Worldwide, and particularly in the United States, utilities have latched onto the sustainability agenda and have begun at full throttle on a trio of top priorities: renewables, nuclear power and energy efficiency, according to the annual survey of utility executives by PricewaterhouseCoopers (PwC).
PwC surveyed 119 senior power utility executives from 114 companies in 44 countries for its annual report, "Energy and Efficiency: the Changing Power Climate." For the first time in the nine-year history of the survey, sustainability is foremost in the minds of utility leaders, PwC noted. Companies worldwide expect renewable energy and the need to gain increased energy efficiency will head the list of major developments in their markets over the coming five-year period, with more emphasis on a range of "climate-change related" measures.
"Climate change appears to have cemented its place on the agenda of utility companies," the 76-page report found. "The sea change in utility industry outlook is strongly influenced by reactions to climate change and a watershed in the mood for action in the U.S. Out of the three major regions [the Americas, Asia and Europe], it is the responses from American companies that are strongest in their expectation that sustainability initiatives will feature prominently in the coming years."
Those surveyed expect wind and nuclear power to take an "increasing" share of their market's energy consumption in the next five years. In 2006, only 17% were expecting wind power to take an increasing share of the market; only 19% expected it to be nuclear power. "In the space of just 12 months, they were being mentioned by 48% and 45%," PwC noted.
In the Americas (North and South), the energy supply predicted to account for an increasing share of the market's energy consumption over the next five years was led by coal, 72%, followed by piped natural gas, 53%; other renewables, 40%; liquefied natural gas, 33%; nuclear, 28%; wind, 28%; hydro, 23%; and oil, 23%.
Especially in the United States, technological advances are forecast to have a major impact on energy efficiency. The focus of utility companies on efficiency jumped to 81% from 22% in 2006 among U.S. respondents, and to 43% from 33% for European respondents.
Asked what areas of generation and supply were expected to be impacted over the next 10 years by technological developments, the Americas' respondents put energy savings and efficiency on top at 81%, followed by wind power, 70%; coal-fired, 67%; natural gas-fired, 63%; nuclear power, 51%; combustible renewable, 49%; combined heat and power, 47%; and distributed generation, 44%. Others making the list included geothermal, 37%; solar power, 35%; hydro power, 35%; waste incineration and landfill gas, 28%; and oil-fired plants, 23%.
Nearly half (48%) of all of those responding worldwide said regulatory moves to unbundle transport and transmission distribution from vertically integrated businesses "will have a strong or very strong" impact on their power and natural gas markets in the period ahead.
"Indeed, 32% of respondents say they will reposition their company in the value chain in the next five years. A similar proportion...say that they also intend to reposition by country. In the Americas there is a net exit from generation. In Europe, by contrast, there is an expected net increase in generation arising from repositioning."
Another concern for all of the utility executives surveyed is energy security. Seventy-one percent of the respondents expect to have to deal with conditions that are "significantly" or "immensely" challenging in the next five years. Anxiety is not confined to developing markets: 62% of the North American respondents considered this a significant challenge.
And human resources shortages have become a "deal driver," according to PwC. Skills and knowledge shortages are an "increasingly" important factor in mergers and acquisitions (M&A) -- they were mentioned by just a third of respondents as a deal driver in 2006, but this year it was up to around 50%.
"Shortages of knowledge and skills are becoming a crunch issue for utility companies worldwide," the survey noted. "Investment in infrastructure, new generation and technology is driving up the demand for expertise. However, this is against a background of an aging workforce and, in some countries, fewer graduates studying relevant engineering subjects.
"The effect on M&A is reported especially by companies in the Americas where its impact has doubled -- from 26% in 2006 to 54% in 2007."
U.S. respondents were asked to rank the industry changes they anticipate in the next five years. Open access through regional transmission organizations (RTO) and independent system operators (ISO) and more regulation were cited as the biggest areas where change will occur. "Not far behind was the belief that more pure-play generation-only companies would result."
For copies of the report, visit www.pwc.com/energy.
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