Power utility companies face balancing act as they look to a world beyond recession, says PwC report
|
PricewaterhouseCoopers’ 2009 Utilities Global Survey, A World Beyond Recession, highlights the dilemmas of steering through the downturn while remaining focused on the long-term. |
Release
Bangalore – Power utility companies face a difficult challenge as they balance the constraints of the downturn with the investment required to meet future energy demand, security of supply, and climate change concerns. PricewaterhouseCoopers’ 2009 Utilities Global Survey, A World Beyond Recession, highlights the dilemmas of steering through the downturn while remaining focused on the long-term. The annual survey goes to the heart of boardroom thinking of 65 leading power companies in 39 different countries around the world. The survey reveals:
– Infrastructure investment needs remain high: The development of new generation capacity and the refurbishment of existing generation plants is a priority area for most companies. A total of 83% of survey respondents say their companies are seeking to make medium to large investment in new generation and 79% are seeking to do likewise in transmission.
– Worries about capital shortages are widespread: There is considerable doubt on whether investment will come forward in a timely manner to keep pace with future demand for power and climate change targets. Two thirds (67%) of survey respondents report that a shortage of capital is having a high or very high impact on their activities. Two thirds cite problems in securing finance as a medium or high barrier to project development.
– Economic incentives needed to boost renewables in the mix: Nearly 60% of respondents feel that their renewable energy investment programmes are being affected by uncertainty on renewable energy targets and financial support. Even with higher tariffs, only 28% of respondents believe that unsubsidised renewable power can compete commercially against fossil fuel generation.
– Technology innovation is the key: The survey highlights the extent to which the industry sees technological innovation as key to the future. In the coming decade, technological innovation is seen has having most new impact on energy efficiency, solar power, distributed generation and combustible renewable generation. Carbon capture and storage will be essential for the sector’s long-term contribution to the mitigation of climate change. In fact, most power utilities in Europe report that their companies are evaluating CCS projects.
Indeed, such is the current and future importance of technology, that power utility companies in the survey point to equipment and technology companies as a more significant competitive threat than even direct competition in the retail market by other utility company home market rivals.
Kameswara Rao, India Leader for Energy, Utilities & Mining, PricewaterhouseCoopers commented:
“Technology will be key to competitive advantage in the coming decade. Notwithstanding the current downturn, power companies seeking growth are setting their sights on a future world of high demand but low carbon. This will require bold changes in strategy and investment in new technology and capital assets.
“Power utility companies are understandably concerned about both the financial environment and the governments’ commitment to future energy security and climate change policy. A tighter financial environment makes it more important for governments to reach an effective agreement at the December 2009 UN Climate Summit in Copenhagen to set a clear and certain framework for the development of cleaner power.
“Realistically, as it is hard to displace the large investments in fossil fuel generation, we need to explore alternate means, and development of carbon capture and storage (CCS) in coal burning plants will perhaps be the most critical single development in the power sector in the coming decade. Like renewables, that will require very strong economic incentives and price signals.”
Further, the survey highlights some of the major moves that companies are making:
• Moving upstream to secure coal and gas supplies and supply chains
• Horizontal expansion to increase presence in the renewable energy or nuclear power field
• Developing new technological capabilities to exploit new sources of power generation
• Exploring a more flexible mix of distributed energy supply and smart grid capabilities
Kameswara Rao added:
“The traditional role and sphere of operations of power utility companies will be superseded by new, more far-reaching footprints. Already, power utility companies are looking to develop networks of plug-in electric car recharging points which will harness the potential of overnight charging to make use of under-used off-peak generation capacity. Likewise, utilities are investing in smart metering technologies, and harnessing the Internet to understand and manage load better.
“Carbon sequestration will require new alliances with utilities and oil companies in order to develop underground carbon storage. The early mover advantage in developing commercial scale carbon capture technology at an acceptable cost will give crucial competitive advantage for the country in the future.”
1. ‘A World Beyond Recession, Utilities Global Survey 2009’ is a major survey of boardroom opinion inside utility companies conducted annually by PricewaterhouseCoopers.
2. It includes data from 69 senior executives of 65 utility and utility investor companies across 39 countries. Research covers Europe, the Americas, Asia-Pacific, Africa and the Middle East. The majority of utility participants were senior vice presidents and presidents, CEOs and other senior managers.
3. The report includes a series of regional reports covering the Americas, Europe, Asia Pacific and the Middle East and Africa; individual country and regional surveys covering the US, Canada, South America and Australia. It also includes viewpoints from leading utility company CEOs.
4. The PricewaterhouseCoopers Global Energy, Utilities and Mining Group is the professional services leader in the international energy, utilities and mining community, advising clients through a global network of fully dedicated industry specialists.
# # #
About PricewaterhouseCoopers
PricewaterhouseCoopers Pvt. Ltd. (www.pwc.com/India) provides industry – focused tax and advisory services to build public trust and enhance value for its clients and their stakeholders. PwC professionals work collaboratively using connected thinking to develop fresh perspectives and practical advice. Complementing our depth of industry expertise and breadth of skills is our sound knowledge of the local business environment in India. PricewaterhouseCoopers is committed to working with our clients to deliver the solutions that help them take on the challenges of the ever-changing business environment.
PwC has offices in Ahmedabad, Bangalore, Bhubaneshwar, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, New Delhi and Pune.