PwC survey of power companies views about future energy supply

April 24th, 2012 by PwC

(click on report cover to go to download page)

European power industry fears of fuel poverty increasing significantly in the next 20 years exceed that of North America, Asia and Africa according to a new survey by PwC.

As the global power industry confronts the challenge of energy affordability, efficiency, and security policies and investments not meeting demands, PwC’s 12th Global Power & Utilities report – ‘The shape of power to come’, surveyed the views of 72 power and utilities companies’ in 43 countries.

The report was released as the UN Secretary-General’s High Level Group on Sustainable Energy For All was hosted by PwC in London to mobilise urgent global action on accessible, cleaner and more efficient energy sources and supply.

Fuel poverty has moved up the agenda globally, with over half admitting it’s a fundamental industry concern, 58% in Europe.

In addition, even with new generation capacity plans, power industry executives say fears of black outs are increasing in Europe and North America.

The capital funding requirement in all markets – both mature and growth territories – is considerable, including major upgrades or replacement generation.

76% said fast-track policies for planning and permitting strategic infrastructure were needed to meet demand. Even with this, two thirds of respondents saw the ability to recover costs fully from customers as a barrier to meeting demand growth.

Steven Jennings, UK power and utilities leader, PwC, said “concerns about affordability and the pace of infrastructure investment in western power markets are translating into unease about security of energy supply.

“The outcome of current moves – and policy deadlock – on energy security, affordability and efficiency are far from certain, and there is a considerable degree of concern about whether there will be enough done to resolve these issues in the next 20 years.

“Power systems will be on a knife edge in terms of whether they will cope with the huge scale of demand growth ahead until effective policy frameworks and investment issues are resolved.”

Analysing the big issues facing the industry now, and what the world of electricity would look like in 2030, PwC’s report underlines the immense changes and challenges lying ahead for the industry.

  • In Europe, over half (53%) predict an increased risk of blackouts up until 2030, in North America, 40%. In developing markets only 13% expect blackouts to increase to 2030.
  • With energy demand predicted to rise 84% by 2035 according to the International Energy Agency Outlook 2011 report, gas heads the list of investment priorities for new generation at double the rates of support for coal or nuclear generation. Despite this, it will not be a game changer, with its share of the fuel mix predicted to rise from 29% now to 33% in 2030.
  • The emergence of shale gas and demand from China, and other fast-growing countries, are the main developments affecting the gas market in the next ten years according to respondents.
  • In overall terms, power companies expect their fuel mix to change from 66% fossil fuels vs. 34% non fossil fuel today to 57% vs. 43% in 2030. While this moves the industry closer to recognised industry predictions to meet demand, it falls well short of what is needed by 2030 to limit global warming to an average of 2°C.
  • Views on smart grids and metering highlight the gap to be bridged between domestic consumers and the industry. This is particularly noticeable in North America and Europe, where 80% and 74% of respondents respectively, are worried about customer engagement being an obstacle to realising the full potential of these technologies.
  • The scale of new generation capacity needed to cope with increasing demand will boost the renewables industry‘s case, with many – over 80% – believing onshore wind, biomass and all forms of solar will not need subsidies to compete by 2030. Overall, participants expect a major ramping up of non-hydro renewables to meet 2030 power demand scenarios.
  • Three fifths of respondents think electric cars will form a significant proportion of the world vehicle fleet by 2030. Three out of five survey participants believe the infrastructure needed for electric-powered transport will be a major challenge for utilities.
  • One in four of the industry believe the new competitive threat of could be big customer brands outside of the power sector who consumers know and trust.

Ronan O’Regan, director, energy and renewables, PwC, said “gas prices are expected to continue to have the biggest impact on consumer prices in the medium term. Questions remain around whether shale gas can have the same impact on the UK gas market as it has had on the US, and many questions also remain about its accessibility and environmental safety.

“Smart grids and smart metering are high on the list of investment priorities and yet a mix of customer apathy and concerns about data usage are already seen as constraints which could limit the potential for these new technologies. It will come down to trust and transparency. So it’s not surprising that the industry is waking up to threats of heavy weight new entrants from outside the sector.”

The most important policies identified by the industry to help meet world power demand growth are:

1) a regulatory environment that encourages network investment (80%)

2) Increased interconnection between different electricity systems (76%)

3) fast-track planning and permitting procedures for strategic infrastructure (76%)

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