Utility companies face balancing act as they look to a world beyond recession says PricewaterhouseCoopers

LONDON, 7 MAY 2009—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 renewal of existing generation plant is a priority area for most companies. 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 the lack of clarity from governments on renewable energy targets and financial support. Following on from a period of record high power prices, only 28% of respondents believe that unsubsidised renewable power can compete commercially against fossil fuel generation.
  • Worries that climate change action could slip - utility companies in our survey emphasise the importance of greater clarity of climate change policy from governments but express concern that the economic recession is undermining the chances of an effective response to climate change. 79% felt the economic recession would slow down responses to climate change with two thirds of these saying it would have a high or very high slowdown impact.
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, combined heat and 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 and 83% of respondents from utility companies in Europe, for example, 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.

Manfred Wiegand, global utilities leader, PricewaterhouseCoopers commented:

“Technology will be key to competitive advantage in the coming decade. Despite the current downturn, companies seeking growth are setting their sights on a future low carbon but high energy demand world. This will require bold strategic and investment moves.

“Utility companies are understandably concerned about both the financial environment and governments’ commitment to future energy and climate change policy. The more constrained financial environment makes it even more important that governments 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.

“It is obvious that it is impossible to invest fast enough in alternative sources of energy to displace the significant contribution that hydrocarbons represent. The development of carbon capture and storage (CCS) in coal burning plant 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.”

As well as investment in CCS, the survey highlights some of the major moves that companies are making:
  • moving upstream to secure gas supply and invest in liquefied natural gas (LNG) 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.
Michael Hurley, Energy & Utilities Advisory leader at PwC sees a future where the roles and footprints of power utility companies change and commented:

“Traditional boundaries and spheres of operations are being superseded by new, more far-reaching power utility company roles and footprints. Already, utility companies are looking at the potential to develop networks of plug-in electric car recharging points and to harness the potential of overnight charging to make use of underused off-peak generation capacity.

“Carbon sequestration will require new alliances with utilities and oil companies in order to develop underground carbon storage. First mover or early mover advantage in developing commercial scale carbon capture technology at an acceptable cost will give crucial competitive advantage in the future.”

Notes to Editor
  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, from 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.
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