WEMO Podcast: Defining the key global Energy & Utilities trends

Trends and topics that are affecting utilities organizations across the globe

Vito Labate in conversation with Perry Stoneman, Energy & Utilities global sector leader, discuss the launch of the World Energy Markets Observatory (WEMO) report 2018 and the key trends and topics that are affecting Utilities across various regions like North America, Europe, Asia-Pacific and more.

This is the first podcast in the series for the transformation of Energy & Utilities companies to better serve their customers in the digital age.

Transcript

Vito Labate: (00:24)

Hello, and welcome to the first podcast in a series focused on the transformation of energy and utilities companies to better serve their customers in the digital age. My name is Vito Labate, and I’m joined today by Perry Stoneman who is the utilities global sector leader to talk about the latest World Energy Markets Observatory report, or WEMO. Perry, welcome.

Perry Stoneman: (00:44)

Thank you.

Vito Labate: (00:46)

So let’s start with some introductions, Perry, if you could please just share a bit about your background.

Perry Stoneman: (00:50)

Absolutely, Vito. I’m Perry Stoneman, lead the global energy and utility sector for Capgemini. I’ve been with Capgemini for 18 years, and it’s been my pleasure working on developing the predecessor to this, which is the European Energy Market Observatory, and then as of last year and this year making it a World Energy Market Observatory.

Vito Labate: (01:08)

Well, as you say, WEMO is now in its 20th year, and I believe you’ve worked on it from the very beginning. So can you maybe tell us a little bit about the origins of the report and what it aims to achieve?

Perry Stoneman: (01:20)

So the origin was from Europe. We studied the European energy market, covering a variety of things, climate change, energy transition, infrastructure, security of supply. And we studied that for 18 years. And as of the 2017, we made the bold decision to take this report global.

Perry Stoneman: (01:39)

And so as of last year, the first edition of World Energy Market Observatory was published. This year is the second, and we decided to do that because we had such a positive feedback from the new geographies. We’ve always had a great readership in Europe, but the world report really did catch the attention in Asia, in North America.

And so it’s a fun report to produce and it’s always a good read.

Vito Labate: (02:03)

Great. So tell us a little bit, Perry, about some of the key trends and even in the region that WEMO covers across the world.

Perry Stoneman: (02:10)

So as I said, we cover climate change, we cover the energy transition, we cover supply and final customers, we cover the transformation that’s happening in the industry, and we study it for Europe, North America, including Canada and Southeast Asia, Australia. Data is a little bit limited today for China. So we do have some information related to what China is doing in the report, but we don’t have key facts and figures from the Chinese market as of now.

Vito Labate: (02:40)

Great. We’ve talked before at a macro level that we’re seeing renewables costs that are dropping, particularly in solar and wind. And obviously, storage battery capacity has not evolved quite so quickly as well. So are you seeing similar trends this year?

Perry Stoneman: (02:56)

Well, actually everybody’s come to believe that solar and wind is going to continue to decline in costs. If you go back 10 years, I think there’d be a lot of skeptics about solar. We’re facing the same situation with battery technologies. There’s still quite a few skeptics that say that battery is going to get to the hundred dollars, US dollars, a kilowatt hour.

Perry Stoneman: (03:16)

But in the last three years, we’ve seen significant declines, 34% followed by a 22% annual decline, Followed by 24% annual decline. If you take that math, and we do believe it will hit another 24% decline in its price, it will move from about 209 US dollars a kilowatt hour to approximately 160. So it’s on a trajectory similar to solar. People just haven’t believed that the manufacturing and the scale of manufacturing and technology advancements is going to get into that magical 100 US dollars a kilowatt hour. I believe it will.

Vito Labate: (03:53)

But building on that, and just to get away from the numbers a little bit, when it comes to energy storage, I’ll put you on the spot a little bit because this year you made a prediction that in 2018 it would be the year that Elon Musk would prove that battery technology’s potential for energy storage is proven. Has that happened in your opinion

Perry Stoneman: (04:12)

Yeah. That was a bit of a fun prediction, but absolutely. If you look at the South Australia power networks, Hornsdale Power Reserve, that’s the one that was kind of famously noted by tweets from us, that he could deliver it within a hundred days or it would be free.

Recently being in Adelaide, South Australia, I talked to the team there, and that 100-megawatt battery implementation is performing better than they ever expected. In fact, in the first year of operation it will return one-third of the cost of the implementation. So it’s on a track to give an ROI of three years, which is absolutely incredible.

What else, it gives you energy in seconds versus other forms of peaking plants that can take up to an hour. So absolutely I believe it has proven its place in the market and proven its value to a utility like South Australia.

Vito Labate: (05:07)

Okay. Well, let’s kind of traverse the globe a little bit. What was your impression of how Europe in particular is progressing on their climate targets this year?

Perry Stoneman: (05:17)

Well, in Europe, they do have to step up their program to meet the EU goals and aspirations of the 2050 vision. Europe is doing reasonably well, but a step change in their policy and their energy efficiency programs needs to happen.

Vito Labate: (05:36)

Okay. And then moving over to China, what are we finding in terms of their place in the global energy market? Are they emerging? How do you see China emerging here?

Perry Stoneman: (05:46)

Well, let’s talk about their industrial capacity first. They are the leader in producing solar panels today. They’re going to retain that position as a leader in the manufacturing of solar. I can’t see anybody displacing them.

They are moving into, if they haven’t already moved into, the leadership position in manufacturing lithium ion batteries. And in consumption to the domestic market, they’ve started to cancel coal plants and implement renewable and combined cycle gas. So they’re making transition to their own energy mix a priority.

They also just became the number one country in the world for adopting electric vehicles, surpassing the United States officially in 2017. So China is in the middle of a transition transformation, maybe more profound than many countries in the world or any country in the world.

Vito Labate: (06:39)

Great. Well, just to wrap up then, let’s talk a little bit about the impact of digital or the digital revolution on the global energy market. Where do you see energy and utilities markets? How do they need to think about what’s coming next from the digital revolution?

Perry Stoneman: (06:57)

Well, there’s a lot of talk about the two-way flow of electricity, and clearly the industry is aware that they have to be able to have a grid that’s intelligent enough to handle that complexity. Probably as important is the fact that many of the resources that are going to be on the network, whether electric vehicles as a demand point or supply, prosumers with solar energy, batteries in the home or batteries in front of the meter, many of these assets may not be owned by the utility.

Perry Stoneman: (07:26)

So how do they handle managing these complexities when they don’t own the assets as they have in the past? So I’d say having a business model, we call that the digital edge, managing those complexities. I think the utilities have to have a strategy on how they’re going to coordinate and manage assets that they don’t own through some type of API, IOT-type technology. So I think they need a game plan to be well-versed in these technologies, these edge technologies, and start to look for use cases where they apply them.

Vito Labate: (07:59)

Great. Well, Perry, listen. Thank you for this sneak peak into the next edition of WEMO. Just for our listeners, the report will be published on November the sixth 2018. You can go to the Capgemini website to subscribe to have an advanced copy emailed to you prior to publication, or check us out at Capgemini.com/WEMO.

Thanks for listening.

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