All companies have a long-term strategy of activity and should therefore rely on the future state of markets and industries. Georgy Afanasyev told us what significant tendencies exist in global energy, and what may soon result.
Today, we see that the most significant changes in the energy industry are not being instigated by energy companies. Therefore, the economic benefits from these innovations can only be experienced if the organization’s system is changed significantly. First of all, by setting up specialized technology companies based on separate divisions.
What are the new markets in the energy industry? What are changes and who can be an agent? Who will benefit from the new cycle of innovation?
A significant change is characterized by introducing energy-creating equipment within consumers. Big companies have got their own power capacity to ensure a continuous production process. Now the main game in power engineering is to move from the B2B market to the B2C market. A wide spread of the ideology of alternative or renewable energy reveals an important trend in power. The disputes on renewable energy feasibility and its share in the ultimate energy balance distract attention from the most important process in the energy field – the generating capacity through privatization by end users.
The most radical changes come about from consumers’ decisions who, supported by new energy engineering, can obtain equipment to generate resources ’at home‘, where the energy generated is also consumed. This tendency is evident in buildings and structures consuming about 40% of primary generated energy in the world. So, due to a new type of construction technology, a number of passive energy-efficient houses with energy consumption reduced by between 25-90%, houses with zero energy balance, and active energy-efficient houses (‘Energo Plus‘) are increasing in numbers.
Energo Plus houses are characterized not only by low energy consumption, but also by their ability to generate it not only for internal needs, but also for external customers. Experimental versions of active houses are already available, but their mass adoption requires new technologies. By 2020, these houses are expected to be the most important innovation in developed countries.
New standards are used in modern house construction; the reasons include their active promotion by the government. New construction standards have been applied in energy consumption in the UK (BREEAM), the U.S. (LEED, Building America and Energy Star) and the EU since 2010. And strict adherence to these standards is planned. Energy consumption of 20 kWh/m2 per year will become the acceptable standard for new homes constructed in Germany by 2015. By 2020, this indicator could be further reduced to 10 kWh/m2 per year. And passive standards for all newly constructed houses will be adopted after 2030. As of June 2012, the international LEED green house building system certified 2 billion m2 in 130 countries.
These changes apply not only to new buildings but also renovated ones. Consequently, the number of consumers who previously would have ignored an old property will now grows faster than those who would prefer newly built housing. The change from good old energy non-efficient housing will be longer be just a dream.
Several groups of global trends are currently observed regarding energy consumption.
1. Construction of Energo Plus houses and buildings turns them from energy consumers into energy market participants as electricity producers. This reduces the energy demand from major suppliers in the residential sector. The nature of demand is changed the same way.
2. New retail
segments for electricity consumption – public and private, electric and hybrid
– appear. The spread of electric vehicles is still limited by their high cost,
low power reserve and long charging times. But an active government policy and
improved technologies are expected to lead to mass production and widespread
use of personal and public electric vehicles by 2020. The market share of
electric vehicles in relation to global vehicle production will reach
between 25-35% by 2025 according to estimates. Federal and municipal programs
are being used in big cities around the world to convert public transport to an
electric one providing energy-saving environmental compatibility while reducing
noise in the streets.
Electric vehicles with an autonomous power supply allow not only for using, but also for storing energy. Electric vehicle fleets integrated in the ’smart network’ will balance the load on the power system at the expense of recharging at night. According to U.S. experts, the transfer of 50% of the national vehicle fleet to electric power consumption can be achieved without new generating capacities – only by increasing use of existing capacity.
More widespread use of electric vehicles is accompanied by the formation of markets for refilling stations and servicing, as well as battery replacement as competitors to fuel stations. And every generation of charging points and refilling stations will be in demand for organizations involved with the infrastructure of electric and hybrid vehicle charging. Residents of private houses will be able to use 1st and 2nd generation charging stations at home if the required current is available on their domestic network. Considering that the private sector’s share is about 30%, 2nd and 3rd generation charging points will be more often used in car parks, parking areas near houses, office buildings, shopping centers, etc., as well as charging stations, combined with gasoline stations for 3rd and 4th generation charging points.
The development of electric and hybrid vehicles’ charging infrastructure is impossible without combined government and private partnership. This is a project of interest to power generating and supply companies, and car manufacturers, major retailers, car park owners, etc.
3. Energy required for heating, as well as general energy consumption seems to be reducing around the world when generated by big co-generation facilities. As a result of the integration of modern construction technology, energy efficiency of existing buildings and industrial facilities, as well as an expanded share of small cogeneration capacities on enterprise sites, a leaning towards accelerated growth of energy demand will remain, while heating demand will remain stabilized. In addition, while reducing energy consumption for heat production and distribution of air conditioning, a winter load peak will be leveled out, aligning the seasonal load to the TPS. Considering the fact that new big cogeneration capacities have recently been integrated, there is a risk of double investment for all projects based on substantial regional cogeneration.
4. Energy for the consumer is now produced on a shared basis. Although the energy is now mostly produced by large specialized enterprises, small and medium-sized companies tend to build their own production facilities to independently provide energy, and later they will combine to form a substantial sector of the energy providing market, all from small power plants.
The increase in energy production by non-specialized enterprises as a result of joint production of electricity and heat (cogeneration) or power, heat and cooling (trigeneration) at the consumer site and at high energy prices becomes cost-effective and reduces the negative environmental impact of hydrocarbon fuel combustion. Active and passive house technology development will allow for the direct use in buildings of potential energy production by small generating units and renewable energy resources.
As a result, the conversion of industrial, service and utility energy consumers into producers will be seen to partly satisfy their own needs while supplying energy to other consumers.
5. The development of a new directions in energetics, such as «green» energetics, growth of energy-efficient buildings, hybrid and electric vehicles stimulating different industries and all joining in one cluster. For example, in the production of bio fuels and bio plastics, the petrochemical industry, agriculture and energy are joined into new groups, energy-efficient house construction unites the housing sector, energetics, IT, power engineering and the chemical industry, energy and automotive industries are combined in the production and maintenance of electric vehicles.
6. Globally, a tendency to change the way of thinking regarding energy is being observed. The traditional cost and effectiveness principle is substituted by awareness of the importance of ’green energy‘. The main concept of green energy is that our generation should not only better meet our own energy requirements, but also create conditions for future generations to have sufficient energy and live in an ecologic environment.
According to world forecasts, the green energy market will be one of the fastest growing sectors of the world economy with large profits and high added value.
The development of smart networks will balance a power consumption level with electricity generation from renewable energy sources, and new energy storage technologies will solve the problem of instability in electricity generation through renewable power resources. In contrast to the traditional type of energy, green energy is not accompanied by land degradation but by development. Increased use of renewable energy resources can stimulate the development of remote and undeveloped areas. In addition, green energy development will create suitable conditions for future generations to live in environmentally favorable conditions.
Six named tendencies seriously affect the system of energy-related markets, namely, energy markets, equipment, energy services, engineering and construction of power units, electricity storage, and the labor market.
Changes in the energy market will be initiated by a large-scale expansion of intelligent systems and restructuring of energy producers and consumers. Any subjects included into the energy production system, including citizens having productive houses with small generating units are actually assumed to turn energy into a new international currency, particularly with the continuing growth in demand for electricity and development of long-term storage technology.
Thus a new ’mixed‘ relationship model for producers and consumers is created. As a result, the market will transfer from the energy market to the equipment market, and the role of the power engineering industry will change from the B2B sector and the B2C sector will increase.
Changes in the market and the equipment will see the launch of a new investment cycle in energy industrialized countries, with a 40-60 year duration determined by the period of operation of generating facilities and the energy infrastructure. In the next decade it will lead to a massive decommissioning of facilities older than 40 years. Capacity will remain the same – old and inefficient equipment will be replaced with efficient power generating equipment, and a line of manufactured heavy equipment will expand through new production and the appearance of medium and small power generation capabilities in the equipment market. In the medium term, the market for small power engineering facilities is potentially bigger than a traditional market and will be expanded. According to Western analytical companies, 30-40% of the world’s energy will be provided by small generating units (plants up to 30 MW) by 2050.
Small power generating equipment is characterized by different requirements for products, because it focuses on the direct sale to the end user, and creates a new player – the energy consumer who, at the same time, is an energy producer. Construction of energy efficient houses also provides new markets for construction materials, house batteries and renewable energy resources (photo elements, wind turbines, home bioreactors, micro hydroelectric stations).
Predicted large-scale replacement of outdated and inefficient facilities with energy equipment of new generation, and integration of innovative energy technologies will require a significant increase in the volume and necessary expansion of a list of energy services – from R & D activity and the control of facilities, to the complex selection and control energy-consuming equipment,, which will see an increase in the number of energy service companies.
According to forecasts, the U.S. energy company market will grow from $ 5 billion in 2010 to $ 20-40 billion in 2020 and to $ 50-150 billion – in 2030. For the EU, these indicators are as follows: from $ 5.2 billion in 2010 to $ 20 billion and $ 50 billion in 2020 and 2030, correspondingly. After 2020, these companies will begin to expand in to developing countries, and by 2030 they will occupy a significant share at the market.
’Smart networks‘ technology, an essential element of smart energy, will create a new market of energy products and services for the end consumer. In addition to traditional energy companies, retail networks, telecommunication companies, software manufacturers and Internet search systems will offer their service. Suppliers with the combined information on power consumption by specific energy consumers will be able to warn homeowners by any kind of communication (via SMS, email or home control console), on inefficient operation or malfunction of appliances and to offer various services, for example, to optimize costs for energy or to buy new, energy-efficient goods. These companies, providing new energy services to people, will play an important role in the formation of an energy-efficient society.
Thus, new consumers of energy services will grow the energy services sector and attract many market participants. In addition to specialized companies, this activity will be promising for energy retail and distribution companies.
In spite of the expected increase in the market for power facility design and construction, heavy competition will remain due to the arrival of new design and engineering companies. The use of technologies meeting international standards, references and taking in to account the main trends of energy development will be the mandatory prerequisite for market participants.
One of the modern technical requirements for companies is the transparent integrated IT-system allowing for the integrated control over the lifecycle process of the design, construction and operation of the energy units with IT-technologies based on 3D-6D. These technologies allow not only for the design of a virtual object and supervision of its development, but also to monitor its status during all phases of the life cycle (design, construction, installation, commissioning and operation of the project unit) under different conditions with various agents.
A massive transfer from the traditional control scheme to EPC / EPCM contracts is considered as important in the construction of energy facilities. This type of contract provides for fixed quotations for the unit construction, depending on its capacity, and a fixed term of commissioning, which seems optimal for customers’ risks and costs as the contractor bears the full financial responsibility for excess / savings of the project estimated cost. As a result of this important change, old businesses will act as subcontractors working for new suppliers.
The design and construction of separate power units cannot remain as before during transference to smart energy. A full power network, or even a city, is designed instead of the design and commissioning being for individual objects.
As for the electricity storage market, the related technologies are rapidly progressing. As a part of the intelligent system distribution, these technologies allow users to effectively control not only energy consumption, but also generation. The potential for surplus power to be returned to the network and, therefore, its sale, will result in the formation of an energy storage market. Revenues from energy storage systems are expected to grow from $ 5.4 billion in 2010 to $ 15.8 billion in 2015 and $ 35.3 in 2020.
Considering that t energy storage technology can bridge the gap between the minimum and peak loads, it will serve mainly not so much to accumulate energy, but to stabilize the energy supply and purchasing operations, and to increase efficiency and reliability of a power supply. Hydro accumulation, compressed air technology, super capacitors, super flywheels, superconducting energy storage and ’distributed battery‘ in electric vehicles are expected to be most popular technologies.
Finally, due to integrated technological innovations the ’old‘ professions and qualifications will radically change, and new skills will appear. In relation to energy technology, the whole system of vocational training and qualifications should be significantly modernized. One will now have to consider competencies associated with the whole lifecycle of new generation technologies – design and production, promotion and sale, installation, operation, repair and maintenance. A new type of qualification in vocational education programs for needed professional groups will reduce the gap between professional education programs and modern requirements from companies, preparing personnel with proper qualifications for the energy sector in the future.
Employers will have to participate in the formation of a new human resource structure; otherwise the required elements of this institutional structure won’t be created.
In conclusion, let’s return to the concept of the ’Technological Company.’ If companies sell raw materials and resources to consumers and food companies also sell their produce on the basis of how much processing has been required, the technological companies sell tools to consumers, together with machines and technologies capable of producing raw material and transform it into products.
Companies selling raw material and food are interested in maximizing the level of consumption and price for resources, and in terms of the price restrictions, the maximum possible and often excessive amounts of energy are sold to consumers. Resource and product companies in the energy sector are characterized by highly conservative and over-regulation by the government. The products they sell are poorly diversified, with only really volume being the flexible feature.
Over the last decades, principal innovations in energy product diversification have been initiated by non-energy companies. For example, mobile energy supply for consumers – formation of battery and electric accumulator industry – had nothing to do with traditional energy companies. As a result, at certain times, the end-user has spent more on batteries than on electricity bills. Thus, one international battery manufacturer sold over 6 billion items and has an annual turnover of $ 3 billion (as of 2005) in 160 countries around the world.
Looking at the whole battery market, including cell phones, laptops, and children’s toys, in 2010 the world market sold 74 billion batteries.
With the example of batteries it is clear that this market is characterized by globalism, that is, its product does not depend on the local market and is not interested in the regional infrastructure (the worse it is, the better the market). However, this business, despite the attractive potential market volume, was not recognized by the energy industry and was not included in the development strategy, or at least being part of it.