OREANDA-NEWS.  huge shift in thinking and action around energy efficiency and cleaner fuels is taking place in the power utilities sector, according to the ninth annual PricewaterhouseCoopers report ‘Energy and Efficiency: Utilities Global Survey 2007’, reported the press-centre of  PricewaterhouseCoopers.

The annual survey goes to the heart of boardroom thinking of 114 power companies in 44 countries and this year reveals a complete shift in the extent to which energy efficiency, renewables and nuclear power are at the top of company agendas.

Utilities companies world-wide expect wind and nuclear power to provide an increasing share of their market’s energy consumption in the next five years. Last year, only 17% and 19% were looking toward these two fuel sources. By 2007, in the space of just 12 months, they were being mentioned by 48% and 45% of respondents. Climate change appears to have cemented its place in utility company strategies.

But the report warns that, without effective and consistent world-wide regulatory and market frameworks, actual progress may be limited. Manfred Wiegand, global utilities leader, PricewaterhouseCoopers said:

“It is clear that the climate of thinking and action around cleaner power, renewables and energy efficiency is shifting fast. The big question is the extent and pace of the actual shift that will take place in the energy mix. Economic signals and incentives will be critical for utility companies to be able to make a big shift. An effective signalling of carbon prices will need to exist across all regions, crucially covering high-emitting and high-growth countries such as the US, India and China.”

The survey shows an industry that believes that technological advances can take the world into a new era of energy efficiency. Expectations that technology can have an impact on energy efficiency have again shot up over the last 12 months — from 22% to 81% among American respondents, from 33% to 43% in Europe and from 41% to 62% world-wide.

Utility companies believe that the greatest energy efficiency gains could come from end-users, of all kinds — industrial, commercial and, especially, residential customers. Although utility companies feel that governments and end-users must set a lead on energy efficiency, companies are ready to invest significantly in efficiency, not just in their own production and transmission but also to help their customers become more energy efficient. Indeed, 72% of respondents from companies with supply businesses are making some investment in demand-side efficiency measures.

Manfred Wiegand, global utilities leader, PricewaterhouseCoopers said:

“This is much more than a ‘waking up’ to climate change. This is a ‘working up’ of activities on a wide range of fronts - 2007 looks set to be the year when utility companies world-wide gear up to seize the sustainability agenda.”

For the first time, the annual survey includes the viewpoints of top leaders from big industrial consumers of electricity in the metals, chemicals and paper sectors. Companies in these sectors are increasingly seeking to be in control of their own energy production and reduce dependence on utility companies. Investment in energy efficiency is a priority for all companies. In some instances, companies are considering moving production to lower price energy territories and many companies are stepping up investment in their own generation, often from renewable sources. There is also a view that utility companies could do more to structure their tariffs around the needs of their big energy consumers.

Other report highlights

Security of supply concerns

Concerns about security of supply are intensifying. Utility companies across the world report that they expect to have to deal with supply and demand conditions that are significantly or, indeed, ‘immensely’ challenging . Seventy-one per cent of respondents rated the outlook in these terms – a major rise from 51% in 2006. This includes 62% of North American respondents, 88% in South America, 70% in Europe, 76% in Australia and New Zealand, 66% in the BRIC countries and all respondents in the Middle East and Africa.

Value chain repositioning

Forty-eight per cent of utility company executives say they expect regulatory moves to unbundle transport and transmission distribution from vertically integrated businesses will have a strong or very strong impact on their power and gas market in the period ahead. Indeed, a third (32%) of all respondents world-wide say they will reposition their company in the value chain in the next five years. A similar proportion of respondents say that they also intend to reposition by country.

Skills and knowledge shortages become a deal driver

For the first time, skills and knowledge shortages are becoming a leading factor in M&A activity. They were mentioned by just a third of respondents as a deal driver in 2006 but, by 2007, this had increased to half. Shortages of knowledge and skills are becoming a crunch issue for utility companies world-wide. Investment in infrastructure, new generation and technology is driving up the demand for expertise. However, this is against a background of an ageing workforce and, in some countries, fewer graduates studying relevant engineering subjects.

Focus on Russia

“The PricewaterhouseCoopers report “[Energy and Efficiency: Utilities Global Survey 2007” highlights a number of key trends in the power utilities industry. As the fourth largest power producer in the world, Russia will continue to play a significant role in shaping global trends.

Russia's role is especially important as it combines significant, but increasingly dated, installed generating capacity and growing domestic demand, with its role as a key supplier of energy feedstock to Europe and its likely growing contribution to meeting the future energy needs in China.” - comments Dave Gray, Partner, Assurance, Energy, Utilities and Mining, PricewaterhouseCoopers, Russia. - “The reform of the domestic electricity sector in Russia, in combination with the trends outlined in the Global Survey 2007 make for interesting times. It follows that the need for Russian power executives and market participants to understand global trends is greater than ever.

Importantly, as highlighted by the “snapshot” on Russia included in the Global Survey 2007, the need for foreign executives to understand the developments in the Russian power market is also growing as reform makes the Russian utility companies increasingly attractive as potential investments, investors or partners”.