Click to insert title title - GP05gp05.fr/dotclear/public/2017/20171211-KeyFindings.pdf2017/12/11...

1World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.111World Energy Markets Observatory – 19th Edition

Click to insert title titleClick to insert presenter, location, and date

https://www.capgemini.com/optimize-your-business-and-it-operations

2World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 2

With strong expertise in

industry sectors …

…to innovative

services and products

Capgemini

190,000+ people worldwide working together as one team

Revenue (2016): €12,539 million

From a complete

range of businesses ...

Application Services

ConsultingTechnology and

Engineering Services

Infrastructure ServicesBusiness Process

Outsourcing

Other Managed

Services

Digital Customer

ExperienceCloud Choice

Insights & Data Cybersecurity

Digital

Manufacturing

Application Development

and Maintenance

Product & Engineering

Services

Quality Assurance &

Testing

Business Services Automation Drive

Utilities

Automotive

Consumer

Products & Retail

Financial Services


3World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 3

Capgemini Consulting is the Global Digital

Innovation & Transformation consulting

brand of the Capgemini Group

One of the worldwide largest provider of consulting, technology and

outsourcing services

Consulting

Technology

Managed Services

An independent, global unit of the group which provides best-in-class strategy and transformation consulting for our clients and creates preconditions in order to be able to respond to changing market dynamics more quickly and intuitively

We conceive and implement transformation strategies with measurable results for our clients

Digital Transformation accounts for 50% of our revenues

Revenues

12.5billion euros (2016)

Operating margin

€1,440m (11.5%) million euros (2016)

7 values

Honesty, Boldness,

Trust, Freedom, Team Spirit,

Modesty, Fun

193,077Team Members in more than 40

countries in September 2017



4World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.Presentation Title | Author | Date © 2017 Capgemini. All rights reserved. 4

Table of Content

Shale oil & gas has changed the worldwide

energy paradigm

Renewables technologies progress bring

significant cost decreases

The 2050 climate changes objectives are

ambitious

European Energy transitions

continue to be bumpy

Digital Transformation is a key enabler

Customers have changed

Utilities situation is slightly improving

Financials

Transformation

Key takeaways

WorldEnergy Market Observatory 2017



5World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 5World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.

Shale oil & gas has changed the worldwide energy paradigm

World Energy Market Observatory 2017



6World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 6World Energy Markets Observatory | November 2017 | 19th Edition

Thanks to shale technologies:

in 2011, the USA became the leading gas producer

In 2013 it became the leading oil producer, in 2013

During the global price war in 2014, the shale industry was threaten

Those who survived implemented deep cost cuts:

Since 2013, the average breakeven oil price has decreased from $80/bl to $35/bl

There are structural and cyclical reasons behind this drop

However between half andtwo-thirds of the cost savings arepermanent if oil prices increase

This form of production is farless capital intensive thanconventional methods, it ismuch more flexible

The USA-led “shale revolution” has dramatically changed the world energy outlook and is establishing a new order

Brent oil prices (24/10/2016-24/10/2017) in € and $

Supply cuts and higher prices wanted by Saudi, make it easier for the shale industry to deliver higher profits

Source: Nasdaq, 2017; Capgemini Analysis, 2017

© 2017 Capgemini. All rights reserved.




Many USA liquefaction projects got permission to export LNG

The first one, Sabine Pass, loaded its first cargo in February 2016

Since April 2017, US total authorized exports are up to 19.3 bcf/d and it should increase

Eastern European countries are keen to pay slightly more for LNG in order to diversify their supply (Poland, Lithuania)

Advanced technologies have enabled the construction of FSRUs whose costs and construction time are half those of traditional terminals.Today, a number of integratedLNG-to-power projects willuse this technology

Global demand for an LNG increase is being outpacedby faster productionincrease, thusexacerbating the glut

The USA natural gas glut, provoked by abundant shale gas, is now expanding to global markets

Gas spot prices (2016 and H1 2017)

The rise of LNG will make natural gas trading much more like oil. Today, the main trade being through regional pipelines, there is no global gas price





Renewables technologies

progress bring significant

cost decreases




9World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 9© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 9World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.

Solar PV has demonstrated significant growth and cost improvements

Solar

~ 300 GW installed capacity

75 GW added in 2016 (2)

From 2009 to 2016,PV solar LCOE*

decrease by

85%

In 2016, utility-scale cost LCOE*reached $46-61/MWh in USA

(Germany; France = $60/MWh)

Electricity costexpected to decrease

by 59% in 2025

Worldwide 2016

*LCOE: Levelized Cost Of ElectricitySource: Irena (2017); Lazard (2017); IEA (2017)




10World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.

Wind

Wind: ~ 470 GW installed capacity ~ 455 GW Onshore; ~ 15 GW Offshore

Installed onshorewind capacity increased by25% per year

over thelast decade

Onshore wind LCOE*~$40/MWh in 2015

expected to decrease by

26% by 2025

Offshore wind LCOE*~$170/MWh in 2015

expected to decrease by

35% by 2025

Worldwide 2016

Source: Irena (2017); GWEC (2016); Lazard (2017)

Wind: Onshore wind is the cheapest renewable technology after Hydro Power

*LCOE: Levelized Cost Of Electricity


11World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 11World Energy Markets Observatory | November 2017 | 19th Edition

Storage costs are also decreasing enablingrenewables development

Storage

Worldwide 2016

The most promising batteries technologies are: Lithium-ion batteries, Zinc batteries, …

Battery costs: decreased by80% from 2010 to 2016 and should be below $190/kWh by 2020

Tesla claims that between 2025 and 2030, battery pack costs should fall below $100/kWh

• Storage market to grow by 60% annually

• By 2020, ~30 GW of new storage capacity to be expected




12World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 12World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.

EV*: Despite battery costs, EV market share is growing thanks to local environmental considerations

Electrical Vehicle

Worldwide 2016

EV progression is greater (23% inQ1 2017) than the global automotive industry (around3% per year)

At the end of 2016, around 2 million EVs were on the world’s roads, although this still represents avery low (1.4%)market share

By 2030, compact and mid-size EVs should reach true price parity (without subsidies) with gas-fuel vehicles

EV interaction with the grid: Charging impact And Vehicule-to-Grid (frequency regulation, …) solutions

Source: IEA-EV Outlook (2017)

750,000 EVs were sold worldwide in 2016 (Hybrids accounted for 70% of EVs)

*EV=Electrical Vehicule




13World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved. 13© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 13World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.

Smart Homes are attracting most of the players. Is this a valuable market?

Smart Homes

Basic offers at this stage: Monitoring Control devices Automation

Pitfalls: High prices Technological

fragmentation Consumers’

lack of a perceived benefit

Smart home marketrevenueUS:$15bn in 2017Europe: $5bn in 2017

Smart Home Management is more than Energy(Healthcare security, Entertainement, Home Automation, …)

Source: Statista, 2017

With further IoT integration, Smart Home startups are creating a range of consumer-facing products and services

New Voicecontrolto boostSmart Home?





The downward trend in renewables costs is linked to technological progress:

Size of the turbines

Improvement of the efficiency of PV panels

Installation costs (notably for offshore wind)

Better sites knowledge

Their cost depends on

The locations

Installation conditions

Start date of projects

A major trend is the renewables cost decrease in Europe

Levelized cost of electricity (LCOE) comparison of selected power generation sources in Europe starting production in 2016-2017

When storage cost is added renewables are not yet competitive in Europe butin favorable regions, renewables are competitive

USA

Solar (utility scale): $49-$61/MWh (~42€-52.5 €/MWh)

Onshore Wind: $32-$62/MWh (~27.5 €/MWh-

53€/MWh)





Benefits

Carbon free

National energy sources

Decentralized: big advantage in some countries

Cost of technology improvement triggered

Renewable energies have some inherent characteristics that impact grid management

Grids operators have to accelerate smarter grids implementationRegulators have to allow related investments

Concerns

Distributed

Intermittent and impacting grid load balancing and design

Need storage

Bidirectional functioning

The impact on the networkdepends on:

Location: population densityand networks sizing

Power systems reserves

Renewable percentage

Additional grid costsbetween 15%-40%

Source:. http://ses.jrc.ec.europa.eu/project-maps, 2017

Smart Grids Projects




http://ses.jrc.ec.europa.eu/project-maps


The 2050 climate changes objectives are ambitious





Three key trends observed in 2017

Next international steps

1. On 12th December 2017, One planet Summit in Paris to accelerate Climate Financing

2. Spring 2018, a new Special Report by the IPPC will be published on the impact of global warming of 1.5°C.

3. November 2018, the UNFCCC “facilitative dialogue” to take stock of collective climate efforts towards the 1.5- 2°C target. A global stock take will be produced every five years, starting in 2023.

Since the Paris Agreement in 2017, climate change issuehas continued to be on top of international agendas

Countries remain engaged on the the Paris Agreement implementation.The USA’s exit from the Paris Agreement should not have a strong impact on energy transition dynamics in the USA.

Private sector involvement in the transition towards a low-carbon economy is growing. Companies coalitions are calling on governments to increase their objectives and implement carbon pricing policies

Carbon pricing is an essential part ofaction on climate change. An international report* proposes an indicative price corridor of $40-80/tCO2 in 2020 increasing to $50-100/tCO2 in 2030.

However, carbon pricing alone is not enough

1 2 3

* « High-Level Commission on Carbon Prices»




In 2017, carbon

pricing policies have

been implemented by

40 governments

and more than 20

subnational

jurisdictions

covering more

than 13% of

global GHG

emissions

Putting a price on carbon is a region or country’s responsibility

World map of explicit carbon prices




The EU ETS towards its phase 4: the post-2020 reform is progressing

EU GHG decrease on track to achieve 2020 target

Phase 4: In Feb. 2017, the EU Parliament and the Council adopted their respective positions and trilogue started in April 2017.

What are the key elements of thepost-2020 EU ETS reform?

An accelerated decline of the annual CO2 cap,

A doubling of the Market Stability Reserve rate

A cancellation of some of EUAs held in the Reserve,

Changes in free allocations to industries

EUA prices in the EU ETS (2008 to 2017

13 October: ITRE vote on

ETS revision opinion

8 December: ENVI vote on

ETS revision opinion

February: plenary vote on

the ETS revision

April: start of

trilogue

negotiations

20172016

20 July: Publication of a

proposal to revise the

EU ETS

2015

June trilogue

negotiations

September

13th trilogue

negotiations

October

12th trilogue

negotiations

November

8th trilogue

negotiations




European Energy transitions continue to be bumpy




21World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.World Energy Markets Observatory | November 2017 | 19th Edition

2020

-20% Greenhouse Gases emissions (GHG)+ 20 % Renewable Energy Source (RES)+20% Energy Efficiency improvements (EE)

EU: 2020 GHG decrease objectives should be met and probably surpassed

EU-28 GHG emissions evolution and targets to 2020 and 2030

It is time to design a credible 2030 energy and climate package in line with EU long-term objectives and the Paris Agreement.

In 2015, 22.1% GHG emissions reduction compared to 1990

On track to achieve the 20% RE target for 2020 (16.7% in 2015)

Additional effort is required to meet the +20% inEE by 2020

2030

-40% GHG/ +27% RES / +27% EE

New proposals in 2015 and2016 for a 2030 climate and energy package and first negotiations in 2017

In November 2016, the “Clean Energy for all Europeans” package provides newlegislative proposals on RES,EE, the Energy Union Governance, and thepower market.




Current (2016) and

future capacity mix

(2020, 2025)

EU:2020 renewables objectives should be reached

Source: Entso-E Database, Wemo-Capgemini Consulting, 2017



EU: 2020 Energy Efficiency objectives remain challenging

Primary energy

consumption and

targets to

2020 and 2030



New EU regulation should slowdown renewables investment

Thanks to cost decrease, installed capacity could continue to grow

In 2016, investments in renewables stabilized in Europe at $60 billion after dropping in 2015

Main reasons:

Subsidies decrease

Lower capital cost per installed

capacity

Main investments in

Wind energy ($42 billion)

Solar energy ($10 billion)

EU reforms will lower renewables subsidies and relate them to market prices

Share of renewables in the member States’gross final energy consumption

While Sweden has reached its objectives, others (France, UK, NL) have to accelerate their efforts





Europe:

Is well supplied in gas

In 2016 consumption increase was due

to lower nuclear plants availability

Europe:

Imports 30% of its gas needs from

Russia,

Is willing to diversify its sources of

supply.

This explains why:

Poland and Lithuania US LNG imports

despite $1-2 price premium

However, in Asia, Middle-East and Africa gas demand will grow significantly

Contrary to other regions, gas demand will remain flat in Europe

Natural gas demand prospects by region

Despite large Utilities commitment, the lack of gas new needs and the EU opposition are endangering Nord Stream 2 completion


Source: Cedigaz




Dispatchable fossil fuel capacity continued to be retired from the market

Replaced by volatile renewables

Capacity markets ensuring that sufficient reliable capacity is available. They have been functioning with different models

In 2016 fossil fuel plants continued to be decommissioned, though at a slower path

Installed and decommissioned generation capacity per type of source (2016 vs 2015)

Security of supply remains a worry. Nuclear electricity is complementary to renewables

Source: Cedigaz

French capacity market first auctions awarded at €10/kW

The Winter Package recommends that national capacity markets open to other member states and to all technologies (except the polluting ones)

Source: EWEA, Capgemini Analysis, 2017





Despite increased coal prices and generation capacity retired, electricity prices remained low in the three first 2016 quarters

During the 2016-2017 winter, lower nuclear plants availability:

Pushed spot prices up and

Endangered security of supply was

threatened

After that episode, prices fell again

The 2017-2018 winter could have similar characteristics than the previous one

Coal prices increases and lower French nuclear plants availability have pushed prices up

Electricity spot prices on the main European markets(2016 and H1 2017)

Forward price for Q1 2018 is at 42€/MWh





Winter package measures willprobably not restore a sustained market

Deliver a fair deal for energy consumers Enable them to participate more in electricity markets (self-producers, load shedding offers).

Suppliers to propose more "dynamic“ offerings.Improved customer information.

Strengthen market governanceInterconnections development, better standard harmonization. Stronger role for ACER.

End of national market rules (e.g. price caps). But insufficient to improve security of supply.

Improve renewables integrationStop subsidies for renewables

Encourage calls for tender and recommend "technological neutrality" (e.g lower-cost technologies)

Increase energy efficiencyIncreased target from 27% to 30% by 2030.

Member States to finance a €10 billion fund for existing buildings renovation.Develop Electrical Vehicles

Our proposals Reforming electricity pricing in wholesale markets.

Establishing a high enough and predictable carbon market price.Criterion for MSR intervention defined according to price thresholds.

Reforming network access tariffs because of self-production increase.

To be adopted in 2017 for entry into force between2020 and 2021.



29World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.© 2017 Capgemini. All rights reserved.Presentation Title | Author | Date 29World Energy Markets Observatory | November 2017 | 19th Edition

Consequences of Brexit on the British energy sector

Subject to the terms of the UK/EU agreementbeing negotiated

Main consequence: end of application of the EU law and end of EU institutions membership, but likely incorporation of the EU common law input into British law (cf. Repeal Bill)

Major focus of attention: The withdrawal of UK from the various regulatory mechanisms

included in the European energy policy framework (Euratom, ETS,

Remit, etc.);

The impact on UK energy infrastructures development (financing,

operation), especially interconnections.





Global climate changes objectives are ambitious: in 2016 GHG emissions reached a ever high level

Regional outlook

CO2/Greenhouse Gas Emissions Clean Investment LCOE

Value (MtCO2) 2016 value ($ billion) 2016 value

North America

5,157(US; 2016)

500-700(Canada;

2015)

$59bn(US)

Solar (utility scale):$49-$61/MWh

Onshore Wind:$32-$62/MWh

Europe ~4,400(2015)

$58bn

PV Solar (utility scale): $60/MWh

Onshore Wind: $40/MWh

Australia ~ 530

(Jul’15-Jun’16) $5bn+ $2bn (2017)

Solar: $56-$100/MWh

Southeast Asia

~1,000(2016)

$4bn -

Source: U.S. Energy Information Administration (2017); Lazard (2017); Canada Climate Change Service (2017); Australian Clean Energy Council (2017)

• US: only ~14% lower than 2005 + uncertainty

• Canada: Emissions to increase (17%-23% above 1990 levels by 2020)

• ~10.7% below emissions in 2005

• High fossil fuel reliance

• High fossil fuel reliance



Digital Transformation is a key enabler





Hurdles to overcome

Skills and Jobs:

Skills shortage

Major social change threatening jobs and slowing down digital deployment

Digital Utility Transformation started in almost all Utilities.It’s time to accelerate !

Grab opportunities to improve drastically the performance, bolster market position and tap new revenue sources

Customer Experience

Customer understanding

Top line growth

Customer touch points

Started but not completed Achieve a really compelling

Customer Experience, engage customers

Leverage Digital for competitiveness (full digital relationships)

Leverage RPA* and AI**

Operational Process

Process digitization

Worker enablement

Performance management

Priority #1 Up to 27% savings for Digital Plant Thanks to technology progresses,

many Digital operations opport.

Business Model

Customer understanding

Top line growth

Customer touch points

Priority #1 Innovate is a must Choose your innovation domains Eco-systems leverage

*RPA: Robotic Process Automation** AI: Artificial Intelligence



Hurdles to overcome

Skills and Jobs:

Skills shortage

Major social change threatening jobs and slowing down digital deployment

How to accelerate digitalization…..

Large established Utilities have more difficulties to become Digital: technological heritage, way of working, culture

Policies:

The European GDPR* enforceable by May 2018

Its objectives are to give control to citizens over their personal data

Specific legal obligations andliabilities on companies

Additional internal complexity(and cost)

Utilities regulation:

Tariff construction doesnot incentive smartgrid investment

Shortage of

Data ScientistTariffs structure

Internal

Capabilities

RegulationComplex internal

procedures

Resistance to

change

€

* GDPR: General Data Protection Regulation





In 2017, major attacks (WannaCry, Petya) shook some large private andgovernmental organizations

Attacks can have multiple motivations:

Money

Destruction of data

Industrial espionage

The area at risk will expand with:

Rise of smart grids

Internet of Things, 5G…

New innovation processes

European regulations willchange the landscape:

NIS (Network and Information

systems Security enforced in 2016)

GDPR (General Data Protection

Regulation) coming into force in 2018

Utilities must anticipate multiformattacks as with the Ukraine

electricity grid

They must:

Identify the most problematic scenarios

Take preventive measures accordingly

How to accelerate digitalization: Cybersecurityconcerns



Customers have changed




36World Energy Markets Observatory | November 2017 | 19th Edition © 2017 Capgemini. All rights reserved.World Energy Markets Observatory | November 2017 | 19th Edition

Average significant electricity decrease in the period:

Reflects wholesale markets evolutions(until end of Q3 2016)

Is also a consequence of increasing competition

Electricity and Gas Prices decreased slightly in 2016 / H1 2017

Average European gas & electricity prices in 2016

The Winter Package aims at abolishing the residential tariffs

In France:

Some new entrants set a -10% forgreen offers (residential electricity)

According to the constitutional court,gas tariff have to be abolished

The question remains open forelectricity tariffs

In case of nuclear lowavailability (securitycheckings, refurbishment),wholesale electricity priceswould increase again

Medium to Large Industries

ELEC

GAS

-8.3%

-16.4%

4.7

1.36

12.6

3.58

In c€/kWh excluding VAT*

In c€/kWh TTC**with PPP adjustment

Residential

9.38

3.11

30.84

11.42

ELEC

GAS

-2.3%

-10.5%

Source: Eurostat, 2017




Trends

Green offers massive deployment, some like ENGIE offer an Energy mix “à la carte”

Low-cost and full Digital innovative offerings

Development of Energy Services including Energy Efficiency

Peer-to-peer market places development continues

Competition continues to increase and churn rates are consistent with this trend

Aggregated European Electricity switching rates (2016)

Churn rates of BE (Flanders), NL,NO and UK/IE became the superhot markets (+3% churn rate)

France residential switchingrate went up to 6.1%

Upward switching ratesmainly profit toalternative players

Many markets remainconcentrated

Gas switching rates are higher on average than electricity switching ratesHigh switching rates countries are similar for electricity and gas





Our recent survey shows customer expectations evolutions in Western Europe

New suppliers mushrooming

Appetite for local energy becomes a topic in some countries

Price comparison platforms increasingly used by customers

New alternative players concentrate on an offer/a service

Appetite for green energy is growing everywhere

When additional costs are limited to less than 5%

Group purchasing or peer-to-peer platforms/communities becomes significant



Thanks to shale gas US retail prices are the lowest, competition is getting aggressive all over

Regional outlook

Retail Price Industrial price Deregulation Switch rates

2016 value US$ cts/kWh 2016 valueUS$ cts/kWh 2016 value

North America

Elec: 12.55* cts/kWh Gas: 3.3 cts/kWh

* Average

Elec: 6.75*cts/kWh

Gas: 1.2 *cts/kWh

* Average

Drop in consumerincome/riskadverse

Europe

Elec: 11-35.5 cts/kWh

Gas: 3.5-13 cts/kWh

Elec: 5.5-14.5/kWh

Gas: 1.5-4 cts/kWh

Alternativesuppliersdevelopment

Australia Elec:17-25 cts/kWh

Gas: 13-16 cts/kWh -

• Strong price increase

• Security of supply at stake

Southeast Asia

Elec: 10.9 (Singapore)/15.1 (HK) cts/kWh (7.6 cts/kWh for Vietnam)

- Competition is limited

30% 70%

Source: U.S. Energy Information Administration (2017); Lazard (2017); Canada Environment Climate Change Services (2017)

Retail marketderegulated prices

100% deregulatedMarket fully

regulated/monopoliesRetail market

regulated prices

70% 30%

70% 30%

20% 80%

Legend:

• Wholesale marketvolatility/Gas cost increase

• Gas cost increase



Utilities situation is slightly improving –Financials





Revenues erosion continued in 2016 (~ -3%), mostly due to low wholesale prices and end customer prices decrease

H1 2017 was slightly better (wholesale electricity prices increase)

Centrica external growth boosted the revenue(Neas Energy)

Engie revenue fell from €92b in 2012 to €66.6b (portfolio reduction and prices decrease)

Revenue are stable or decreasing for most of the players of our sample(~-3% in average)

E-On & RWE splitted in two parts:1. E-On (Nuclear & Regulated) / Uniper (Conventional generation)2. RWE (Nuclear/ Conventional Generation) / Innogy (Regulated & Sales)

*Sample for Europe: Fortum; DONG Energy; RWE; Uniper Vattenfall; Centrica; EnBW; EDF; SSE; CEZ; Engie; Enel GNF; Iberdrola; E.ON; EDP

(UNIPER makes the figure not consistent)

2015 & 2016 revenues in € billion and CAGR 2016





Downward trend of the five last years continued but slowed down

ENEL, IBERDOLA and DONG show a positive trend this year

Figures improved in average in H1 2017, particularly with good news for EON and RWE and higher wholesale prices

Engie divestment plan:gas upstream and LNG assets for sale

Fortum entered in negotiations to buy Uniper → is

conventional generation gaining more interest ?

EBITDAs decrease is slowing down

In H1 2017, thanks to higher electricity and carbon prices, many Utilities results have improved. North American Utilities are more profitable

EBITDA margins and associated CAGR (2012-2016)





All Utilities have an ambitious divestment plan

8 companies expect their divestment policy to be visible in 2018

In 2016, despite those divestments, the average leverage ratio increased except for 5 Utilities

In 2017, several major Utilities expect their ratio to land between 2.5X and 3.0x

Most companies were able to reduce their net debts, but the leverage ratio continues to increase (2.7x to 3.0x)

Net debt and EBIDTA in €million and leverage ratios for 2015 and 2016

Performance plans seem to have some positive effects. With expected margin improvements and the debt level decrease, the leverage ratio should improve- if not in

2017- in 2018 or 2019





Utilities situation isslightly improving –Transformation





Downstream energy transformation and value proposition development gravitate around four Smart areas

Smart City &

Community

Monitor and manage all flows (energy, water, networks, etc.)

Provide new public services (communication, security, etc.)

Better plan & design intelligent districts

SMART4

Smart

Mobility

Enable low emission

transportation

(e.g. e-vehicles)

Foster energy

efficiency in

mobility (with

fuel consumption

monitoring, with

alternative

models such as

car pooling, etc.)

Improve traffic

management

Smart Home (B2C)

Increase Home automation

Enable Energy Management

Improve comfort & security

Increase Energy performance of building

Increase operational efficiency

Improve comfort & security

Smart Building & Factory (B2B)

Smart = Digital

Energy Transition

enables

Source: WEMO 2017 – Capgemini Consulting Analysis

The SMART4 approach – the 4 smart areas of the energy transition downstream



Contribution of the key technology levers to the 4 Smart areas

Storage solutions

Energy marketplaces

EV charge management

Solarself-consumption

Blockchainfor Energy

Ex: Self-consumption is currentlyboosting Smart Home development and has a significant potential to

increase its growth

KEY LEVERS

Energy management

platforms

SMART CITY & COMMUNITY

SMART MOBILITY

SMART HOME

SMART BUILDING & FACTORY

Current impact Estimated potential

Contribution of key levers to the 4 Smart areas



Players are diverse, beyond Utilities

Heatmap of types of players on key levers

TRADITIONAL PLAYERS PLAYERS FROM ADJACENT SECTORS SPECIFIC PLAYERS

Storage solutions

Energy marketplaces

Solar self-consumption

Blockchain for Energy

EV charge management

Energy management platforms

Utilities ESCOs*Car

manufacturersNet players (GAFA…)

CPG-Retailers TelCosSolar & storage players

OtherSpecific

small playersConstruction

KEY

LEV

ER

S

Ex: Utilities are moderately

active regardingself-consumption

offersElectrical

equipment manufacturers

*ESCOs: Energy Service Company Level of activity of the players



Key takeaways





The renewables development 2030 objective should bemet thanks to renewable cost decrease

OurRecommendations

Reforming electricity pricing

in wholesale markets.

Establishing a high enough

and predictable carbon

market price

Factor for MSR intervention

defined according to price

thresholds

Reforming network

access tariffs because of

self-production increase

The Climate-Energy package aims at reducing GHG but no priority is allocated

GHG target will be reached and even surpassed in 2020:

Thanks to economic crisis

Despite lowGHG price (€7/t)

With the economic recovery, will it last?

PV is the front runner with big cost decrease potential

Onshore wind is the cheapest (except Hydro) but has toface local opposition

Offshore wind costs are also decreasing (fall by 35% by 2025)

Battery costs have decreased by 80% from 2010 to 2016 and should be decreasing further

Battery energy storage is ready for market take off

EV have a charging impact but can also contribute to grid balancing

GHG€



Customer must be able to participate more fully in electricity markets with suitable offerings

Delivering a fair deal for

energy consumers

(real green energy, more

systematic “dynamic”

pricing offerings better

reflecting wholesale market

prices in real time)

Gas and electricity prices falling but moderately for residential electricity price

Switch rates increased in average but their level varies from region to region

Aggressive Utilities transformationplans with objectives to reduce thecost-to-serve

Customers seeking more involvement and low price

Demand response is a necessity

Aggregation becoming critical for load adjustment

Offerings

Low cost anddigital offers

Innovative tariffs and discounts

Self service and“à la carte” supply

Energy marketplaces

Various new services

OurRecommendations

Creating special prices for

self-consumers

Inventing new business models,

trying to find the grail: differentiated

services valued by customers



2016 Utilities financials,while remainingproblematic, seemstabilizing due to transformation plansand wholesale marketprices slight rebound

Accelerating large

transformation plans

Adapting ambitions to

financial resources and

human capabilities

Transforming business

models to be more profitable

Revenue decreased due to electric and gas spot prices evolution with some exception (Nordic Utilities)

Profitability decreased

Debts decreased

But leverage ratio increased

Stock values underperformed against the Euro Stoxx index

OurRecommendations

€€



Boosting profitthrough Digitalization(20-30% costs gains)

Establishing an

innovative environment

(open innovation,

start-ups…)

Evolving Business Models to be

more profitable

Overcome

digitalization hurdles:

Skills and jobs,

Policies,

Regulation,

Cyber-security threats, …

Smart grids allow renewable increase in the electricity mix

Smart meters enable dynamic tariffs and energy management

Helping smart buildings will contribute to clients better awareness and energy efficiency improvements

Applications enable the residential customers to manage heating and cooling expenses, as well as other servicesbeyond energy

New approaches as use of massive data, mobility, robotics and AI, shouldlead to plants performance improvement

Digital Operations being the priority #1

OurRecommendations



Thank you!Download your copy:

www.capgemini.com/wemo



This message contains information that may be privileged or confidential and is the property of the Capgemini Group.Copyright © 2017 Capgemini. All rights reserved.

Rightshore® is a trademark belonging to Capgemini.

A global leader in consulting, technology services and digital transformation,

Capgemini is at the forefront of innovation to address the entire breadth of clients’

opportunities in the evolving world of cloud, digital and platforms. Building on its

strong 50-year heritage and deep industry-specific expertise, Capgemini enables

organizations to realize their business ambitions through an array of services from

strategy to operations. Capgemini is driven by the conviction that the business

value of technology comes from and through people. It is a multicultural company

of 200,000 team members in over 40 countries. The Group reported 2016 global

revenues of EUR 12.5 billion.

About Capgemini

Learn more about us at

www.capgemini.com


https://www.linkedin.com/company/capgemini

https://www.linkedin.com/company/capgemini

https://www.slideshare.net/capgemini

https://www.slideshare.net/capgemini

https://www.twitter.com/capgemini

https://www.twitter.com/capgemini

https://www.youtube.com/capgeminimedia

https://www.youtube.com/capgeminimedia

https://www.facebook.com/capgemini

https://www.facebook.com/capgemini

https://www.capgemini.com/insights-data

http://www.capgemini.com/about/how-we-work/the-collaborative-business-experiencetm

http://www.capgemini.com/about/how-we-work/the-collaborative-business-experiencetm

http://www.capgemini.com/about/how-we-work/rightshorer

http://www.capgemini.com/about/how-we-work/rightshorer

Click to insert title title - GP05gp05.fr/dotclear/public/2017/20171211-KeyFindings.pdf2017/12/11...

Documents

Transcript of Click to insert title title - GP05gp05.fr/dotclear/public/2017/20171211-KeyFindings.pdf2017/12/11...