Power Producer Perspective on Fuel Competition. Derrick Philippe GOSSELIN Suez Energy International

Transcription

1 Power Producer Perspective on Fuel Competition Derrick Philippe GOSSELIN Suez Energy International

2 Table of content Company Profile 5 Key Messages Conclusion 2

3 SUEZ Energy International within Suez 3

4 SUEZ Energy International - Mission To develop and to manage electricity and gas projects and to offer tailor-made energy solutions to industrial and commercial customers internationally 4

5 Worldwide Presence 5

6 Key figures SUEZ Energy International Europe Number of Employees* 2005 Turnover (B ) Installed Generation Capacity (GW)* 2005 Electricity sales (TWh/year) 2005 Gas sales (bcm/year) 4, , * As of 31/12//05 **SEI Estimate Sales and capacities are 100% consolidated for all companies included in Suez consolidation perimeter 6

7 SUEZ Energy International fuel mix Gas 40% Gas IWPP 13% Coal 9% Hydro 33% Others 3% Fuel Oil 2% 7

8 Table of content Company Profile 5 Key Messages Conclusion 8

9 Preliminary Remarks: Time Horizon = 10 years This presentation is made with a time horizon in mind of 10 years. We are very very bad in predicting prices as well in the short as in the long run. We are better in predicting trends. We are very good in analyzing the past. We are excellent in forgetting what we have predicted already yesterday. KSF in forecasting is either telling a date or an event but never both at the same time 9

10 1. NYMEX: Unreliable in times of uncertainty NYMEX 12-month Forecast: Crude Oil NYMEX 12-month Forecast: Natural Gas 10

11 2. Gas: Technology of choice for the future? Europe US Coal The relative economics of coal vs gas Diversification strategies Regulation The relative economics of coal vs gas Diversification strategies Regulation Gas Low investment costs and shorter lead times are important, especially for smaller players and new entrants smaller footprint and lower emissions of gas-fired plants make permitting easier for gas than for coal Diversity of supply (Russia) Complexity of the system US nuclear plants, the largest nuclear fleet in the world, have reached their technical limits Some coal plants in the Midwest can run more but are constrained by load and transmission Diversity of supply (MEA/Mexico?) Complexity of the system 11

12 3. LNG: Key for US economy, Option for Europe? US continental gas market is characterized by rising total demand - spurred by growing gas consumption for power generation - on the one hand and by essentially stagnant indigenous gas supply on the other. LNG becomes essential. No growth without LNG Europe can rely on imported piped gas though it also promotes LNG to limit its dependency. Key for Europe will be diversity of supply 12

13 4. Nuclear: Industrial ambitions collides with public opinion On one hand, we see political incentives to jumpstart new nuclear development The Energy Policy Act of 2005 provides substantial financial incentives Finland and France will build EPR of 1,600 MW. The mounting constraints of CO2 emissions, the current level of electricity prices in wholesale markets, and the tight gas markets situation provide many arguments to reopen the nuclear debate But Nuclear developers need to overcome many hurdles Nuclear developers should build into their plans the assumption of commodity price swings and economic cycles (Developing and building nuclear plants takes a decade even if all goes well and there are no delays ) Public Opinion opposition 13

14 5. Booming market for renewable power generation Several trends underpin the enthusiasm for these new generation technologies. A growing number of countries are implementing mandates, targets, subsidies, and feed-in tariffs to support renewable energy (China, India, Japan, US, Canada, Brazil, Europe) Advancing technology, High fuel prices, Low interest rates, Strong demand growth driven by a growing world economy Supportive framework for these technologies Political awareness & public support Will take very long before alternatives will have an impact (<20 years). KSF will be technology driven efficiency increase to become price competitive 14

15 Table of content Company Profile 5 Key Messages Conclusion 15

16 No single fuel of choice A power plant is a long-lived asset and is likely to go through several large swings in fuel prices. A balanced fuel mix/technology mix of generating plants works as a long-term physical hedge against fuel price risk Price trends for natural gas, coal, and emission allowances are moving toward parity in electric power generation on the margin. Even though coal remains about half the price on a delivered basis, greater efficiency of gas-fired combined-cycle plants and costs for emission allowances at coal plants narrow the gap. Market prices for coal have softened in recent months, but the average delivered cost of coal still is up by 50 percent since Gas prices have moved down quickly, while coal prices typically shift gradually due to dependence upon contracts 16

17 Thank you! Derrick P. GOSSELIN EVP Strategy & Portfolio Management