NewEnergyNews: TODAY’S STUDY: THE UTILITY PARADIGM SHIFT TO NEW ENERGY FROM THE INSIDE

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge now: To make every day Earth Day.

YESTERDAY

  • ORIGINAL REPORTING: Turning Distributed Energy From Threat To Opportunity
  • ORIGINAL REPORTING: Solar Policy Action Heats Up
  • ORIGINAL REPORTING: Maine’s Almost Solar Policy Breakthrough
  • THE DAY BEFORE

  • TODAY’S STUDY: How To Balance Competing Solar Interests
  • QUICK NEWS, December 6: Sliver Of Hope? Al Gore In Climate Change Meet With Donald Trump; The Opportunity In New Energy; Google Seizing New Energy Opportunity
  • THE DAY BEFORE THE DAY BEFORE

  • TODAY’S STUDY: A Way For New Energy To Meet Peak Demand
  • QUICK NEWS, December 5: Trial Of The Century Coming On Climate; The Wind-Solar Synergy; The Still Rising Sales Of Cars With Plugs
  • THE DAY BEFORE THAT

  • Weekend Video: Trump Truth And Climate Change
  • Weekend Video: The Daily Show Talks Pipeline Politics
  • Weekend Video: Beyond Polar Bears – The Real Science Of Climate Change
  • AND THE DAY BEFORE THAT

  • FRIDAY WORLD HEADLINE-Aussie Farmers Worrying About Climate Change
  • FRIDAY WORLD HEADLINE-The Climate Change Solution At Hand, Part 1
  • FRIDAY WORLD HEADLINE-The Climate Change Solution At Hand, Part 2
  • FRIDAY WORLD HEADLINE-New Energy And Historic Buildings In Europe
  • THE LAST DAY UP HERE

    THINGS-TO-THINK-ABOUT THURSDAY, December 1:

  • TTTA Thursday-First Daughter Ivanka May Fight For Climate
  • TTTA Thursday-Low Profile High Power Ocean Wind Energy
  • TTTA Thursday-A Visionary Solar Power Plant
  • TTTA Thursday-EVs Have A Growth Path
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    Anne B. Butterfield of Daily Camera and Huffington Post, f is an occasional contributor to NewEnergyNews

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    Some of Anne's contributions:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

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  • THINGS-TO-THINK-ABOUT THURSDAY, December 8:

  • The Record Of The New EPA Head
  • The Undeveloped New Energy
  • Walking On New Energy
  • Electric Tractor For Emissions-Free.Farming

    Wednesday, October 16, 2013

    TODAY’S STUDY: THE UTILITY PARADIGM SHIFT TO NEW ENERGY FROM THE INSIDE

    Energy transformation; The impact on the power sector business model

    October 2013 (Pricewaterhouse Coopers)

    Executive Summary

    The PwC Annual Global Power & Utilities Survey goes to the heart of boardroom thinking in utility companies across the globe. In this, our 13th edition, we look at the pressures building up on the traditional power utility business model and the industry’s viewpoint on the transformative changes that lie ahead.

    Disruption and transformation

    Many in the industry expect the existing power utility business model in their market to transform or even be unrecognisable in the period between now and 2030. 94% predict complete transformation or important changes to the power utility business model. But there are big regional differences and the industry is split on the extent of change and transformation ahead. The prospect of transformation of the industry business model arises from a number of potentially disruptive changes. Decentralised generation is already eating into revenues and partly marginalising conventional generation. Ultimately it could shrink the role of unwary power utility companies to operators of back-up infrastructure. Across the main markets of Asia, Europe and North America, only a minority of our survey participants expect centralized generation and transmission to play the lead role in meeting future demand growth.

    Changes in technology and cost

    The growth of distributed generation and its threat to the power utility business model depends on technological developments and cost. Its rise in Europe has been subsidy-driven. Cost barriers remain in the way of it being truly market-driven. But, if these barriers can be overcome, they could set the scene for widespread global industry transformation. Many believe that point is within reach. Energy efficiency, falling solar prices, demand-side management and smart grid technology head the list of technological developments that the industry believes will have the biggest impact on their power markets. But new sources of fossil fuel supply will also have a major impact on the power market. The advent of shale gas and tight oil are changing the economics of the energy landscape. Peak oil forecasts are fast being revised. The prospect of North American energy independence is within reach and the geopolitics of world energy flows are in flux. Industry opinion is far from ruling out the possibility that a new abundant energy era might open up. But alongside this, there is a significant degree of societal concern about extractive activities and a feeling that renewable energy can bring benefits and is here to stay.

    How should companies respond?

    How companies respond to these changes will determine whether they will be part of the future or join the ranks of companies from other industries whose business models have been eclipsed by technological and market change. Strategies are needed that identify the best revenue opportunities in a changed and, potentially, transformed future market landscape.

    Key elements in this will be a strategic view on just how far and at what pace distributed generation will take hold in their markets, together with a view on the role and opportunity afforded by gas. The impact of shale gas will be heavily determined by how the environmental and community concerns about it are played out in different territories. Vast amounts of distributed power generation will change the nature of the distribution network, making it much more complex. The roles of transmission system operators and distribution system operators will need to be re-designed in an era of self- generation, smart grids and demand-side management.

    Efficiency savings and performance improvements can buy power utility companies considerable defensive headroom in responding to the changing industry environment. Nearly a third (31%) of all survey participants worldwide say there is scope for power and utility companies to achieve cost base and efficiency improvements of more than 20%. Nearly three-quarters (73%) see big scope for improvement in asset performance management.

    But also critical will be how companies respond to the rise of the ‘energy saving’, ‘energy generating’ active consumers. A significant proportion (41%) of our global survey participants see their market in one or more of these terms in ten years’ time compared to just 9% today. This includes 60% of survey participants in Europe, 50% of those in North America and 46% of those in Asia

    How can regulators respond?

    Governments and policy-makers have the difficult task of grappling with the big issues of supply availability, affordability and environmental impact. The tensions between these goals are coming to the fore more and more. Affordability has risen up the agenda in many countries. Concerns about blackouts are increasing as reserve capacity gets stretched. And the advent of shale gas is introducing a new environmental battleground which governments will need to police.

    The sentiment from many of the participants in our survey suggests that regulation is facing something of a crisis. On balance, the industry viewpoint is that, in many places, current developments in companies’ power markets are increasing rather than decreasing the risk of blackouts. There is a feeling that regulation is at a crossroads, with the era of liberalisation fading and a new era of greater certainty needed.

    The issue of what policy design features are needed to enable system operators to balance a system with high levels of intermittent generation is an urgent one for regulators. Capacity schemes are one answer to this. Together with

    Big Issues

    Transformation

    Many in the industry expect the existing power utility business model in their market to transform or even be unrecognisable in the period between now and 2030. But there are big regional differences and the industry is split on the extent of change and transformation ahead…

    Business model change

    In most contexts, this demand growth would present a rosy picture for companies already established in the market and well positioned to profit from further expansion. But the industry is increasingly coming to recognise that to stay profitable and to succeed in the period ahead, companies will need to adapt their business models to respond to a power environment that could be transformed by changes such as decentralised power, technological changes and a very different customer outlook…

    Industry sights set on transformation

    In such a context, nearly half of the industry expecting transformation is significant. And perhaps more significant is that, although Europe is where the current environment for power utilities is proving most disruptive, the anticipation of transformation is more widely felt (figure 1). Indeed, the strongest anticipation of transformation is from power utility companies in Asia. It’s a significant indicator of the extent to which the industry is set to change radically, given that Asia is not as fully electrified and renewables are not as subsidised as Europe. Asian change and technology development could reinforce and quicken the pace of change elsewhere…

    Disruption

    The prospect of transformation of the industry business model arises from a number of potentially disruptive changes. Decentralised generation is already eating into revenues and partly marginalizing conventional generation. Ultimately it could shrink the role of unwary power utility companies to operators of back-up infrastructure…

    The impact of distributed power generation

    Across the Atlantic, a paper produced for the Edison Electric Institute, an association that represents all US investor-owned electric companies, notes: “Today, a variety of disruptive technologies are emerging that may compete with utility-provided services. Such technologies include solar photovoltaics (PV), battery storage, fuel cells, geothermal energy systems, wind, micro turbines, and electric vehicle (EV) enhanced storage. As the cost curve for these technologies improves, they could directly threaten the centralised utility model.”…

    Physical and revenue impacts

    On a technical level, the intermittent nature of distributed generation increases the difficulty of physically balancing the system and ensuring adequate power supply. On a revenue level, managing these extra challenges pushes more costs back onto the system. There is the danger of increased centralized costs to be borne by those customers who are more grid-dependent.The cost impact is further exacerbated by any cross-subsidisation mechanisms to recover payments used to promote renewable sources and demand side measures, as these are also typically borne by the wider customer base…

    Technology

    The growth of distributed generation and its threat to the power utility business model depends on technological developments and cost. Its rise in Europe has been subsidy-driven. Cost barriers remain in the way of it being truly market-driven. But if these barriers can be overcome they could set the scene for widespread global industry transformation…

    Fast-changing economics

    The UBS research estimates 43GW of unsubsidised solar in these markets by 2020, reducing demand for grid- supplied power by 6–9%, on top of shrinking demand due to energy efficiency and subsidised renewables. It talks about “a vast opportunity for unsubsidised solar, even though certain financial and technical limitations will leave some potential untapped.”…

    A technology-driven future

    The impact of the changing economics of solar power, as well as the potential of energy efficiency and other demand-side management innovations, is reflected in our survey participants’ views on which technological development they expect to have the most impact in their power markets. Energy efficiency, falling solar prices, demand-side management and smart grid technology head the impact list…

    Supply

    New sources of fossil fuel supply will have a major impact on the power market. The advent of shale gas and tight oil are changing the economics of the energy landscape. Peak oil forecasts are fast being revised. The prospect of North American energy independence is within reach and the geopolitics of world energy flows are in flux…

    Shale gas impact

    The impact of shale gas on the power market is scored highest by survey participants in the Americas (figure 5). Of course, the US is now well advanced down the shale gas road. But South America is also set to be a major producing region. Argentina holds the third largest technically recoverable shale gas reserves in the world after the US and China. Brazil and Mexico are also in the world top ten for shale gas reserves…

    Big Responses

    Companies

    How companies respond to these changes will determine whether they will be part of the future or join the ranks of companies from other industries whose business models have been eclipsed by technological and market change. They will need to be clear-sighted about where their best revenue opportunities lie, act fast to reduce costs or exit unprofitable areas, improve customer service and appeal to a new type of actively engaged customer…

    Efficiency and performance improvement

    In the opinion of our survey participants, the industry as a whole has the potential to deliver substantial cost base and efficiency improvement (figure 6). Nearly a third (31%) of all participants worldwide say there is scope for power and utility companies to achieve cost base and efficiency improvements of more than 20%. In Europe, 58% and, in Asia, 31% say this level of cost saving is possible. In North America and South America, 22% and 20% view this as possible and 11% say the same in the Middle East and Africa…

    Strategy

    Efficiency savings and performance improvements can buy power utility companies considerable defensive headroom in responding to the changing industry environment. But defense needs to be accompanied by offense. Strategies are needed that identify the best revenue opportunities in a changed and, potentially, transformed future market landscape…

    Customers

    Companies are likely to face stiff competition with each other as they seek to ensure distributed power generation becomes an opportunity rather than a threat. Becoming a provider of distributed generation services to customers tops the list of strategies that our survey participants identify as most likely to succeed in a more decentralised power landscape…

    Regulators

    Policy-makers have the difficult task of grappling with the big issues of supply availability, affordability and environmental impact. The tensions between these goals are coming to the fore more and more…

    Keeping the lights on

    On balance, the industry viewpoint is that, in many places, current developments in companies’ power markets are increasing rather than decreasing the risk of blackouts (37% increasing versus 26% decreasing globally) (figure 11). Many survey participants are neutral on this topic. But, of those expressing a view, the worry that current developments are tilting the balance towards blackouts is particularly felt in South America (67% versus 0%), North America (30% versus 0%) and the Middle East and Africa (50% versus 30%). In Europe, opinion is much less likely to be neutral but is divided with 40% feeling the risk of blackouts is increasing and 40% saying it is decreasing…

    Meeting and balancing demand

    Asked what the most important policy levers are to help meet demand in the coming decades, it is a regulatory environment that encourages network investment (scored strongly by 81% of survey participants), increased interconnection (also 81%) and fast-track planning and permitting for strategic infrastructure (67%) that tops the list. Things like market liberalisation (40%) and unbundling (35%) come at the bottom of the list…

    Regional survey highlights

    Power markets around the world differ in many ways, not least the stage of their development and their natural resource context. Different energy policies have also played a key role with the result that the inroads made by new forms of renewable and distributed power generation vary considerably…

    Business model transformation

    Although Europe is where the current environment for power utilities is proving most disruptive, the anticipation of transformation is more widely felt. Indeed, the strongest anticipation of transformation is from power utility companies in Asia. It is weakest in South America, the Middle East and Africa (see main figure 1 at front of report). Some of the factors at work in explaining these difference are the strong role of hydropower and the potential of shale gas in South America, the fossil-fuel-rich context of the Middle East and the importance of widening access to grid power in Africa…

    The impact of distributed power generation

    Across the main markets of Asia, Europe and North America, only a minority of our survey participants expect centralized generation and transmission to play the lead role in meeting future demand growth (figure 2). Indeed, in all regions at least half of our survey expect the rise of distributed generation to be such that it plays a role alongside centralized generation…

    Companies

    We reported earlier on the widespread view in the industry that the sector has the potential to deliver substantial cost base and efficiency improvement (figure 6). There are some variations in opinion across regions about just how far the cost base can be reduced…

    Regulators

    On the generation side, regulatory barriers are reinforcing the problem of access to finance for new generation. Consistently, in every region, companies report the ‘inability to recover the cost of new generation via regulated energy tariffs’ as a disincentive to developing new generation…

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