New business models are critical for a downstream sector supplying energy to a changing mobility market. In this article, Daniel Monzón, Rodolfo Guzman, Alfredo Verna and Micaela Carlino at Arthur D Little, consider the challenges and opportunities facing downstream players.
Electricity demand in Europe is down 5% on 2010 levels, with up to 8% declines in the major markets. U.S. power consumption is stagnant over the same period. Energy demand in developed markets is being driven down for many reasons, chiefly environmental, but the key fact is GDP growth in developed markets is no longer based in energy-intensive industries. Utility CEOs are therefore looking to grow their top line outside of the traditional asset base. In this article, Kirsty Ingham, David Borràs and Matthias von Bechtolsheim from Arthur D. Little, examine how utilities can achieve sustainable growth.
Many of the highest-cost and technically most complex oil and gas development projects, including remote and deep-water fields, are still deferred or cancelled as their economic outlook remains poor. This presents international oil companies with an increasing reserves-replacement challenge that the largest national oil companies do not face, or at least not in the same way. In this article, Stephen Rogers and Ondrej Sanislo from Arthur D. Little, explain why low prices may drive persuasive structural changes in upstream oil and gas.
The meltdown at Fukushima in 2011 has not deterred all nations from building new nuclear plant. According to the World Nuclear Association 31 countries around the world still have plans for new reactors – 65 (representing nearly 70 GWe) are under construction, 173 (182.42 GW) are on order or planned and 337 (379.2 GW) are proposed. In this article, Michael Kruse of Arthur D. Little is quoted as saying: “Since market prices and LCOE are very close, the risks of building a nuclear power plant that is not profitable is very high. Since the market prices are very uncertain at present, it is difficult to justify the investment without any kind of guarantees.” At Hinkley EDF is guaranteed an off-take price of £92.50/MWh for 35 years, giving EDF sufficient stability in its business case, yet it still hesitates in making its FID. “This,” said Kruse, “shows how difficult it is to enter into an investment, which will cover a lifetime of 60 to 80 years.”
With major construction and infrastructure development companies, including those in the renewable energy sector, increasingly expanding their footprints into countries far from their home markets, Stephen Watson and Javier Serra from Arthur D. Little give some essential advice for successfully managing third-party risk.
Matthias von Bechtolsheim, partner in Arthur D. Little’s energy and utilities practice, was interviewed about the French energy turnaround. The French government recently passed a law to increase the usage of renewable energies, and nuclear energy is planned to be reduced from 75% to 50%. von Bechtolsheim highlights that Germany’s measures, taken in 2011, could be a role model for other countries in Europe.
However, the French actions go far beyond the German plans in some areas. France will expand the usage of electronic cars significantly. To support that process, the government has implemented monetary incentives to raise demand, and is planning to invest in development of an infrastructure. von Bechtolsheim points out that the French plans may be a first step towards a European energy union, which is a long-term goal for Europe. Nevertheless, there is still a long way to go to realize a union. Among the obstacles are the heterogeneous market concepts within the different countries and the legal requirements for energy efficiency.
This article about the potential of the Gulf region to adopt solar energy is based on Arthur D. Little’s report, “GCC Solar Energy: Turning Plans into Reality.” The region has the means, particularly all-day sunshine, to harness solar energy, but it has a long way to go, according to the article. Countries across the Gulf region, particularly Saudi Arabia, have announced big plans to tap solar energy, but few of these plans have come to fruition. The report authors say the region needs government backing, clear roles between players, well-defined policy initiatives, and strong R&D efforts to move the plans into reality.
Arthur D. Little partner Matthias von Bechtolsheim is quoted in this article about the German government’s plans to abandon a levy on coal-fired power plants but reduce brown-coal power production. von Bechtolsheim says that power stations are important for ensuring power supply in winter, and that some plants may have been closed up for good with Germany’s movement toward increased renewable energy. According to the article, many experts, such as those at ADL, believe that levying coal plants may push energy production into other European countries.
The German “Energiewende” is a signature project of the German federal government. It includes not only the reduction of CO2 emissions, but also a nuclear phase-out. Furthermore, Germany will no longer rely on coal-fired power. Heating, electric power and mobility are the three backbones of the Energiewende. Matthias von Bechtolsheim, Partner at Arthur D. Little’s Energy & Utilities Practice in Frankfurt, gave insight into the future of the German energy market regarding the challenges of the Energiewende. He also classifies the EU CO2 policy and the German dependency on Russian natural gas as prevailing future market trends. Bechtolsheim points out that the success of the Energiewende project relies on the right political measures and incentives.
This online feature article is adapted from Arthur D. Little’s recent Viewpoint on reviving momentum that the Gulf Cooperation Council (GCC) has lost in past years for developing solar energy technology in the region. The GCC has one of the highest rates of insolation, and therefore huge potential to benefit from solar energy as its primary energy source. Almost all of the countries in the GCC have declared plans for significant solar energy initiatives – particularly Saudi Arabia, with its goals of implementing 41GW of solar energy over the long term.
However, the high ambition across the region appears to have lapsed since the various announcements in recent years. The article talks about key areas affecting the progress, including policy support, implementation vehicles, industrial strategy and participation of the private sector in the initiatives, as well as R&D, human capital development and investment funding.