1
John WestwoodThom Payne London Business School Energy Club 8 Feb 2010
Established 1990About us
Established 1990Aberdeen, Canterbury & New York
Activities & service lines• Market research & analysis• Commercial due-diligence• Business strategy & advisory• Business strategy & advisory • Published market studies
Industry sector coverage
offshore power
Industry sector coverage• Oil & Gas • Power• Renewable Energy
400 clients in 60 countries • >600 projects completed for:
LNGonshore LNG
• >600 projects completed for: • government agencies• energy majors and their suppliers
22
• investment banks & PE firms• the leading independent provider of
commercial DD to OFS investorsdownstream renewables
Published reports include………
3
Brazil – ‘huge blackout. Half the country left without electricity’ g y y
South Africa – ‘fear of return of power cuts’
UK ‘ k d d ld d it b 2017’UK – ‘peak demand could exceed capacity by 2017’
Australia – ‘Victoria electricity demand neared a record peak’
China – ‘cold weather electricity rationing continues’
UK ‘gas supplies for businesses turned off’UK – gas supplies for businesses turned off
Venezuela – ‘key industries halted by hydroelectric crisis’
Press reports since November 2009
44
Energy Market DriversEnergy Market Drivers
Sustainable EnergySustainable Energy
UK Power GenerationUK Power Generation
5The FutureThe Future
Energy sources & issues
Hydro 2%E i t l
CRW 10%Combustible renewables & waste
Important in some countries Environmental concerns over large dams
pGrowth potential
Coal 27%Abundant supplies
Highly pollutingCCS i
Nuclear 6%NIMBY concerns
Long plant build time
Oil 34%
CCS very expensive5x gas powergen Capex
Oil 34%Preferred transportation fuel
Supply concernsEmissions concerns
Gas 21%Abundant – but local shortages
Expensive to transport Emissions concerns‘Off-the-shelf’ powergen plant
Emits half CO2 of coal
6
World Energy ConsumptionSource: Douglas-Westwood /IEA 2009
Energy – two linked concerns; one driver
Population growth
7Energy supplies Global warming
Energy demand outpaces population growth193%
sources: DWL,UN, BP
55%
95%
oil demand growth
population growth
energy demand growth
Global Growth 1965-2008
Consider oil, the fuel of transportation:
• 1 billion cars worldwide. Production capacity 86 million p.a. (2008)• Electric cars will help efficiency (eventually)• But how long to change the world car fleet (>20 years?)• Meantime China and India’s growing populations will ‘motorise’
8
• And cause a huge growth in oil demand and prices• Can the global economy handle this?
Energy demand and climate change
197.6
3 0US• Security of energy supplies is a
i di t bl th11.1
10
4.9
3.0
1.4Russia
more immediate problem than global warming (and some governments are now realising this!)
10
9.5
3.8
4.0
0.8
1 3
Germany
Japan
• The big political driver is climate change
8.93.5
1.3
0.6
p
UK
CO2 (t.p.a.)
energy (toe p.a.)• US consumes 5x more energy
per capita than China and 6
4.3
4.0
1 5
0.6France
China
population (hundred million)
p pproduces 4.4x CO2 per capita
• But China has 5x the population
1.1
1.5
0.4
13.3
11.5
China
India
But China has 5x the population
• What might happen as such developing economies grow?
9
developing economies grow? Douglas-Westwood analysis using multiple data sources
China’s oil demand could double in a decade
China doubles
‘Were China to follow Korea’s path of development as it
China doubles US in 2025
development - as it largely has to date – its oil demand would more than double in the next
China reaches US in 2018
decade. By 2030, Chinese consumption could exceed 50 mbpd’
source: Douglas-Westwood analysis using EIA, IMF, and US Census Bureau data
• China is the key driver of global oil demand growth
• China oil consumption up 4.9% year on year, 7.3% in December
10
p p y y ,
• Vehicles sold: China 13.6 m vs. US 10 m in 2009
China leads a return to growth
• Exports +17.7% YOY, (4.0% forecast)• Imports +55.9% (31% expected) p ( p )• Industrial output +25% YOY (Dec)• GDP growth in Q4 exceeded 11%• The world's biggest car market in 2009. 13.6 million
sold compared with 10 million in the US• Car sales forecast to rise 15% in 2010 • Imports from Asia soar. S Korea +94%, Taiwan +91%,
Malaysia +53% (Nov) • China to move from 5th to 2nd largest economy
overtaking JapanOil i t 14% i D b 4 9% YOY• Oil imports +14% in December, up 4.9% YOY
• DWL expect oil consumption to run1-2% ahead of GDP
• ‘Other Asia’ oil consumption +12% Dec• Other Asia oil consumption +12% Dec. • And ‘Other Asia’ has more consumption than China
11
China invests in future energy supplies
Russia: $300 bn. 300kbd UK: windpower bid
Canada: $1.7bnOil sands
USA: $2.2 bnWindpower
Venezuela: $8 bn Nigeria: 1/6th O&G reserves
Brazil: $10 bn. 160kbd
Australia: $5 2 bn CoalAustralia: 20 year LNG
Australia: $5.2 bn Coal
January 2010:S Korea to buy
12Data: Major investments in 2009. Douglas-Westwood
10 oil companies ‘energy security a priority’
They got it wrong before – will they again?
13March 1999 April 2009
Europe – oil production in decline, gas to follow
6.06.57.0 Offshore Oil
Southern EuropeOther NW Europe 275
300Offshore gas
Southern EuropeOther NW Europe
Source: Energyfiles
3 54.04.55.05.5
s oi
l per
day
Other NW EuropeNorwayUnited Kingdom
175200225250
ar
Other NW EuropeNorwayUnited Kingdom
1 52.02.53.03.5
lions
of b
bls
75100125150
Bcm
per
yea
0.00.51.01.5
1985 1990 1995 2000 2005 2010 2015 2020 2025
Mil
0255075
1985 1990 1995 2000 2005 2010 2015 2020 2025
UK UK
1985 1990 1995 2000 2005 2010 2015 2020 2025 1985 1990 1995 2000 2005 2010 2015 2020 2025
• Offshore Europe has lost 50% of its oil production in a decade• Massive dependency on Norwegian gas
14
Global oil supplies cannot continue to grow
120<200252
countries past
by 200866
countries past
Source: Energyfiles
80
100er
day
BIOFUELS
CTL
GTL
peak peak
60
on b
arre
ls p
e
OIL SHALES
OIL SANDS
20
40milli
o
REFINERY GAIN
OFFSHORE DEEP
OFFSHORE SHALLOW
01995 1999 2003 2007 2011 2015 2019 2023
OFFSHORE SHALLOW
ONSHORE
• Global fields reserves declining at 6.7% p.a. (2007 estimate was 3.7%!) IEA
• Global peak revised down by 4 Mbpd to 89 Mbpd Total CEO 16 Feb ‘09
15
Global peak revised down by 4 Mbpd to 89 Mbpd Total CEO,16 Feb 09
• Need to find and get into production one NEW Saudi Arabia every THREE years!
The Movement Offshore – OilGrowing Importance of Offshore Production
100
120
y
Of fshore DeepOffshoreOnshore (inc. Unconventional Reserves)
60
80f o
il pe
r day
20
40
on b
arre
ls o
f
01950 1965 1980 1995 2010 2025
mill
io
Global Oil Production 1950-2025
• Offshore oil currently accounts for 33% of global output:• 35% by 202035% by 2020.• Deepwater share of offshore production to grow rapidly over the next decade.• Deepwater – 3% of production in 2002, 6% in 2007, 10% by 2012.
16
• After 2012, deepwater is the only sector to continue to grow.
Cyclical & cynical: a brief history of the offshore market
$12025
$60
$80
$100
15
20
l ($2
008)
ber o
f Rig
s
$0
$20
$40
0
5
10
$/bb
Num
b
• The offshore market has seen a number of activity cycles since 1969
$001969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
Semi-Submersible Drilling Rig DeliveriesSource: Riglogix
• The offshore market has seen a number of activity cycles since 1969.• Oil price volatility has been a major driver for this behaviour.
• The 2005-2008 cycle was also particularly driven by the move to deepwater (W Af i B il & G M)(W.Africa, Brazil & GoM)
• The 2009 recession will not be the end of the offshore oil & gas market. But reserves are getting harder to find and more challenging to produce.
17
• What will be the key themes for the Offshore market?
NOCs rule – OK?
Source: Barclays: Outlook 1 Feb 2010Source: Barclays: Outlook 1 Feb 2010
• NOCs to control 55% of 2010 non-US spend• And 80% of the world’s remaining reserves• And 80% of the world s remaining reserves• Note PetroChina market cap now larger than Exxon!• Gazprom boe reserves equals the rest of the top-10 players by mar cap
18
p q p p y y p• So what is the long-term role of the major international oil companies?
Have 8 out of 10 oil majors have passed peak production?
2002 2003 2004 2005 2006 2007 2008ExxonMobil 2496 2516 2571 2523 2681 2616 2404BP 2018 2121 2531 2562 2475 2414 2410PetroChina 2109 2119 2233 2270 2276 2312 2379Shell 2359 2379 2253 2093 2030 1899 1771Petrobras 1533 1701 1661 1847 1908 1920 1996Petrobras 1533 1701 1661 1847 1908 1920 1996Chevron 1897 1823 1737 1701 1759 1783 1676Total 1589 1661 1695 1621 1506 1509 1456ConocoPhillips 891 1237 1242 1447 1698 1644 1367
Data: Petroleum Review May 2009 Peak Year
ENI 921 981 1034 1111 1079 1020 1026StatoilHydro 1112 1132 1135 1102 1058 1054 1056
Data: Petroleum Review, May 2009
• Peak oil is a reality, not just for the majority of the producing countries b t h f th j it f th t d
Peak Year
but perhaps for the majority of the top producers. • Offshore is one of the few remaining places where the oil majors can
increase production
19
Global offshore oil & gas production & spend to grow
350
400 AfricaAsiaAustralasiaE t E & FSU
Source: EnergyFiles
200
250
300
x ($
billi
ons)
Eastern Europe & FSULatin AmericaMiddle EastNorth AmericaWestern Europe
100
150
200
Cap
ex &
Ope
x0
50
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
C
• Global Capex falls in 09/10 but Opex sees long term growth
• Most regions to see overall growthMost regions to see overall growth
• But W Europe to decline
• Particularly UK needs incentives
20
• Particularly UK – needs incentives
• Norway has longer term prospects
But what about all the big new deepwater discoveries?
21• It can take 5-10 years to get a major deepwater field to full production
Deepwater Capex to reach new highs
$30
$35
)
AfricaAsiaAustralasia
$15
$20
$25
ure
($bi
llion
s) Latin AmericaOthersNorth AmericaWestern Europe
$5
$10
$15
Exp
endi
t
$02004 2005 2006 2007 2008 2009 2010 2011 2012 2013
• Deepwater production: to grow 99% (shallow water 20%)
• Future deepwater investment:$137 billi th t fi
22
$137 billion over the next five yearsSource: “The World Deepwater Market Report
2008-2013” Douglas-Westwood
‘Big oil’ to get best IRR in deepwater?
23
Floating production market has turned the corner
10
12
14 Africa AsiaAustralasia E. Europe & FSULatin America Middle EastNorth America Western EuropeOrder Year
6
8
10
$ bi
llion
0
2
4
2004 2005 2006 2007 2008 2009 2010 2011 2012 20132004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Global Floating Production Expenditure 2004-2013Source: Douglas-Westwood
• Material decrease in orders in 2009; but market has bottomed• Impact of project delays – $14 billion of projects slipped• Gl b l FPS k t t b th $50 billi 2009 2013 i d• Global FPS market to be worth $50 billion over 2009-2013 period• Increasing share of market to leased FPSOs. Consolidation likely• Market still well below pre recession levels
24
• Market still well below pre-recession levels• Long term >200 prospects exist and growth will recover
Subsea recovers from a tough 2009
3,000
3,500Aker SolutionsCameronDril-Quip
2,000
2,500
lue
$ m
illio
ns
Dril-Quip FMCGE Oil & Gas
500
1,000
1,500
Ord
er V
al
Subsea Production and Processing OrdersSo rce “S bsea Market Share Assessment December 2009” Do glas West ood
0
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09
• Subsea processing orders were hard hit in with the recessionPl bl t bl d t b kl
Source: “Subsea Market Share Assessment, December 2009” – Douglas-Westwood
• Players revenues reasonably stable due to backlog• Orders bottomed in Q4 2008• Trend suggests 2010 will recover to ‘normal’ levels
25
• Trend suggests 2010 will recover to normal levels• FMC is subsea market leader 2009 Q1-3 by order value
Offshore ops & maint spend to see good growth
$70
$80 AfricaAsia-PacificEastern Europe & FSULatin AmericaMiddle East
$40
$50
$60
$bill
ions
Middle EastNorth AmericaNorwayUKRest of Europe
$20
$30
$40
$0
$10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: “The World Offshore Operations & Maintenance Market Report 2010-14”Douglas-Westwood
7 000 fi d & 200 fl ti l tf• >7,000 fixed & >200 floating platforms • Spend to exceed $330 billion over the next five years
Plus demand for major modifications
26
• Plus demand for major modifications • Subsea IRM 10% CAGR as subsea installations increase
Natural gas production to soar
80
90
100
per d
ay Africa
AsiaAustralasiaEastern Europe & FSU
60
70
80
il equ
ival
ent p Eastern Europe & FSU
Latin AmericaMiddle EastNorth AmericaWestern Europe
30
40
50
n ba
rrel
s of
o
Middle East
0
10
20
mill
ion Middle East
• Natural gas production currently dominated by E Europe & Russia
Source: Energyfiles
1930 1937 1944 1951 1958 1965 1972 1979 1986 1993 2000 2007 2014 2021
Natural gas production currently dominated by E Europe & Russia• Middle East, Latin America, Africa & Asia to see significant growth• But local supply issues e.g. in Europe
27
• Deepwater gas and LNG to be of growing importance • And ‘unconventional gas’ – US shale gas, coal bed methane, etc
Continuing growth in global LNG capacity
300
350
400
pa)
AfricaAsia-PacificFSUMiddle EastSouth America
200
250
300
n C
apac
ity (m
mtp South America
North AmericaWestern Europe
50
100
150
Liqu
efac
tio
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
• Large expansions to Qatargas and Rasgas plants to come onstream in 2009/2010 Will add 46 8 million tpa of new capacity to the market2009/2010. Will add 46.8 million tpa of new capacity to the market
• 33 additional installations forecast, incuding19 new facilities
• 53 new LNG import terminals and a number of expansions to expected
28
p p pto be completed in the next five years
Escalating costs are a major concern for future developments
$120
190
200
Oil Price Actuals (Brent)
Offshore Cost Inflation Index(CERA)
$80
$100
160
170
180
blCos
t Ind
ex
Brent Oil Price
$
$40
$60
120
130
140
150
$/bb
Off
hsor
e C
Brent Oil Price (Actuals)
Brent Oil Price (Forecast)
$0
$20
100
110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
• Cost Inflation has tracked oil prices closely over the past 10 years.• Costs cooled somewhat in 2009 but remain high.
BUT Oil i th i• BUT… Oil prices are on the move again.• Another flurry of offshore activity may well trigger a similar cost inflation
scenario.
29
• Major challenge for the industry to manage costs in the supply chain over the next five years.
Oil & Gas –The Post-Recession World
• Technology-driven− IOC’s will be under increasing pressure for new discoveries and
expanded production mostly from deepwaterexpanded production – mostly from deepwater
• But recession has ended ‘price is no object’ environment− OECD countries are unlikely to sustain oil prices much above $80− Threat of recurring recession, sluggish growth, possibly stagflation− China and other emerging economies will tend to absorb incremental
oil productionp
• Cost will be an important driver− If we find the oil, can we afford to lift it?
• Oil supply will be insufficient to meet future needs− Natural gas has to take up some of the load
• Both innovation and cost will be critical drivers in the years aheadBoth innovation and cost will be critical drivers in the years ahead• Challenging times ahead, but the global economy will absorb all oil
volumes that can be produced at affordable prices
30
Energy Market DriversEnergy Market Drivers
Sustainable EnergySustainable Energy
UK Power GenerationUK Power Generation
31The FutureThe Future
Alternative energy – challenges & opportunities
onshore wind offshore wind biomass solar hydro wave tidal
• There is no ‘magic bullet’. None are ideal: many are very high cost &/or technically immature /&/or technically immature / impractical / location specific / unproven /conflicting interests, etc
nuclear CCS carbon cap & trade conservation
32
But…….they are a major part of the way ahead
Alternatives – the problem is cost
Other Conventional Oil
Middle East Oil
nven
tiona
l O
il
Tidal energy costs £0.15 kWh, wave energy £0.25,coal-fired electricity costs £0 05
Candadian Oil Sands (new dev.)
Venezuela's Orinoco Belt
Deepwateron
al O
ilC
on £0.05. The Carbon Trust Feb 2010
Oil Shale
Coal to Liquid
Candadian Oil Sands (new dev.)
Unc
onve
ntio
Brazilian Sugar Cane Ethanol
US Corn Ethanol
European Biodiesel
Bio
fuel
s
Traditional Coal
Coal with CCS
Brazilian Sugar Cane Ethanol
Coa
l
Onshore Wind
Offshore Wind
Nuclear
Ren
ew-
able
s
33Source: FT 12/08
0 20 40 60 80 100 120 140 160
Onshore WindR
$/bbl equivalent
Windpower: a $36 bn world market
US22%
UK3%
Denmark2%
Portugal2% ROW
14%22%
GermanyIndia7%
Italy3%
France3%
3% 2%
158GW16%
Spain12%
China16%
7%
Source: GWEC
Installed Global Windpower Capacity (end 2009)
• 2009: world installed capacity grows by 31%• China +100% to 25GW; US by 39% to 35GW• Europe +54% of which UK added1MW +36%
• Wind is a green solution and an important part of the energy mix
Europe +54% of which UK added1MW +36%
34
• But best locations are remote & major NIMBY issues in some countries• Offshore has major attractions: out of sight & a better wind regime
Offshore wind: 5.3 GW to come online 2009-13
Forecasts 2009-13• UK 2.3 GW• Germany 1.4 GW
1200
1400
MW
BelgiumChinaDenmarkGermany
• Denmark 0.9 GW• Belgium 0.4 GW• Others 0.3 GW
600
800
1000
talle
d C
apac
ity M Germany
NetherlandsSwedenUKOthers
200
400
Annu
al In
s
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Douglas-Westwood
• UK is the world’s leading market• Germany to follow
35
Germany to follow• China emerging (and exporting monopiles)
Tackling the installation problem
Source: Keppel FELSSource: Keppel FELS
• By applying offshore oil & gas techniques
36Source: RESTATS, July 2009
Offshore renewable energy – global Capex in context
1 2
200
180200
152
120140160
billio
n)Source: Douglas-Westwood
476080
100
Cape
x ($
2009
2012
0.2 20.6 5.20
2040
Marine Offshore All Wind Offshore
• Offshore renewables small but with strong growth
Marine Renewables
Offshore Wind
All Wind Offshore O&G
g g
• Wind power is EU supply chain dominated
• Marine renewables is new with great future potential
37
Marine renewables is new with great future potential
• But will UK invest or will see a repeat of the windpower situation
Coal Coal –– huge growth in world demand. Can CCS be financed?huge growth in world demand. Can CCS be financed?
3.0
Rest of ld
2.5
s)
world
China consumes
1.5
2.0
(billi
on t
onne
s China consumes 45% of world coal
1.0
Coa
l
0.5
Dirty coal UK 1952
0.0
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
3838
Dirty coal – UK 1952 Dirty coal – China 2009
• Carbon capture & storage has not yet been achieved on a large scale
Is nuclear the answer?
• >426 new reactors ‘planned or proposed’• >426 new reactors planned or proposed worldwide (125 in China) Source: World Nuclear Assn.
• 28 under construction in China• Nuclear suited to ‘centralised’ grids• ‘The cheapest large scale, low carbon
electricity source’ EDF
• Newbuild takes 8-10 years & 5 bn euros f• French EPR design – safety issues raised
• Finland – reactor 3 years late and several billion euros over budgetbillion euros over budget
• ‘New [UK] sites at risk from lack of subsidies’ (CEO EDF)
39
• ‘Level playing field with wind needed’
The ‘Negawatt’
• The need to invest in less
Picture: www.eagleshieldinc.com/
• The need to invest in less• Average UK home emits 5.5 t CO2 p.a. – twice as much as a car• Reducing thermostat by 1 degree saves 10% of heating costs• I t i l B iti h h 1/3 f th h t i l t th h f & ll
40
• In a typical British home 1/3 of the heat is lost through roof & walls
Energy Market DriversEnergy Market Drivers
Sustainable EnergySustainable Energy
UK Power GenerationUK Power Generation
41The FutureThe Future
4 February 2010
B iti h h h ldBritish households risk unaffordable energy bills Ofgemenergy bills, Ofgem warnsHouseholds and businesses face the risk of unaffordableface the risk of unaffordable energy bills unless radical action is taken to safeguard Britain's supply the regulatorBritain s supply, the regulator Ofgem warned today.
42
Demand could exceed capacity by 2017
• If existing station closure programme is implemented
• How will new capacity impact ?
43
p y p
Source: The UK Power Generation Expenditure Report 2010‐2030. Douglas‐Westwood
Coal, Nuclear & Gas (CCGT) dominate UK powergen
Wind 2%
Hydro and pumped storage, 5%
Others, 0% Interconnector, 3%
Coal & Coal Others, 35%
Gas turbines and oil engines, 6%
Wind, 2%
Oil 5%
CCGT & CHP, 31%
Oil, 5%
Nuclear, 12%
44Source: The UK Power Generation Expenditure Report 2010‐2030. Douglas‐Westwood
79 GW of additions needed by 2030*8
6
7
8
WSolar PV
Biomass
Hydro
*Base case. Online dates
4
5
6
ditio
ns G
W
Wave & Tidal
Onshore Wind
Offshore Wind
2
3
4
Cap
acity
Ad
Nuclear
Coal
Gas
1
2C
0
• Total annual new plant additions of 1-7 GW per annum
• 2010-17 additions: >50% gas, 44% wind (mainly offshore)
45
• A new UK ‘dash for gas’ with security of supply implicationsSource: The UK Power Generation Expenditure Report 2010‐2030. Douglas‐Westwood
£149 billion spend forecast*
8
9
10Solar PV
Biomass
*Scenarios range £119-162 bn
6
7
8
lion)
Hydro
Wave & Tidal
Onshore WindOFFSHORE WIND
4
5
Cap
ex (£
bil
Offshore Wind
Nuclear
CoalNUCLEAR
1
2
3 GasNUCLEAR
COAL +CCS
0
• Total period gas spend 8% (CCCT is the cheapest option)• Clean coal spend begins 2021? (online 2024 earliest)• Nuclear spend begins 2012 (online 2018 earliest) total >£42 billion
46
• Nuclear spend begins 2012 (online 2018 earliest) total >£42 billion• Annual Capex rises from £1.7bn in 2008 to >£9 billion in 2020
Source: The UK Power Generation Expenditure Report 2010‐2030. Douglas‐Westwood
Energy supply security
• Europe lacks a free k t i l t i itmarket in electricity
• Massive investment in a European super-grid is essential
• UK needs more links to Norway and Europe
• And a national ‘smart grid’ – and smart appliancesappliances
47
The smart grid
• The smart grid can also enable smart appliances to be used
Figure 27: An Interconnected Electricity SystemSource: Parliamentary Office of Science and Technology
• The smart grid can also enable smart appliances to be used• Appliances can switch on at cheapest power times• 200,000 x 40 kW cars can quickly provide 8 GW of power to the grid• S th K l $24b t id ith l 30 000 l t i hi l
48
• South Korea plan $24bn smart grid with nearly 30,000 electric vehicle charging stations by 2030
UK powergen – final thoughts
• Taking into account the potential for increasing demand, and
intermittency of renewable sources , powergen capacity will may need to
grow to 112 GW by 2030 (base case)
• The equivalent of 95% of existing UK capacity will need to be built over
the next 20 years
• Required capital investment £149 billion (range £124bn to £167 bn)
• Plus major grid investment!Plus major grid investment!
• Could total £264 bn in the next decade! Lord Davies, Trade & Investment Minister FT 26Jan ‘10
49
Energy Market DriversEnergy Market Drivers
Sustainable EnergySustainable Energy
UK Power GenerationUK Power Generation
50The FutureThe Future
The €1,000 billion EU power bill
33% 34%35%2007
19%
25% 26%
19%
24%
20%
25%
30%2007
2030
4% 3%7%
1%
5%5%
10%
15%
0%
oil
gas
nucl
ear
hydr
o
new
able
s
coal
Biggest five European countries need to spend:
ren
Biggest five European countries need to spend: • €300bn to meet environmental targets• €470bn on replacement & renewal
51
A massive growth in renewable energy is requiredSource: DWL & FT 3 Feb 2010
Towards changeSource: ‘The End of Energy Obesity’ Peter Tertzakian
• We must decouple GDP growthWe must decouple GDP growth from energy demand growth
• Some successes:
• Japan – ‘Top Runner Programme’
• Denmark carrots & sticks (taxes• Denmark – carrots & sticks (taxes, wind power, cogeneration, etc.)
• Switzerland ‘Swiss Energy• Switzerland – Swiss Energy Programme’
• But we must not ‘export’ our• But we must not ‘export’ our energy demand
52
Thank Thank youyou
53
This presentation can be downloaded from www.douglasThis presentation can be downloaded from www.douglas--westwood.comwestwood.com