleenan (UK) 2012 > 1,000 MW
IT - AT Prati di Vizze (IT) / Steinach (AT) 2013 n.c.
EE - FI Püssi (EE) / Anttila (FI) 2013 650 MW
LU - BE Bascharage (LU) / Aubange (BE) 2013 n.c.
DE - NL Niederrhein (DE) / Doetinchem (NL) 2013 > 1,000 MW
FR - ES Baixas (FR) / Sta.Llogaia (ES) 2014 > 1,000 MW
14%
11%
44%
11%
1%
57%
26%
108%
17%
33%
3% 4%
25%
52%
17%
4%
84%
41%
12%
3%
10%
21%
8%
13%
82%
24%
12%
23%
Source: ENTSO-E – Capgemini analysis, EEMO13
Despite progress in interconnections, significant bottlenecks remain. A more fluid electricity grid would
improve security of supply
| Energy, Utilities & Chemicals Global Sector
11
47 Total net imports (in bcm)
Piped gas imports (net)
LNG imports (net)
Exporting country
Importing country
Piped gas flows
Existing LNG terminal
QATAR
LNG: 28 bcm EGYPT
LNG: 4 bcm
LNG flows DK
FR
PT
ES
GR
IT
RO
BG
PL
SK
HU
DE
CH
FI
EE
3
LV
IE
BE
SE
UK
47
NORWAY
Piped gas: 96 bcm
LNG: 3 bcm
ALGERIA
Piped gas: 35 bcm
LNG: 15 bcm
35
5
38
21 LU
1
AT 7
SI
6
2
2
CZ 12
10
78
8
4
LT
1
5
2
5
75
4
LIBYA
Piped gas: 9 bcm
LNG: 0.3 bcm
Russia
Piped gas: 113 bcm
NIGERIA
LNG: 15 bcm 1
-3
NL
-36
OTHERS
LNG: 1.9 bcm
Source: BP statistical review of world energy 2011 – Capgemini analysis, EEMO13
TRINIDAD & TOB.
LNG: 6 bcm
Russia is a dominant source for Europe Gas imports
LNG Supply (18% in 2010) increase would improve the European gas security of supply.
| Energy, Utilities & Chemicals Global Sector
Utilities are divesting to restore their balance sheet and to comply with the 3rd EU directive
Networks, having long term recurrent revenues, are attractive for funds.
• E.ON sold its electrical transmission grid to TenneT (NL) for €885m
• Vattenfall Germany sold its electrical transmission grid to Elia (BE)/IFM for €810 m
• RWE Germany sold 75% of its transmission grid (Amprion) to a financial investors group for 1.3bn€
• RTE, France transmission grid: 50% transferred to 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 (GDF Suez): Italy’s distribution networks were sold between 2009 and 2011 to F2i and partners funds
• EDF Energy UK electrical distribution networks sold to a Hong Kong consortium for £5.8 bn
• 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
investments?
12
Hong Kong Consortium (headed
by Li Ka-Shing)
TENP
French nuclear decommissioning
fund
€885M
€810M
€1.5bn €800M
£5.8bn
£4bn
Investor group led by
Commerzbank
€ 1.3bn
€800M €290M
€480M
Utilities are selling their networks to investment funds
| Energy, Utilities & Chemicals Global Sector
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
Fukushima is triggering a debate on present and future Energy Mix
Media and some anti-nuclear groups are asking for a nuclear phase out. Before asking ourselves if it is 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
14
World electricity generation by type (2010 Scenario)
Source: IEA: World Energy Outlook 2010
Results of nuclear opinion survey in France (March 2011)
Source: L’express, SIA, Opinion Way, Published April 2011
| Energy, Utilities & Chemicals Global Sector
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, increasing production 4 fold since 1990 (300 bcm in 2008). Global unconventional natural gas resources in place (tcm)
IEA World Energy Outlook 2009
Gas long term perspective has changed as IEA estimates now the total gas reserves to 250 years.
• The latest IEA report shows 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
| Energy, Utilities & Chemicals Global Sector
Power plant’s consumption is the main cause for gas demand growth
Previous assumptions: European Gas consumption decreased during the crisis by
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
16
On the longer term, increased gas consumption for power plants will require more flexibility in storage and pipeline management
* If the Libyan outage lasts only until the end of 2011 **According to Deutsche Bank forecast.
World primary Natural Gas Demand by sector and scenario
Source: World Energy Outlook 2011: Golden Age of Gas Report
| Energy, Utilities & Chemicals Global Sector
Golden Age for Gas (GAS) June 2011 IEA Scenario
2035 horizon New assumptions*:
• 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
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°
17
Primary Natural Gas Demand by region and scenario
World primary energy demand by fuel
*policies scenario * Compared to WE2010 “new policies” scenario
| Energy, Utilities & Chemicals Global Sector
Golden Age for Gas (GAS) Main comments
18
World cumulative investment in gas-supply infrastructure by scenario
CO2 emissions in the GAS relative to the New Policies ,2035
Positive trends for gas development:
• 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
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$/MBtus). A few reasons for increase:
environmental issues, massive coal to gas switch,
sector consolidation, decreased exploration
spending.
This scenario needs to handled cautiously as its results are very sensitive to the assumptions. However the forecasted trends should be right
| Energy, Utilities & Chemicals Global Sector
During the last three years the LNG market has considerably changed
New liquefaction plants were commissioned: • Yemen: additional 6,7 Mt/y • Qatar: plant# 7: 7,8 M/y
additional capacity
… increasing worldwide liquefaction capacity to 594.1 bcm/y in 2010 (vs. 540.1 bcm/y end 2009).
New re-gas terminals were commissioned in 2009 and early 2010 in Europe: • UK: South Hook LNG and
Dragon LNG • Italy: Adriatic LNG (floating
terminal) • France: Fos Cavaou
The average European re-gas terminals utilization factor is only 50%: • ~ 30% in UK • ~ 75% in France • ~ 77% in Italy
The 2009 economic crisis had an impact on the 30 re-gas terminal projects. Many projects were delayed or cancelled.
19
Pipeline and LNG terminals projects (2010)
With the LNG market quicker rebalance, new projects Return On Investment should improve, provided that there will not be a new
economy slowdown in H2 2011/2012
| Energy, Utilities & Chemicals Global Sector
Gas is not a global market. Very different regional pricing systems
20
Spot gas markets prices are below long term continental European prices(indexed on oil prices). For how long?
4.4$/MBtu=10.6 €/MWh
Source: Focus Gaz September 2011
Indexed prices Europe
| Energy, Utilities & Chemicals Global Sector
Will renewables increase their long term market share?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
Gro
wth
(%
)
Electricity production (TWh)
Geothermal
IT
PT
FR AT
IT
FR
Solar PV
Growth (abs.) Capacity Growth (%)
DE
ES
CZ
SK
FR
SI
DE
CZ
FR
Top 3 countries ranked by:
Capacity installed* Growth** (absolute)
2. ES
1. DE
3. CZ
2. FR
1. SK
3. SI
* 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 wind
Small hydro
IT
FR
ES
RO
IT
DE
Wind
Growth (abs.) Capacity Growth (%)
DE
ES
IT
ES
DE
FR
RO
BG
PL
Biomass
DE
FI
SE
PL
SE
NL
+
Biogas
DE
UK
IT
DE
UK
NL
Municipal waste
DE
FR
IT
UK
NL
FR
2005
2010
2009
2008
2007
2006
2005 2006
2007 2008 2009
2010
2009
2009
2009
2009
2009
Sourc
e: E
ur’O
bserv
er b
aro
mete
rs –
Capgem
ini a
naly
sis
, EE
MO
13
Some governments have started to increase again their subsidies for renewables. This trend could be reverted again by the public deficit problems
21
| Energy, Utilities & Chemicals Global Sector
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.
| Energy, Utilities & Chemicals Global Sector
Smart Grid Investments
23
Network Device and Events Ops Management
Back Office Applications
Enhanced Power Grid Digital Communications and Control
Smart Meters & Building Automation Control
Interface
Communication Technologies
Renewables
Advanced Metering
Plug-In Hybrids
New challenges have to be
addressed: renewable share
increase, decentralized generation,
new consumption patterns…
A grid with more intelligence has to
be built requiring large investments
Worldwide Smart grid investments:
from 2008-2015: 200bn$ (53bn$ in the
US). (Pike Research source).
ICT (Information and Communication
Technologies) systems investments:
Cisco sees15-20 bn$ investment
opportunities to link smart grids with ICT
systems over the next 7 years. John
Chamber, Cisco CEO, says that it
might be bigger than internet.
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
Electricity generation costs will increase
Estimated costs of electricity in France:
• Nuclear: 45 €/MWh
• Gas fired plants: 50 to 60 €/MWh (with today relatively low gas prices)
• Hydropower: >50 €/MWh but highly 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)
24
Regional ranges of levelised costs of electricity for nuclear, coal, gas and onshore wind power plants
• Assumption: carbon price of USD 30/tCO2
• Cost of CC(S) is still in the development stage
5% Discount Rate
Source: IEA: Projected Costs of Generating Electricity, 2010 Edition
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
€/MWh per year over 2012-15*.
*Deutsche Bank Forecast
| Energy, Utilities & Chemicals Global Sector
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
Conclusions
Recent events are putting Energy questions in the spot light
• 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
26
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 Orb » (PG&E) gives visual indications to clients involved in energy
demand management programs
www.capgemini.com/energy
Together. Free your energies
2
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