Squaring the Circle : Energy Product Development in an Uncertain Energy World. Dr J L King Doosan Babcock

Transcription

1 Squaring the Circle : Energy Product Development in an Uncertain Energy World Dr J L King Doosan Babcock

2 Doosan Babcock Doosan Babcock Will deliver market leading, innovative solutions towards a low carbon future Thermal Nuclear Oil, gas and petrochemical Pharmaceutical and process industries Worldwide references Subcritical boilers 123,086MWe Supercritical boilers 44,145MWe Nuclear plant 4,190MWe Offices in UK Germany Poland USA Middle East 125 years 04 July 1891 Page 2

3 The Challenge Doosan Babcock s market environment is changing 50% of UK coal capacity closed since 2007 and post 2025 little or no coal 37% share value (100bn ) lost by 5 utilities supplying 60% of Europe s electricity 150% increase in renewable generation in UK in the last 4 years, with further increases planned Environmental targets require clean generation across heat and transport as well as electricity Renewables, distributed generation and energy storage are all being considered as solutions While geographical expansion is underway and Doosan Babcock s core market and competence is primarily UK-based, these market environmental changes are global, and gaining pace To deliver a sustainable future Doosan Babcock requires to adapt, from a business perspective, to the changing market environment To this end, Doosan Babcock identified key questions to be addressed in a Scenario Planning exercise The energy (electricity, heat and transport) scenarios in the UK may change as increasing decarbonisation occurs, combined with potential changes in demand side management technology and capability, what are the resultant changes in our energy landscape that we might expect to see on this pathway between now and 2030? Given these changes what products, technologies and resources should Doosan Babcock be investing in to deliver a sustainable future? Page 3

4 The Scenario Planning process In an unstable and unpredictable world, long term business decisions still have to be made Need to be able to clear a path to the future to take the un out of uncertainty! Scenario planning is a process of visualising What future conditions or events are probable What their consequences or effects would be like How a business should respond to, or benefit from, the future scenarios Process refined and facilitated by Prof George Burt, formerly of Strathclyde University and now Director of the Centre for Advanced Management Education at Stirling University The process involves the initial generation of ideas through to the creation of four interrelated future scenarios Used to heighten our sensitivity to the way in which the market is headed, via monitoring of Early Warning Indicators Outcome applied to in house strategic planning decisions.corporate direction, product investment etc. Page 4

5 Idea and Clustering Page 5

6 Uncertainty Cluster Labelling Impact of government incentives on investment decisions Energy as a pawn in a political relationship Consumer brands availability influence behaviour Geo-political risk on energy systems (viability) Pace of, and ability to, harness technological empowerment Rate of decarbonisation of transport Extent of grid independence Evolution of energy flow management Rate of decarbonisation of heat Sources and availability of funding Rate of uptake of new energy prosumers Impact of Paris on rate of decarbonisation Evolution of the Industry value chain Rate of energy storage development to meet supply / demand Evolution of perception of Sustainability Page 6

7 Low impact High impact Uncertainty Ranking Matrix Most predictable outcome Shale gas impact on feedstock and gas Consumer brands availability influence behaviour Geo-political risk on energy systems (viability) Pace of, and ability to, harness technological empowerment Extent of grid independence Rate of uptake of new energy prosumers Impact of Paris on rate of decarbonisation Evolution of perception of Sustainability Rate of energy storage development to meet supply / demand Sources and availability of funding Rate of decarbonisation of transport Rate of decarbonisation of heat Least predictable outcome Energy as a pawn in political relationship Impact of government incentives on investment decisions Evolution of the Industry value chain Evolution of energy flow management Page 7

8 Government and society appetite for zero emissions Scenario Matrix Net zero emissions a reality A Brand New "Business as Usual" Smart Life Centralised Evolution of energy flow management Localised / Decentralised Groundhog Day Dragons slay Dinosaurs Failing to meet emission targets Page 8

9 Government and society appetite for zero emissions Scenarios for UK Energy System Evolution Net zero emissions a reality A Brand New Business As Usual UK desire to meet ambitious, internationally binding emissions targets drive A New BAU. The government continues to promote centralised electricity generation infrastructure, with large generation assets supplying the National Grid. Smart Life UK desire to meet ambitious, internationally binding emissions targets drive Smart Life. The government introduces policies which support innovation in, and generation from, small scale renewable generation technologies and energy storage. Decarbonisation of heat and transport increases. Centralised Evolution of energy management flow Localised / Decentralised World events lead to an inward-looking national government with security of supply and affordability as priorities. UK retrenches to fossil fuels. Governments fail to agree internationally binding targets on emissions. UK government provides no clear energy policy. Technological innovation enables regional energy hubs for distributed generation to begin playing a more significant role in the energy mix. Groundhog Day Dragons Slay Dinosaurs Failing to meet emission targets Page 9

10 Government and society appetite for zero emissions Scenario Power Profiles Net zero emissions a reality Centralised Evolution of energy management flow Localised / Decentralised Failing to meet emission targets Page 10

11 Early Warning Indicators September 2015 Indicator Current Comments Smart Life Dragons Slay Dinosaurs Brand New BAU Groundhog Environmental Commitments Renewable energy outstrips coal for first time in UK electricity mix COP21 participants indicate INDCs are moving closer to a 2 degree scenario Energy Affordability Developer Claims UK Solar Has Hit Grid Parity Security of Supply UK guarantees 2bn nuclear plant deal as China investment announced Fast pace of power plant closures threatens UK electricity grid Eggborough coal plant closure worsens UK power crunch Energy Demand SSI closure Key Regulation Changes CBI warning over renewables subsidies Key events / must haves Government will seek to close all coal units in UK by What are the main Utilities / Suppliers doing Drax pulls out of 1bn carbon capture project National Grid CEO: Large Power Stations For Baseload Power Is Outdated Shell pulls out of Arctic First mover indicators Osborne poaches Labour peer to lead rail and energy overhaul UK's small energy suppliers gain market share from 'big six Balcombe 'fracking village' to go 100 per cent solar power No pull in scenario direction Scoring Indicator strongly supporting scenario Page 11

12 EWI Output September 2015 A Brand New Business As Usual Zero emissions a reality Smart Life Centralised Distributed September 2015 Groundhog Day Failing to meet emission targets Dragons Slay Dinosaurs Page 12

13 EWI Output October 2015 A Brand New Business As Usual Zero emissions a reality Smart Life Centralised Distributed October 2015 September 2015 Groundhog Day Failing to meet emission targets Dragons Slay Dinosaurs Page 13

14 EWI Output November 2015 A Brand New Business As Usual Zero emissions a reality Smart Life Centralised Distributed November 2015 October 2015 September 2015 Groundhog Day Failing to meet emission targets Dragons Slay Dinosaurs Page 14

15 EWI Output December 2015 A Brand New Business As Usual Zero emissions a reality Smart Life Centralised Distributed December 2015 November 2015 October 2015 September 2015 Groundhog Day Failing to meet emission targets Dragons Slay Dinosaurs Page 15

16 EWI Output January 2016 A Brand New Business As Usual Zero emissions a reality Smart Life Centralised Distributed January 2016 December 2015 November 2015 October 2015 September 2015 Groundhog Day Failing to meet emission targets Dragons Slay Dinosaurs Page 16

17 EWI Messages Monthly Directions A Brand New Business As Usual Zero emissions a reality Smart Life Centralised Distributed January 2016 December 2015 November 2015 October 2015 September 2015 Groundhog Day Failing to meet emission targets Dragons Slay Dinosaurs Page 17

18 Conclusions so far The developed scenarios feel reasonably representative of potential end states there is life in the model Need to be careful about how we interpret the time line monthly data can float around the axis reflecting short term reactions / vested interests / propaganda.it s more about longer term trends; the technique allows the business to temper short term issues and differentiate fact from noise To date the monthly movements appear to reflect the facts associated with where we are in the industry moving towards decarbonisation (to meet climate change objectives) with a trend towards decentralisation This is somewhat more balanced than what might be described as the feeling on the street in that there is a perception of a gathering swing towards a decentralisation agenda (perhaps more in Scotland than in UK) Page 18

19 Conclusions so far An integrated decentralised energy system based around the Internet of Things has major implications for all stakeholders Energy efficiency measures combined with CHP will drive down the total primary demand Consumers become prosumers..diimby rather than NIMBY Current utility business models / concepts are likely to become outdated Entrepreneurs will enter the energy supply market, from a product and supply perspective A current highly centralised grid infrastructure will need to be able to cope with a high degree of decentralisation, flexibility, storage, DSR etc. Public and political awareness of what a decentralised world looks like, and the transition to it, is poor Until there is clarity around the 2050 decarbonisation route map, continued uncertainty, vested interests and propaganda will continue to distort the UK energy agenda Page 19