Power & Utilities

Reshaping the generation mix and renewing aging networks

Faced with ongoing policy pressure to reduce carbon emissions, the sector has an opportunity to reshape the generation mix completely over the next 30 years, through a mix of technologies. But aging infrastructure means major investment decisions must be taken today.

These will have implications across the value chain as networks respond to different demands from generators and suppliers.

Companies are considering how best to react to the introduction of low-carbon generation technologies, with a host of ongoing ‘make or buy’ questions.

Against the over-riding imperative of maintaining security of supply, key challenges include:

• Deciding on the best generation mix for a particular market
• Navigating policy regimes from country to country
• Funding the acquisition or construction of low-carbon generation assets
• Managing the risks of large-scale construction projects
• Engaging with customers over the value of a low-carbon future.

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Making sense of the smart transformation

The introduction of smart technology is an immediate challenge in terms of funding and making the right technology choices.

The focus of smart today varies.

In Europe and the US, improving consumers' responsiveness to price signals and enabling the connection of distributed renewable power to the network is key. Elsewhere, improving network resilience and allowing large-scale power transmission is often more important.

Either way, matching supply and demand will become increasingly complex.

Longer term, smart technology is likely to cause major disruptions to existing business models and P&Us cannot afford to view it as simply an infrastructure upgrade.

• All significant business processes will be affected by smart technology. Major change programs may be needed to realize potential benefits and keep stakeholders engaged.
• P&Us need to get ready for the reality of 'big data'. Smart roll-outs will result in huge increases in data, and winners will be on top of this, able to handle the increased risks that the data flood brings and use the data to extract added value.

Smart grids will enable two-way energy flows, encouraging customers to play a new role in determining their energy consumption and putting new strain on existing network assets and mechanisms.

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Accessing capital in times of austerity

Power & utilities remains a hugely capital-intensive sector. The strategic allocation of available capital and access to new sources of finance will become increasingly important over the coming decade.

Massive investment will be needed to:

• Replace existing generation capacity, while taking account of environmental factors
• Renew and upgrade aging network infrastructure
• Transform today's networks into tomorrow's smart grids.

Since the global financial crisis, P&Us have come under pressure to strengthen balance sheets. This has led to significant divestment programs in Europe, and a new round of consolidation in North America.

Looking ahead, P&Us will have to raise and deploy capital on a huge scale, while engaging with a wide range of new finance providers and protecting credit ratings.

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