European Utility Industry 2008 Top 10 Predictions. The ramp up of carbon-neutrality

Transcription

1 European Utility Industry 2008 Top 10 Predictions The ramp up of carbon-neutrality Roberta Bigliani January 2008

2 Energy Insights A premier global provider of research-based advisory and consulting services focused on market and technology developments impacting the energy industry. Part of IDC a leader in market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. Research led by team of senior analysts with decades of direct energy-industry experience Serving more than 125 clients utilities, IT vendors, oil and gas companies, equipment manufacturers, and other organizations 2008 Energy Insights, an IDC company Page 2

3 Why predictions? Goal Identify trends and developments that impact European utility industry business and technology investment decisions Process Drawn from IDC and Energy Insights research, industry contacts and discussions, and our own industry experience Bias We focus on the transformation of major utility industry business processes and how technology enables that transformation Timeframe Predictions are focused on 2008, but will have an impact over the next 5 years 2008 Energy Insights, an IDC company Page 3

4 Energy Insights Predictions 2008 Energy Insights published Top 10 Predictions for each of these markets: European Utility Industry 2008 Top 10 Predictions North America Utility Industry 2008 Top 10 Predictions Worldwide Oil & Gas industry 2008 Top 10 Predictions Worldwide Energy Industry 2008 Top 10 Predictions 2008 Energy Insights, an IDC company Page 4

5 Agenda 1 Business and regulatory environment 2 3 The Utilitity of the Future Top 10 Predictions 2008 Energy Insights, an IDC company Page 5

6 Business and Regulatory Environment Energy prices volatile and rising Oil Prices: Brent Cur. Month FOB European Power Exchange Prices, 2007 ( /MWh) jan-06 feb-06 mar-06 apr-06 may-06 jun-06 jul-06 aug-06 sep-06 oct-06 nov-06 dec-06 jan-07 feb-07 mar-07 apr-07 may-07 jun-07 jul-07 aug-07 sep-07 oct-07 nov-07 dec-07 January February March April May June July August September October November December Gas Prices: Household and Industrial Electricity Prices: Household and Industrial Energy Insights, an IDC company Page 6 Euro per Gigajoule Euro per kwh Source: Eurostat, EEX, 2007, GME Industrial EU 27 Industrial EU 15 Household EU 27 Household EU 15

7 Business and Regulatory Environment European energy demand and imports dependency is growing Energy consumptions in Europe are rising European import dependency is rising. Reserves are concentrated in a few countries. European Import Dependency (%) EU27 Source: European Commission DG TREN, PRIMES 2008 Energy Insights, an IDC company Page 7

8 Business and Regulatory Environment European utilities are financially in good shape but the need for future investments is huge Dow Jones Euro STOXX Utilities Index Coal 1% RES-H,T 5% Gas 12% EU-27 Cumulative Energy Investments ( ): billion Oil 5% Electricity 77% Generation 65% Transmission 8% Distribution 27% /01/ /03/ /05/ /07/ /09/ /11/2007 DJES TMI Util Rt DJS 600 Rt Source: Energy Insights on Dow Jones STOXX data Source: European Commission DG TREN 2008 Energy Insights, an IDC company Page 8

9 Business and Regulatory Environment The three pillar of EU Energy Policy Security of supply Sustainability & the fight against climate change; Competitiveness & functioning internal markets 2008 Energy Insights, an IDC company Page 9

10 Agenda 1 Business and regulatory environment 2 3 The Utilitity of the Future Top 10 Predictions 2008 Energy Insights, an IDC company Page 10

11 The Utility of the future Today Tomorrow Electro-mechanical Limited automation of distribution network, few sensors, centralized control Heavily dependant on human interaction Lack of visibility in the field Limited integration of processes Digital Self healing networks, automated and multilevel control Enhanced communication, collaboration, and decision making Integrated processes linked to metrics Optimization of key competencies and skilled resources No integration between technical and enterprise systems Limited price signal and customer choice Stop at the meter Billing based on estimates Appointments not timely Major CO 2 contributors Integrated technologies, (OMS/DMS/EMS), SOA/Web services Fewer (and shorter) outages and leaks Demand Response and customer choice No billing estimates Appointments on time, Customer service excellence, Self service Increase of RES and DG 2008 Energy Insights, an IDC company Page 11

12 From today traditional electric grid... Power station Houses Factory Office building 2008 Energy Insights, an IDC company Page 12

13 ... To the future landscape Power station Hospital (with own generator) Control centre Factory Wind power Solar power Energy Storage Houses Apartment buildings Smart-office building (with own generator) 2008 Energy Insights, an IDC company Page 13 Smart house (with hydrogen-car generator)

14 What is the Intelligent Utility The two-way flow of energy and information all along the value chain from plants to transmission networks to distribution networks to consumers. Initiatives such as smart metering and the intelligent grid are components necessary to create the intelligent utility. Energy Insights 2008 Energy Insights, an IDC company Page 14

15 Agenda 1 Business and regulatory environment 2 3 The Utilitity of the Future Top 10 Predictions 2008 Energy Insights, an IDC company Page 15

16 #1 Climate change will drive investment in energy and information technologies Drivers EU % target (March 2007) and Climate-focused energy policies and regulations Consumer and business awareness and concern with climate change issues Increased venture capital investment in clean/green/zero emission technologies Climate change/sustainability attention by investors and credit rating agencies Predictions Retailers will update their customer strategy and offering portfolio to promote Carbon-free or Green energy as an additional lever to compete in liberalized markets Utilities will ramp up the development of programs and/or partnerships to promote energy efficient industrial and consumer technologies, such as smart building controls and smart appliances Renewable energy technologies, Cogeneration, Zero Emission Fossil Fuel Power Plants (ZEP). Nuclear will attract investments for realization and additional R&D Climate change benefits will increasingly be used to help justify investments in other pre-existing programs (smart metering, intelligent grid) Utility companies will increase their investments in IT systems to measure and manage their carbon footprint especially emissions/compliance reporting, verification and trading Competent authorities are proactively automating emissions registry and data reporting 2008 Energy Insights, an IDC company Page 16

17 #2 Security of supply and aging asset concerns will drive intelligent grid technology investments Drivers Aging T&D assets causing reliability problems and requiring increased capital investment Need for a higher level of grids interconnection Climate change issues driving grid interconnection of renewable resources and need for demand response programs Aging workforce causing a shortage of skilled labor and increasing the need for automation Better communication networks 2008 Energy Insights, an IDC company Page 17 More sensors Predictions Utilities will invest in technologies to enable greater visibility into the grid, automated analyses and decision making, and improved reaction time to events Near-term investments will focus on building the communications backbone, initially justified by smart metering requirements. Important to carefully select network type, but key question is who will provide these communications networks Additional sensors will be targeted at problem areas of the distribution network to better measure asset life-cycle Pilots on Microgrids and Virtual Power Plants are on-going across Europe The vision of very quick decisions (VeQuiDs) made in milliseconds by computers and intelligent devices analyzing complex real-time data is still a ways off for most utilities Improved analytics

18 # 3 Energy efficiency EU regulation will accelerate Smart Metering adoption Drivers Regulatory pressure/mandates from EU and national legislations Support for climate change programs (energy efficiency) Increase operational efficiency (cost to read meters, remote connect/disconnect) Support for intelligent grid initiatives (reliability) Improve customer satisfaction (outage mgmt, choice of rates) Full implementation Increase share of smart meters Consultation/Planning phase Predictions Effectively managing the exponential increase of data and effectively using them will emerge as the most critical success factor for smart metering projects Most utilities doing any smart metering pilots plan to increase significantly their spending over the next five years and are looking for solutions to mitigate the risk of adoption Smart metering will be the typical first step toward an intelligent grid for most utilities Pricing Signals will push deployment of energy efficient consumer technologies In-home displays will increasingly provide more information and smart-appliance control capabilities 2008 Energy Insights, an IDC company Page 18

19 #4 Renewable Energy and Distributed Generation will continue to challenge grid management Drivers EU objectives to reach 20% of Renewable Energy in the generation mix by 2020 EU Biomass Action Plan National Climate change policy encouraging efficiency, including CHP Advances in control and communication enabling distributed energy operations Investments to enhance energy security and reliability Predictions RES represent about 14% of total electricity consumptions in EU (about 6.5% on primary energy consumption). Among non-hydro, Biomass for electricity and Wind are in the lead, followed by geothermal, and solar. By 2010 Wind will significantly overcome Biomass for electricity generation and PV the geo-thermal. Also the role of Solar Thermal will increase. Germany is leading in distributed PV followed by Spain. PV will expand rapidly sustained by a feed-in tariffs incentive mechanism Vehicle-to-grid (V2G) will progress over decades - not years - as incremental infrastructure development will be slow to materialize Additional IT solutions and systems will be required to manage renewable energy (weather forecasting and modeling for production scheduling, trading on green certificates markets, ) 2008 Energy Insights, an IDC company Page 19 Source: EU 2007 Renewables Roadmap

20 #5 Web self-service and on-line capabilities will increase to address retailers shrinking margins Drivers The number of customers with Internet access is growing and becoming more diverse Customers want self-service options and increased choice With smart metering, there will be pressure for more in-home displays and advanced communications with smart appliances and environmental systems Regulatory and internal utility pressure to expose customers to costs Predictions Germany In Western Europe, Utilities are expecting to increase by over18% the IT budget dedicated to webenablement initiatives Utilities will offer more rate choices and will enable customers to run on-line what if scenarios Service call scheduling and appointment notification through web self-service and text messaging will continue to be adopted by utilities The web will become an increasingly important channel for outage communication Utilities will begin to implement specialized portals on their websites, such as those that focus on green energy or specific business segments 2008 Energy Insights, an IDC company Page 20 WE Utilities, % of IS budget devoted to Webenablement initiatives Spain UK Italy France WE Past 12 month Next 12 month Source: Energy Insights Nov Survey

21 #6 Utilities will invest on mobile and spatial Work and Asset Management to optimize operations, reliability and address the lack of a Skilled Workforce Drivers Utilities are increasing investment in assets: generation followed by distribution and then transport/transmission Regulatory pressure and shareholders expectations (standards, capital and cost efficiency) Large number of employees leaving the workforce in 5-10 years. Utilities are still facing issue of attracting talented young resources in addition to having a slow learning curve Utilities highly reliant on craft labor (field crews, plant operators, etc.) Predictions Western and Eastern Europe will both invest in work and asset management applications: share of spending on total SW is about 6% with a CAGR ( ) across Europe over 7% (WE more mature and growing with a slower pace than EE) The ramp up of investments in assets will require additional project-reporting and project-management capabilities as well as asset management systems able to manage total cost of ownership of asset over their life-cycle Leading utilities will integrate spatial references in their work and asset management solutions Mobile devices are increasingly adopted at all level of the utilities workforce, including senior executives Utility companies will also focus more on non-it solutions, such as long-term staffing plans, training, and outsourcing 2008 Energy Insights, an IDC company Page 21

22 #7 Utilities will increasingly centralize Multi- Commodities Trading (including emissions) even with a slow coupling of trading markets Drivers EU ETS - NAPs II ( ), Kyoto (CDM, JI), raising of carbon voluntary markets Several markets for trading Electricity (11+4), Gas, Emissions (7), Green Certificates and Energy Efficiency Certificates Financial institutions increasingly focused on commodity trading Predictions Legend Utility companies still underestimate the level of effort required to support carbon trading business process changes, deal capture, verification, confirmation, settlement, analytics on generation dispatch Utilities will continue to look for applications to handle nominations, scheduling and logistics that are user friendly and easily integrated with the trading desk Beyond transactions there will be increased attention to analytics Generators need to accommodate emissions in dispatching generation fleet Security of supply will focus energy trading also on delivery risk Trading liquidity in electricity and gas markets Low Liquidity High Liquidity 2008 Energy Insights, an IDC company Page 22

23 #8 Compliance, Security and M&A activities continue to require IT investments Drivers EU Directives, the 3rd legislative package on EU Electricity & Gas markets (Sept. 2007) and other regulations Compelling Standards on Service quality and reliability Pan-European M&A activities and post-merger optimization Companies Privatization, Unbundling, Restructuring and Repositioning along the value chain Predictions Compliance with various regulations will drive investments in security software (identity and access management), content applications (document management, auditing and reporting) and storage software (data protection and recovery software) Company headquarters will struggle in systems roll out on acquired or merged companies: major success will be on financial/enterprise applications, a centralization will happen on trading, a sort of coordination will emerge on CRM/Billing but major freedom will be on technical/asset applications portfolio Utilities restructuring still on-going, especially in the CEE (and Russia), will create a greater degree of deployment and updating of IT across the whole organization, as well as new outsourcing opportunities 2008 Energy Insights, an IDC company Page 23

24 #9 Integration is a key word in CIO minds Drivers Process Centric IT Collaboration and Web 2.0 Need to improve integrated access to relevant information Need to optimize decreasing availability of skilled resources Creation of centralized core competence centers Predictions Utilities will invest to integrate their ERP systems with additional solutions to improve enterprise visibility and performance, and to extensively allow availability of applications to remote and mobile users. More integration will be pursued among technical area systems and between enterprise and technical systems in order to support decision making processes, planning and operations: for example integration of GIS with SCADA, with call center applications (for incident management), and other utilities back offices applications Analytics and simulation tools will improve utilities decision making and effectiveness 2008 Energy Insights, an IDC company Page 24 Western Europe, Utilities, Main Areas of Organization's IT Focus during the Next 12 Months (% of Respondents) Q. Which one of the following will best represent your organization's main area of IT focus during the next 12 months? Developing and/or implementing new strategic applications to improve our organization competitiveness (17.4%) Controlling costs for continued IT investment (18.0%) Contracting out software development activities (4.8%) Source: Energy Insights Nov Survey Implementing new strategies for communications services (4.8%) Migration from older technologies to more modern platforms (2.6%) Integrating central and end-user resources (52.4%)

25 #10 Different IT market spending growth in Western and Eastern Europe WE Utility IT Spending 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, EE Utility IT Spending 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Software CAGR = 6.3% IT Services CAGR = 4.8% Hardware CAGR = 4.6% Software CAGR = 13.2% IT Services CAGR = 16.3% Hardware CAGR = 9.9% Predictions IT Spending in Western and Eastern Europe Will Reach $11.5 Billion by 2008 Highest Growth Segment in WE (07-08): Smart handheld devices/rfid (22.8%) Security software (11.9%) Business Performance Management (10.4%) Procurement (9.5%) Highest Growth Segment in EE (07-08): IT Consulting (24.3%) Security software (21.9%) Storage (21.7%) Procurement (20%) Initiatives like smart metering and intelligent grid will blur the line between corporate and line-of-business IT spending, making budgeting and management more difficult 2008 Energy Insights, an IDC company Page 25

26 More information Roberta Bigliani Research Director, EMEA Energy Insights, an IDC company Page 26