frost & sullivan what's hot in the energy and environment industry in 2012

What’s Hot in the Energy & Environment

Industry

Trends, Opportunities and Challenges through the Eyes of the Key

Players in the Energy & Environment Sector in 2012

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Disclaimer

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Table of Contents

Ø About this Market Insight

Introduction 5-6

6

What’s Hot in 2012 7-25

8

9

10

13

16

19

22

24

25

Ø Key Perspectives on Growth in the Energy & Environment Industry in 2012

Ø Market Highlights for 2012

Ø Environmental Markets

Ø Building Technology Markets

Ø Power & Energy Markets

Ø Power Supplies & Battery Markets

Ø Energy & Environment Markets Convergence with other Industries

Ø Global Hot Spots in the Energy & Environment Industry

Ø 3 Big Predictions for 2012

About Frost & Sullivan 26-30

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Introduction

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About this Market Insight

Based on a survey of several thousand key companies conducted across Europe in December 2011,

this Market Insight highlights the hot topics for growth that have been indentified in the energy and

environment sector for 2012 and beyond.

Data and opinions of key stakeholders, combined with analysis and commentary from Frost & Sullivan

industry experts, have been used to present key market highlights, hot growth topics, global and regional

hot spots, areas of market convergence, and bold predictions for 2012.

In this study, a summary of the highest growth areas for the Energy & Environment industry is presented

for the following key sectors:

• Environmental technologies

• Building technologies and services

• Power and energy (including renewable energy, power generation & smart grid)

• Power supplies and batteries

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What’s Hot in 2012

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Key Perspectives on Growth in the Energy &

Environment Industry in 2012

2 Digital technology is transforming the industry with great opportunities for smart grids, smart water and smart buildings

3 European players still place primary focus on home markets, which is a high risk given the higher growth outside Europe

4 Technology and market convergence is attracting new and threatening players to the Energy & Environment arena

5 Efficient localization of best in class services remains the growth challenge of the global energy & environment market

1 Energy is a key mega trend today, with massive opportunities for efficient generation, distribution and use of energy

Source: Frost & Sullivan analysis.

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Market Highlights for 2012

• Smart grid and themes surrounding this area are growing in interest, especially business

models and growth opportunities post smart meter rollout in Europe and North America.

• Shale gas is driving interest in North America, China and to a lesser extent Europe.

• Growth of distributed generation (DG), legislation surrounding this market as well as

integration of DG into the grid are emerging trends especially in the developed markets.

• Importance of energy efficiency and total cost of ownership is driving investment in ‘green’

equipment, most notably UPS, generator-sets and inverters.

• Value chains, less consolidated and stretching across hundreds of components, have been and

are still presenting many opportunities in the renewable energy industry. Wind power is the

most highly attractive segment to European companies. Solar PV still has a positive growth

outlook but opportunities for European players are slowly vanishing as the global market

becomes more dominated by Chinese players.

• There is an increasingly urgent need for provision and upgrading of environmental

infrastructure (water and waste management) to sustain growth in developing and developed

economies. Most European players have been slow to exploit these global opportunities but

they will be critical to future success as European markets mature.

• Water stress is transforming into a global threat rather than a regional threat.

• In the environmental infrastructure markets, energy efficiency and resource recovery drive

technology innovation in an erstwhile less tech-driven market.

Key Market Highlights

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1. Environmental Markets

What Participants see as Hot Topics in 2012

Rank Market Topic % of Respondents Nominating as Hottest Topic

1 Wastewater Treatment 32%

2 Water Monitoring, Instrumentation & Analysis 27%

3 Smart Water - Digitisation of the Water Market 26%

4 Industrial Waste Management 26%

5 Waste Re-Use Opportunities 25%

6 Materials Recovery and Value Recovery 25%

7 Decentralised Water & Wastewater Treatment 23%

8 Waste Recycling 23%

9 Membrane Separation Markets 19%

10 Water Stress - Water Reuse and Recycling 16%

11 Bio-Solids Management 12%

12 Municipal Waste Management 12%

13 Disinfection & Filtration Markets 10%

14 Tertiary & Advanced Wastewater Treatment 10%

15 Hazardous Waste Management 10%

16 Decarbonising Water 8%

17 Medical Waste Management 4%

Environmental Technology & Service Markets: Identification of Hot Topics (Europe), 2012


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What Participants see as Hot Topics in 2012 (Contd ...)

• Diminishing quality and quantity of freshwater

supplies increases the focus on wastewater

treatment

• Increasing opportunities for advanced wastewater

treatment solutions of tertiary treatment for

resource recovery

• Lack of adequate wastewater treatment facilities,

especially in the rapidly urbanising emerging

markets, pose a threat to derail economic growth

• Increasing complexity and criticality of water

quality has accentuated the need for strong

monitoring

• Promising developments of ICT deployment by

water utilities in improving the much needed

operational and energy efficiency of networks is

driving focus on smart water solutions

• Industrial waste management shifts focus to

material sand resource recovery

Market Themes for 2012

Environmental Technology & Service Markets:

Top 5 Market Topics (Europe), 2012


Wastewater Treatment

Water Monitoring, Instrumentation and Analysis Markets

Smart Water - Digitisation of the Water Market

Industrial Waste Management

Waste Re-Use Opportunities

Others

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Primary Focus Regions

• Western Europe continues to be the core focus for

European companies given the significant and at

times large scale rebuild and refurbishment

opportunities of Environmental Management

Infrastructure, especially in the water sector

• Implementation of EU Directives in the New

Member Eastern European countries continues to

offer growth opportunities for environmental

services companies

• Increasing consolidation of the Environment market

also increases the focus of European companies

across to North America

• European companies continue to capitalise on the

environmental services expertise to further

consolidate and grow in the highly profitable

Middle East market.

• Asia Pacific, LATAM and Africa appear to be

medium to long term focus given the challenge of

local competition and extreme pricing pressures

Geographic Focus for 2012

Environmental Technology & Service Markets:

Primary Regions of Focus for EU Players (World), 2012


North America

Latin America

Western Europe

Eastern Europe

Middle East

Africa

Asia Pacific

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2. Building Technology Markets



1 Opportunities for Green Buildings 61%

2 Smart Buildings Markets 47%

3 Building Energy Management Systems (BEMS)

Markets 44%

4 Building Automation and Control 36%

5 Energy Management and Performance Contracting 36%

6 Micro-Renewable Energy Generation in Buildings 28%

7 Energy Efficiency Software Markets 22%

8 Home Energy Management Systems (HEMS)

Markets 21%

9 Smart Homes and Home Automation 21%

10 Integration of Fire Safety and Building Security 18%

11 Sustainability Management Services 13%

12 Technology Advancements in Fire Suppression 10%

13 Integrated Facility Management Markets 8%

14 Fire Detection Markets 7%

15 Voice Alarms and Mass Notification 7%

16 Workplace Management 4%

Building Technology Markets: Identification of Hot Topics (Europe), 2012


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• The criticality of energy efficiency and reduction of

carbon emissions remains a critical issue for

building owners. These are factors that crucially

link costs, environmental impact and building

performance. As a result, the concept of green

buildings remains a critical topic in the building

technologies sector.

• Smart buildings have yet to make a massive impact

on the industry but represent a massive

opportunity and area of major change in the

market. This is continuing to lead to convergence

of both technologies and competition within the

building technologies industry.

• The dominance of energy efficiency also explains

why participants are excited about the prospects of

key technology platforms such as BEMS and

building automation, as well as service markets

such as energy management and performance

contracting.


Building Technology Markets:



Opportunities for Green Buildings

Smart Buildings Markets

Building Energy Management Systems (BEMS) Markets

Building Automation and Control

Energy Management and Performance Contracting

Others

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• The building technologies industry has become a

global marketplace in the past decade and this is

continuing. However, this chart shows that

European players still see Western Europe as their

primary focus market today.

• With high energy prices, a large and aging building

stock and increasing commitment to environmental

performance, this focus on home markets will

continue.

• European players also see significant opportunities

in North America, Eastern Europe and APAC but

these are all fiercely competitive markets.

• The Middle East is very significant for European

players with very sophisticated buildings and high

growth potential. However, construction rates are

only just recovering from the massive slump caused

by the recent financial crisis.

• In terms of building technologies, most players see

Africa as a market to watch rather than prioritise.


Building Technology Markets:



North America

Latin America

Western Europe

Eastern Europe

Middle East

Africa

Asia Pacific

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3. Power & Energy Markets



1 Opportunities in Renewable Energy Value Chains 52%

2 Growth Outlook for Solar Power Technologies 36%

3 Future of Wind Power 35%

4 Competitive Landscape of the Smart Grid Market 31%

5 Smart Meter: Next Steps by Manufacturers 24%

6 Future of Gas-Fired Power Generation 20%

7 Future of the Supergrid 20%

8 Power Plant Service Markets 19%

9 Hybrid Power Systems Markets 18%

10 Distribution Automation 18%

11 Carbon Capture & Storage 17%

12 The Future of Nuclear Power 15%

13 Opportunities for Exploitation of Shale Gas 14%

14 Opportunities for Hydropower 14%

15 Emerging Gen-Set Markets 13%

16 Micro CHP Market 13%

17 Future of Coal-Fired Power Generation 13%

18 AMI Market 8%

19 LV Panel Boards and Distribution Boards Market 7%

20 HVDC Markets 6%

Power & Energy Markets: Identification of Hot Topics (Europe), 2012


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• Equipment manufacturing in all renewable energy

markets is consolidated with a few large

competitors sharing the market.

• Technology complexity and large up-front

investment do not allow for an easy market entry.

• On the contrary, the value chain consisting of 100s

of components and 1,000s of players presents

many opportunities for M&A, investment and even

new entrants with innovative products.

• The growth outlook and future of the wind and

solar industries, the most rapidly expanding in the

past, may not be as cloudless as before. The

government support is weakening forcing the

industries to accelerate cost and price reduction.

• Smart grid, and smart meters as its key

component, is heavily promoted by the

governments as a critical element in achieving

energy efficiency targets and integrating increasing

amounts of distributed generation into the grid.


Power & Energy Markets:



Opportunities in Renewable Energy Value Chains

Growth Outlook for Solar Power Technologies

Future of Wind Power

Competitive Landscape of the Smart Grid Market

Smart Meter: Next Steps by Manufacturers

Others

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• A few years ago, the domestic EU market and the

US market presented the most opportunities due to

an early start for these regions in renewables,

smart grid and energy efficiency.

• As other countries realize the necessity to

introduce the supportive legislation and market

mechanisms to accelerate the development of a

green and smart energy sector, regional markets in

Eastern Europe, Middle East, Latin America, Asia

Pacific and Africa become attractive for imports

and in some cases setting up new manufacturing

facilities.

• The importance of the developing countries’

markets will further increase based on the

virtually untapped potential and a serious need to

upgrade the power industry infrastructure.

• The exponentially growing power demand will also

be a major contributing factor.


Power & Energy Markets:



North America

Latin America

Western Europe

Eastern Europe

Middle East

Africa

Asia Pacific

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4. Power Supplies & Battery Markets



1 Trends in Datacentres and Emerging Technology

Demands 51%

2 Small Scale Storage of Renewable Energy 39%

3 Inverters for Renewable Energy Systems 33%

4 UPS Market 33%

5 Utility Scale Storage of Renewable Energy 33%

6 Green UPS 27%

7 Battery Technologies for Electric Vehicles 27%

8 DC Power Systems Markets 24%

9 Modular UPS 24%

10 Healthcare UPS Market 22%

11 Battery Charger Markets 18%

12 UPS Services Market 16%

13 Secondary Battery Markets 14%

14 Transformerless UPS Market 8%

15 Battery Technologies for Telecom Applications 8%

Power Supplies & Battery Markets: Identification of Hot Topics (Europe), 2012


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• Energy consumption by datacentres is on the rise

due to energy intensive equipments such as blade

servers, precision air conditioners, etc. The future

trend is for energy efficient datacentres.

• Total cost of ownership is a key purchasing criteria

and hence efficient equipment such as green UPS

systems and modular UPS is growing in demand.

• The advent of smart grids has led to an increased

interest and emphasis on energy storage, both

small scale (less than 1 MW) as well as utility scale

storage. Research is ongoing and pilot projects are

being implemented to find the most suitable

technologies and this will remain a critical topic.

• Governments and countries across the globe are

promoting electric vehicles, not just for the

purpose of cleaner transport but also as a valuable

source of distributed generation handling periods

of peak demand.


Power Supplies & Battery Markets:



Trends in Data centres and Emerging Technology Demands

Small Scale Storage of Renewable Energy

Inverters for Renewable Energy Systems

UPS Market

Utility Scale Storage of Renewable Energy

Others

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• The developed markets of Europe and North

America account for the vast majority of

companies’ primary interest due to market size and

pace of take-up of new technology.

• Europe and North America are interesting to track

for energy storage opportunities, while the growth

of traditional power quality equipment such as UPS

and inverters is faster in the developing regions of

Africa, Latin America and Asia.

• Smaller countries such as Vietnam, Bangladesh, Sri

Lanka and certain countries within Africa and Latin

America are particularly interesting such as Nigeria,

Kenya, Brazil and Venezuela.

• China and India are unavoidable focus areas given

the sheer size of the population and manufacturing

base.

• The Middle East, Russia and CIS , with their oil and

gas money, offer good possibilities for growth in

equipment as well as services.


Power Supply & Battery Markets:



North America

Latin America

Western Europe

Eastern Europe

Middle East

Africa

Asia Pacific

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Energy & Environment Markets

Convergence with other Industries


Key Industries Tracked in Addition to Company’s Core Markets (Europe), 2012

Core Market Cross-interest 1 Cross-interest 2 Cross-interest 3 n

A&D Security 50% ICT 29% Electronics 24% 42

A&T Electronics 24% ICT 19% EPS 12% 86

CMF A&T 40% EBT 36% EPS 30% 53

Electronics M&I 53% EPS 47% IPC 47% 15

EPS EBT 32% IPC 21% A&T 15% 73

EBT EPS 58% ICT 15% M&I 15% 26

HC CMF 18% ICT 14% M&I 8% 90

IPC EPS 74% A&T 41% EBT 26% 27

ICT A&T 30% EPS 24% HC 21% 66

M&I EPS 25% EBT 25% IPC 25% 8

PPE A&D 17% CMF 17% EPS 17% 12

Security ICT 39% A&D 33% EBT 33% 18

A&D = Aerospace & Defence

A&T = Automotive & Transportation

CMF = Chemicals, Materials & Food

EPS = Energy & Power Supplies

EBT = Environment & Building Technologies

HC = Healthcare

IPC = Industry & Process Control

ICT = Information & Communication Technology

M&I = Measurement & Instrumentation

PPE = Personal Protective Equipment

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Energy & Environment Markets

Convergence with other Industries (Contd ...)

• Energy and environment (E&E) players see the greatest convergence today from within their

own sector as well as the industrial automation and ICT industries. This comes as no great

surprise and will be one of the defining points of convergence for the foreseeable future as

automation, digital intelligence and E&E infrastructure converge to create smart solutions for

grids, buildings, homes, water networks etc.

• The significant convergence that participants have identified between energy markets and

automotive and transportation (A&T) is highly significant and relates primarily to the

emergence of electric vehicles and e-mobility. In the E&E sector, this is driving innovation in

batteries, energy storage, transmission and distribution infrastructure, battery charging and

integration of mobility into the smart home.

• Technology innovation in the Water sector is driving convergence opportunities especially

among treatment technology, process control and automation & instrumentation sectors.

• ICT has begun to prop up as a significant efficiency enabler in the water market by targeting

key challenges such as Non-revenue water as well as metering.

• Chemical and material companies have begun to take significant steps further down the value

chain to acquire key technology and solution capabilities in the fast growing and high

potential E&E markets. Particular emphasis to date has been on renewable energy (eg solar

PV) and water and wastewater treatment (eg membrane filtration).

Key Areas of Technology Convergence

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Global Hot Spots in the Energy & Environment Industry

Energy & Environment Markets: Global Hot Spots (World), 2012

US EPA estimates water infrastructure funding gap could reach beyond $500 billion in 20 years

Source: Frost & Sullivan

The Middle

East

Russia

Europe

Africa

Latin America

North America

APAC India

China

$65 billion water utilities market to offer efficiency and carbon-footprint reduction related opportunities for water & wastewater infrastructure

$10.92 billion Pure Water Programme and Federal Support Attracting Finanacial Aid for Urgent Rehabilitation of water infrastructure

Increasing water stress and rising volumes of sewage sludge to fuel exponential growth of MBR and sludge treatment markets

Construction market recovering and creating attractive opportunities for building technology solutions.

Advances in smart grids, specifically a vibrant market for demand response and home automation. Energy storage another key area with quite a few manufacturers for new technologies

A number of countries (Brazil, Mexico, Chile) are starting to invest more ambitiously in renewable energy. solutions

Distributed generation and hybrid power solutions will have a solid chance to attract interest and investment.

Massive expansion of coal-fired power generation. Wind power will also present an attractive opportunity in India, driven by a new government commitment.

China has set aside a substantial amount of money for investment in smart grids and upgrading the country’s T&D infrastructure

Smart meter rollout in full swing. Lots of incentives and legislations promoting EV growth and its infrastructure development in terms of charging stations

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3 Big Predictions for 2012

2

Smart technology will have a profound impact on the energy &

environment sector with efficiency improvements at the centre of the

market evolution. Smart grids, buildings, homes, cities and water networks

will all become a reality this decade, thus creating far-reaching market

growth opportunities.

3

Distributed generation is poised to take off in Europe to a new level. There

is increasing focus on deployment of small scale renewable energy close

to the point of consumption. This will create opportunities for suppliers or

micro-generation technologies as well as requiring new strategies and

business models from power generation companies and utilities.

1

A new competitive order of the global energy & environment market will be

shaped by industrial convergence and value chain integration. This will

include the emergence of players from outside the traditional E&E space

as well as powerful systems integrators.


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Environment & Energy Group Oxford, UK

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