global power & energy outlook – key trends & investment opportunities to 2020

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Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020 Jonathan Robinson, Senior Consultant Harald Thaler, Director Harald Thaler, Director Energy & Power April 7, 2011

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Page 1: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Jonathan Robinson, Senior Consultant

Harald Thaler, DirectorHarald Thaler, Director

Energy & Power

April 7, 2011

Page 2: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Functional Expertise

• Over a decade of research and analysis expertise in the energy & power industry, including

- Strategic market analysis with a strong analytical background

- Lead analyst and advisor in numerous consulting assignments for the global energy industry

- Managing research agenda for power generation research

Industry Expertise

� Proven track record across a broad range of power and energy sectors, with particular strengths in:

- Fossil-fired power generation (coal, gas, oil)

- Power plant maintenance and repair services

- Electricity demand and power generation capacity forecasts

What I bring to the Team

Harald Thaler

2

• Vast industry knowledge of the global power generation industry and its challenges and opportunities

• Global outlook and understanding of different business cultures, having lived and worked in several countries of Europe and Asia

• Fluent in German and Italian, working knowledge of Spanish, French and Thai.

• Extensive network of connections accumulated over the past decade

Career Highlights

• Established long-term relationships with global industry players including Alstom, Ansaldo Energia , Siemens and Wood Group

• Prior to joining Frost & Sullivan, worked as a freelance energy writer for publications such as Petroleum Economist, Reuters Business Insight and FT Energy

• Energy markets analyst for Datamonitor Plc - produced numerous studies covering the power, gas and oil markets of Europe, Latin America and Asia

Education

• M.Sc. (Econ.) European Studies – London School of Economics and Political Science (LSE)

• B.A. History and Politics – University of Kent at Canterbury (UK)

Harald ThalerIndustry Director

Energy & Power

Frost & SullivanEuropeLondon, UK

Page 3: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Functional Expertise

• 5 years of research & consulting experience, involvement in more than 40 projects. Particular expertise in:

• Opportunity Assessment

• Procurement Strategy

• Supply Chain Management Strategy

• Due Diligence for IPO/M&A activity

Industry Expertise

• Experience base covering broad range of energy sectors, leveraging long-standing working relationships with

leading industry participants:

• Renewables sector (wind, solar, tidal, hydro)

• Conventional thermal energy (coal, gas)

Jonathan Robinson

3

Jonathan RobinsonSenior Consultant

Energy, Environment Practice & Building Technologies Practice

London (UK)

• Nuclear

• Oil & Gas

• Future energy (fuel cells, energy storage, smart energy)

What I bring to the Team

• Extensive track-record of energy focused research and consulting projects

• Knowledge of, and relationships with, key stakeholders in the energy sector

• Strong analytical skills

Career Highlights

• Before Frost & Sullivan, worked for a political consultancy in London and for the NSW State Government in

Australia.

Education and Nationality

• MBus, University of Sydney; BSc Politics & Law, University of Southampton, UK National.

Page 4: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Electricity Growth Trends

44

Page 5: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

44%

63%

93%

76%

61%

33%

71%77%

84%

57%63%

50%

60%

70%

80%

90%

100%

Carbon-Free Fossil

52%

67%

97%

81%

65%

32%

80% 82% 84%

66% 67%

50%

60%

70%

80%

90%

100%

Carbon-Free Fossil

Share of Fossil–Based Electricity Generation by Region, 2010

Share of Fossil–Based Electricity Generation by Region, 2020

World Power GenerationFossil Fuel Dominance to 2020 and Beyond

5

0%

10%

20%

30%

40%

0%

10%

20%

30%

40%

Source : International Energy Agency, Frost & Sullivan

*Carbon-Free includes nuclear and all renewable energy sources.

Source : International Energy Agency, Frost & Sullivan

*Carbon-Free includes nuclear and all renewable energy sources.

Page 6: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Coal

Oil

Gas

Nuclear

Hydro

Wind

Other renewables

2010-20 2020-30

World Power GenerationGrowth Trends by Power Generation Technology

Electricity Generation Average Annual Growth Rates by Technology, 2010-2030

6

-6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14%

Other renewables

Total

� Overall growth of 2.7% and 1.8% CAGR over next decades

� Gas, nuclear and hydro expanding at similar rates through 2020

� High coal growth in this decade but then declining

� Wind growth tailing off post-2020 but other renewables maintain momentum

Source: Frost & Sullivan

Page 7: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

World Power GenerationGrowth in Electricity Generation by Region

Regional Share Trends in Electricity Generation, 2010, 2020, 2030

EU15.8%

Russia5.0%

Middle East4.0%

Africa3.0%

North America25.0%

Latin America5.3%

China19.2%

India4.4%

ASEAN3.1%

OECD Apac8.8%

Other6.3%

2010

� Traditional developed regions losing ground to

emerging markets

� Rapid urbanisation and creation of middle class

� India and China driving growth but developed

regions declining

� Fastest growth in India, ASEAN and China

� China expansion much more limited post-2020

� Anaemic increases in developed countries

7

Source : Frost & Sullivan, International Energy Agency

5.3%

EU13.1%

Russia4.4% Middle East

4.1%Africa3.2%

North America21.1%

Latin America5.2%China

25.4%

India6.0%

ASEAN3.6%

OECD Apac7.7%

Other6.1%

EU11.7%

Russia4.1% Middle East

4.6% Africa3.3%

North America19.1%

Latin America5.1%

China26.8%

India7.7%

ASEAN4.7%

OECD Apac6.7%

Other6.1%

2020 2030

� Anaemic increases in developed countries

Page 8: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Share of Fossil–Based Electricity Generation by Region, 2010

Share of Fossil–Based Electricity Generation by Region, 2020

46%

61%

91%

70%

60%

27%

62%67%

77%

58% 58%

60%

70%

80%

90%

100%

Carbon-Free Fossil

52%

67%

81%

65%

32%

80% 82% 84%

66% 67%

60%

70%

80%

90%

100%

Carbon-Free Fossil

World Power GenerationFossil Fuel Dominance to 2020 and Beyond

8

Source : International Energy Agency, Frost & Sullivan

*Carbon-Free includes nuclear and all renewable energy sources.

91%

0%

10%

20%

30%

40%

50%97%

81% 80% 82% 84%

0%

10%

20%

30%

40%

50%

Source : International Energy Agency, Frost & Sullivan

*Carbon-Free includes nuclear and all renewable energy sources.

Page 9: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

50

100

150

200

250

300

350

2010-20 2020-30

Net Gas-Fired Capacity Changes in GW, 2010-2030 Net Coal-Fired Capacity Changes in GW, 2010-2030

World Power GenerationGas and Coal Regional Capacity Growth

10

20

30

40

50

60

70

802010-20 2020-30

9

-100

-50

0

Source: Frost & Sullivan

0

10

� Gas capacity growing in most regions of the world but major growth in coal capacity limited to China as well as Indiaand ASEAN

� Gas: growth declining dramatically in Middle East but accelerating in North America, China, India and ASEAN

� Gas driven by replacement need of ageing coal capacities in mature economies, diversification away from coal inemerging regions

� Also need for a more flexible generation system

Page 10: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Top 10 Trends for the Decade

1010

Page 11: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Power Demand Growth

Power Demand Growth

2010 20202015

Key Impact/Opportunities

1) Europe and North America - retrofit/refurbishment –

limited capacity expansion

2) China and India key markets (over 400 million people

Growth in GlobalElectricity Demand, 2010-2030

Low demand in West offset by boom in Middle East

Big expansion of electric/hybrid vehicles

Global electrification reaches 80%

Non-OECD countries Surpass OECD China becomes

largest consumer

30000

35000

11

2) China and India key markets (over 400 million people

in India without electricity) – but limited direct

opportunities for Western manufacturers - JV,

licencing key ways of market exposure

3) Low growth in Europe and North America – approx.

1%. Industrial demand forecast to be stake – energy

intensive industries heading to China

4) Gradual adoption of electrical vehicles – developed

economies first, developing economies soon after

Source: International Energy Agency, Frost & Sullivan

0

5000

10000

15000

20000

25000

2010 2015 2020 2025 2030

Ele

ctr

icit

y G

en

era

tio

n (T

Wh

)

Page 12: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Power Plant Decommissioning

Power Plant Decommissioning

2010 20202015

Key Impact/Opportunities

1) Obvious point decommissioning = need for

replacement plants

- Europe – gas likely to play a key role

Likely DecommissioningIn Selected Regions, 2010 - 2020

First of substantial wave of gas-fired plant closures

Closure of substantial coal-fired capacity in Europe to comply with the

Large Combustion Plant Directive

Gradual closure of nuclear-firedpower stations in Europe

and North America

80

90

Cap

acit

y D

eco

mm

issio

ned

(G

W)

12

- Europe – gas likely to play a key role

- Baseload power needed

- Middle East – gas

- Africa – mixture

2) Potential revenues from remediation work to restore

sites/prepare sites for new development

- Nuclear €300 million per reactor

- Opps for specialist waste companies/EPC players

that could expandSource: Frost & Sullivan

0

10

20

30

40

50

60

70

Europe Eastern

Europe &

Russia

Middle

East

Africa

Cap

acit

y D

eco

mm

issio

ned

(G

W)

Page 13: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Nuclear Power

Nuclear Power

2010 20202015

Key Impact/Opportunities

1) Focus on safety

2) Life extensions

Number of Reactors Planned and Under Construction

Fukushima Accident

Start of UK nuclear build

2nd Wave of Gen III+ construction

442 reactors in operation480+ reactors

operational

Global Safety Reviews

65 reactors under construction

Finalised construction of ITER

13

2) Life extensions

- up to 20 years = (€500

million)

- new plant = €5 - €6 billion

3) New equipment orders =

approximately 60 pressure

vessels ordered in the next five

years, despite Fukushima

Source: PRIS, Frost & Sullivan

Page 14: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

New Age for Natural Gas

2010 20202015

Key Impact/Opportunities

1) The growth in unconventional gas - has put a lid on

global gas prices - creates opportunities for equipment

suppliers, exploration companies, pipeline companies,

project developers etc

CCGT favourite generation technology

Shale gas boom in USA

Growth in global pipeline network

Massive boost in LNG availability

Gas demand peaks in OECD but keeps growing elsewhere

Global LNG CapacityExpansion 2008 - 2013

New Age for Natural Gas

14

2) Continuing growth in gas pipeline network – big

projects in Europe – opportunities for raw materials

suppliers (eg pipes) and OEMs (eg turbines,

compressors)

3) Growth in LNG capacity - Qatar completed massive

investments and further growth from Australia - more

opportunities for equipment suppliers and developers

4) Low gas prices boost investments in gas-fired capacity

– Middle East key but other markets growing in

importance - also boost for cogeneration and onsite

powerSource: OECD

Page 15: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Clean Coal Commercial-

isation

2010 20202015

Cost Component Percentages of a CoalPlant with CCS

Transport,

Storage,

9%

90%

100%

Commercial CCS viability established and large-scale development commences

Ultra supercritical technologybecomes prevalent globally

Carbon Capture and Storage Pilot Plants

Clean Coal Commercialisation

Key Impact/Opportunities

1) Ultrasupercritical installations replace existing sub-

critical plants

2) Refurbishment and upgrading – creating opportunities

15

Source: Frost & Sullivan

Power

Plant,

70%

Capture,

18%

Transport,

3%

40%

50%

60%

70%

80%

90%

Power Plant with CCS

2) Refurbishment and upgrading – creating opportunities

for suppliers of boiler-related equipment such as

economiser, reheaters and superheaters

3) Commercial viability of capture unproven but

opportunities in demonstration projects

4) Transportation – further opportunities for pipeline-

related companies

5) Storage – mainly in depleted oil and gas fields and salt

aquifers

6) Commercial operations only post-2020

Page 16: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Market Liberalisation

2010 20202015

European Priority Corridors forElectricity and Gas

Focus on emerging markets retail liberalisation

Growing trans-regional power trading

Most power generation markets fully liberalised

Towards a global emissions trading system

Key Impact/Opportunities

1) Liberalised markets demand flexible generating assets

– boosts gas turbines and services market

Market Liberalisation

16

Source: EC DG Energy

– boosts gas turbines and services market

2) Market liberalisation creates more diverse fuel mix

3) More regional power exchanges, greater trans-

regional interconnections

4) Promotes more efficient operation of emissions trading

schemes

Page 17: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Smart Energy

Smart Energy

2010 20202015

Key Impact/Opportunities

1) Re-invigorated T&D

- Substantial upgrades for existing infrastructure

- PMUs, sensors, cables

- Enabling utilities to carry out preventive maintenance

Global Smart Grid RevenueForecasts, 2009-2017

Smart meters taking off in US and Europe

Smart meters reach most consumers in

developed world

Direct load control of smart appliances via remote management

Peak shaving through energy efficiency and promotion of

embedded generation

50,000

60,000

Reven

ues (

$ M

illi

on

)

17

- Enabling utilities to carry out preventive maintenance

2) ICT opportunities

- Substation automation – SCADA to IP based systems

using switches and IEDs.

- Volume of data transmitted and stored – huge opps for

the traditional ICT players. Datacentre growth through

need for storage.

3) Opportunities in the home

- Creation of Home Area Networks (HANs), remote utility

monitoring or customers given power though remote

access - smart phones?

- Need for appliances that are HAN readySource: Frost & Sullivan

0

10,000

20,000

30,000

40,000

2009 2010 2011 2012 2013 2014 2015 2016 2017

Reven

ues (

$ M

illi

on

)

Page 18: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Energy Efficiency

Energy Efficiency

2010 20202015

Key Impact/Opportunities

1) Green buildings = reduction of emissions + efficient

utilisation of resources.

- opps for range of renewables/building technologies -

mix of generation, but also monitoring

Conceptual Drawing of a Green Building

Global coverage for energy-efficient lighting

Green buildings become norm in developed world

Grid investments lay foundations for supergrids and reduce T&D losses

Global penetration of micro-renewables and micro-CHP

18

mix of generation, but also monitoring

- can be applied to existing housing stock as well to

some new buildings

2) Large-scale deployment of compact fluorescent lights

(CFLs) can help reduce peak electricity demand –

efficiency 4 or 5 times above incandescent bulbs. Further

improvements with OLED lighting

3) Increased investment in grid infrastructure will increase

efficiency + will enable growth in DG micro generation –

lower T&D losses + greater efficiencies through CHP

growthSource: Frost & Sullivan

Page 19: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Energy Storage

Energy Storage

2010 20202015

Key Impact/Opportunities

1) Advances in technology means that returns are

becoming more attractive

- Renewable off-peak being sold on-peak, asset

utilisation, cost savings

Forecast Growth of the EnergyStorage Market 2009 2016

Grid-scale energy storage such as pumped storage and CAES takes offImproved existing battery technologies emerge

such as Li-ion, Nickel-Zinc, and Molten Salt

Energy storage market reaches $50 billion

19

utilisation, cost savings

- Utility scale storage inevitable

2) New entrants to the market, businesses looking for the

best storage locations, potential for storage rental as

opposed to ownership – important to get in early to

secure best opps

3) Alternative vehicle growth means boom for lithium-ion

batteries

4) Rethink in strategies will lead to consolidation,

alliances, pricing pressures – fast changing market

Revenues

Page 20: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

35%

40%

45%2010-20 2020-30

Continued Investment in Renewables

Continued Investment in Renewables

2010 20202015

Key Impact/Opportunities

1) Massive potential in a number of geographies

- Concentrated solar highest growth, but wind most

important in MW capacity

Growth in Wind and Other Renewables –2010, 2020, 2030

Renewables achieve grid parity in some European markets

European countries encourage investment

to reach 2020 EU targets

Strong renewable growth in developed economies,

backed by subsidies and regulation

Private equity investors re-focus back on

renewable projects

Commercialisation of Energy Storage

technologies drives growth

20

0%

5%

10%

15%

20%

25%

30%

Hyd

ro

Win

d

Bio

mas

s & W

aste

Geo

ther

mal

Sol

ar P

V

CS

P

Mar

ine

important in MW capacity

- Feed in tariffs/clear regulation vital

- Consistency very import – investors need

confidence that an investment can pay off

2) Renewables a key factor driving T&D investment to

connect new capacity to where it is needed.

- Creation of supergrid in Northern Europe, others

planned in North America and China

Source: IEA, Frost & Sullivan

Page 21: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

Next Steps

� Request a proposal for Growth Partnership Services or Growth Consulting Services to support you and your team to accelerate the growth of your company. ([email protected])

� Join us at our annual Growth, Innovation, and Leadership 2011: A Frost & Sullivan Global Congress on Corporate Growth occurring in London on 17 – 18 May 2011. (www.gil-global.com)

21

� Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news)

Page 22: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

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Page 23: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

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Page 24: Global Power & Energy Outlook – Key Trends & Investment Opportunities to 2020

For Additional Information

Chiara Carella

Corporate Communications Director

Europe

+44 (0) 207 343 8314

[email protected]

Juliet Shaw

Sales Director

+44 (0) 207 343 8363

[email protected]

24

Harald Thaler

Director

Energy & Power

+44 (0)20 7343 8325

[email protected]

Jonathan Robinson

Senior Consultant

+44 (0) 207 343 8314

[email protected]