Blackouts on both sides of the Atlantic have promoted security of energy supply into first place among the chief concerns of utility company executives, according to the sixth annual PricewaterhouseCoopers report Supply essentials: utilities global survey 2004.
The report, which represents the views of 177 leading companies across 56 countries throughout the world, indicates that securing power supply has risen rapidly from nowhere two or three years ago to the fourth ranking concern twelve months ago to the highest ranking issue of 2004. The change is a direct result of increasing difficulties in the balancing of power generation, demand and transmission. Demand is now outstripping supply, and world demand is expected to rise by two-thirds between 2003 and 2030. In the same period, global electricity sector investment needs are estimated at US$10 trillion, a three-fold increase over the 30-year investment level.
The report's author Manfred Wiegand, comments: “Security of supply is a global concern. Across the world we see ageing infrastructure, coupled with increasing demands on generation and transmission capacity. A consistent and stable regulatory environment is required to make the sector more attractive to investors. Capital will only come with good rates of return.”
After security of supply, there is a variety of other issues. In Europe, 91% of respondents surveyed believe blackouts will continue to be a regular occurrence. In the US, vertical integration and a back-to-basics approach is back on the agenda, as 82% predict a modest 0-5% growth in the next twelve months. In Asia, a small number of companies are investing outside their domestic markets, driven by constraints in their home markets due to high reserve margins and expanding electricity sector regulation.
The report also identifies issues driving the market. Companies predict increasing regulation and obligation over the next five years. Many regions are experiencing a slow reform environment and the market is calling for clarity. Emissions trading in particular the EU Emissions Trading Scheme, is also proving to be a challenge as utilities struggle to deliver climate change strategies that encompass emissions reductions and trading. 43% of global respondents had a fully or partially operational strategy for
climate change while 26% have no strategy at all despite a deadline of
1 January 2005. In M&A, caution has become the over-riding sentiment with M & A activity being driven by the need to enlarge the customer base locally and in neighbouring markets. And energy trading is taking a pivotal role globally. Hedging price risk for own generation and retail remains the dominant strategy. Trading and risk management have become an integral part of the business model.
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