Late last year Capgemini released its 20th annual World Energy Markets Observatory Report for 2018. Ecogeneration takes a look at the report and what it means for the renewable energy sector as China continues to be the world leader in the production of renewable energy sources.


In 2017, renewable energy comprised 36.6% of China’s total installed power capacity, and 26.4% of its total power generation with the majority of that coming from hydroelectric sources.

The World Energy Markets Observatory (WEMO) report 2018 takes a close look at China’s role as a leading global player in technology, equipment and utilities ownership.

China is the world’s largest consumer of energy and a leading emitter of greenhouse gas emissions (GHG). The report found China is a significant energy supplier, and key player in critical resources and key investor in electricity companies.

The report states that energy requirements are constantly growing in China, who in 2017 increased their liquid natural gas by 46%. They also have a long-term policy of developing equipment for the local market usage before selling it internationally. China is exporting coal-fire power plants and to date currently has 700 under construction.

They are the world leader in the production of photovoltaic solar panels and are responsible for almost half of newly installed worldwide capacity and wind turbines. According to the report, electricity storage and electric vehicles alongside nuclear reactors will be the next wave of exports out of China. The country also has a dominant share of around 95% of the world’s production of sought-after rare metals and rare-earth elements needed for energy transition.

China is now making acquisitions into Europe’s electricity networks and utilities after a decade long dominance of acquisitions in Africa, South America and Asia.

Growth at what cost?

Economic growth puts into question climate change objectives but has in turn driven electricity and gas wholesale market price rebounds which has improved utilities financial health.

The report found that after three years, during which GHG emissions had stagnated, they increased in 2017 by 1.4% driven by stimulated increased energy demand. The climate change objectives from the Paris 2015 Climate Accord could be under threat despite a rise in carbon prices.

Renewable energy and storage prices continued to decrease but tech limitations and cost of development means full renewable generation is far off for the majority of countries.

The cost of renewable energies over the past 12 months has continued to fall, says the report (-20% for solar photovoltaic): onshore wind and utility scale photovoltaic (PV) costs are becoming competitive almost everywhere (not including extra grid costs) compared to most traditional electricity generation resources. Battery costs are following the same downward trend.

The report states that this could lead to countries like Denmark setting goals towards a 100% renewable generation mix. However, the report found that for large countries or states, even with battery storage, this type of grid is not manageable at the present time because of limitations in the technology, intermittency management and implementation costs.

The utilities landscape continues to evolve along with the renewed financial health of industry players while new challenges emerge.

The report found that there was a slight improvement in the financial position of the utilities sector especially in Europe, which has been attributed to wholesale electricity prices, gas market price rebounds and transformation achievements of industry players. This situation has led to a landscape of transformation and merger and acquisition activities. German utilities are concentrating on value chain segments and the UK is correcting retail market consequences with new regulations. Asian markets are starting the deregulation process and new players are entering the market.

What does this all mean for Australia?

According to Capgemini Australia director and industry practice lead energy and utilities Anastasia Klingberg the key findings of the report for Australia were:

  • Australia’s emissions have increased in the past three years and the momentum will continue until 2030. Regardless of this, Australia is on track to meet its 2020 and current investment trends which suggest it will also reach its 2030 targets.
  • The year 2017 was overall marked as a year of positive developments in the renewable energy front, despite the marginal decline of 2% in renewables shares, owing to low hydro output
  • The ACCC review identified four root causes of the 56% residential customer price increase over the last 10 years. Policies to tackle these issues are being developed and we believe they will play an integral role in both Federal and State elections during 2018 and 2019.
  • There has been an increased investment on the management of distributed energy resources aiming to ensure reliability as the energy market transforms
  • Advancements in emerging technologies such as blockchain, IoT, big data and cloud are resulting in innovative services such as low-cost and low-energy consumption based IoT networks, blockchain powered trading platforms, smart lighting and smart environment services

“It was surprising that despite the increase in investment in 2017, Australia’s overall share in renewable energy reduced by 2%. This shows the impact that drought has to our renewable electricity supply. We expect this impact to be reduced over 2018-19 as Australia invests heavily in large-scale wind, solar and battery installations,” Klingberg says.

Klingberg believes Australia is on track to meet its emissions target even though there is no comprehensive climate change policy or NEG.

“Current investment trends suggest that Australia is on track to meet and exceed its 2020 target and at the time of writing the report investment trends suggested its 2030 target as well,” she says.

“The 2030 target is reliant on consistent energy policy to stimulate investment in renewable technologies. Australia’s renewable investment history has shown that major changes in climate change and energy policies significantly impact investment in the renewables sector and may impact the ability to reach the 2030 target. 2019 will be an interesting year to watch.”

The states lead the way

Across the sector, the states and territories are leading the charge with renewable investment and projects playing a crucial role in Australia’s renewable future, which Klingberg says was evident in the WEMO report.

“States and territories will continue to drive the sector in Australia. Currently individual state targets in renewables are above the federal governments RET. If government changes, there will be possible changes in energy policy priorities. Some states may slow their RET journey, while others will speed up. The net effect will be that the states and territories will continue to drive the sector in Australia,” Klingberg says.

“According to Bloomberg New Energy Finance data, large-scale wind and solar project activity pushed investment in Australia up 150% to a record $11.7 billion in 2017. Investment will taper over the coming years unless there is a significant change in government policy.”

As the sector advances with investment and state and territory-led initiatives it leaves the question of what advantages will emerging technologies bring to the sector?

Klingberg suggests emerging technologies will improve efficiency of operations, empower customers to make more informed energy decisions and create new business models that will allow new players into the market, which will improve competition and drive innovation.

“All segments of the value chain are impacted by digital transformation, from client relationships and operational processes, through to grids and interactive services, with a huge potential to decrease costs,” Klingberg says.

“Utility incumbents need to accelerate their transformations and step up their focus on new service-based business models as competition from different domains including new entrants is increasing.

“We can think of China as the large tanker with Australia as the speed boat. China cannot move with the agility of Australia during the energy transition but when it does move, it creates a large impact on energy emissions,” says Capgemini director and practice lead energy and utilities Anastasia Klingberg.

China powers ahead

Klingberg says China has also become an important investor in electricity companies. “Energy requirements are constantly growing in China, which in 2017 increased its imports of Liquid Natural Gas by 46%, making it responsible for 30% of the growth in global demand. Pollution levels remain a concern and China is the world’s biggest emitter of GHG.”

China has a long-term policy of developing equipment for domestic usage first before selling it internationally. It is aggressively exporting coal-fired power plants (with 700 currently under construction), photovoltaic solar panels (of which it was responsible for almost half of newly installed worldwide capacity) and wind turbines. According to the report, electricity storage and electric vehicles, as well as nuclear reactors, are likely to be the next wave of Chinese equipment exports. China also has a dominant share (95%) in the worldwide production of highly sought-after rare metals and rare- earth elements needed for energy transition.

“We can think of China as the large tanker with Australia as the speed boat. China cannot move with the agility of Australia during the energy transition but when it does move, it creates a large impact on energy emissions. China will be looking to countries like Australia to lead the way in innovation in technology and new business models during this global energy transition,” Klingberg says.

“In 2017-18 Australia had the world’s largest battery installed in South Australia, the approval for one of the world’s largest solar power plants in Queensland. Australia continues to invest in refining new business models, for example the expansion of virtual power plants within the Australian market. Australia can play a lead in defining what our global landscape will be like in 10-20 years’ time and China is watching.”

WEMO Report 2018 key findings for Australia are:

  • Australia’s emissions have increased in the past three years and the momentum will continue until 2030. Regardless of this, Australia is on track to meet its 2020 and 2030 targets.
  • 2017 was overall marked as a year of positive development in the renewable energy front, despite the marginal decline of 2% in renewable shares, owing to low hydro output.
  • In the backdrop of an unsustainable electricity-pricing situation, an ACCC review identified four root causes of the 56% residential customer price increase over the last 10 years.
  • There has been increased investment in the management of distributed energy resources aiming to ensure reliability as the energy market transforms.
  • Advancements in emerging technologies such a blockchain, IoT, big data and cloud are resulting in innovative services such as low-cost and low-energy consumption based on IoT networks, blockchain powered trading platforms, smart lighting and smart environment services.

 


Anastasia Klingberg is the director and industry practice lead energy and utilities at Capgemini Australia.
The World Energy Markets Observatory Report is an annual publication by Capgemini that monitors the main indicators of the electricity and gas markets in Europe, North America, Australia and South-East Asia, and reports on the developments and transformations in these sectors. Information used in this article was provided from the 20th edition which was also provided by De Pardieu Brocas Maffei and VaasaETT.