It’s innovation, stupid!
Dr.-Ing. Leonhard Birnbaum, Member of the Board E.ON SE Generalversammlung Swissgas 22nd / 23rd June 2015, Hotel Bellevue Palace in Bern Disclaimer
This presentation may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group Management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. E.ON SE does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments. Agenda
The German „Energiewende“ is just an example for other energy transitions taking place globally
There is no way back: “Energiewende” is a now global trend driven by innovation not by politics – and digital is a key element
The energy landscape becomes increasingly complex – also for gas
Investor owned utilities and the gas industry need to adopt their business models aggressively to this environment. German energy transition: Achieving the impossible?
Abatement Climate -23.8% of greenhouse Change (estimated) gases in % …
Share in electricity 25.4% … Renewable consumption … Energy Share in final energy 12.4% consumption (2012)
Reduction primary -3.3% energy demand Energy Efficiency Energy productivity +1.1% p.a.
Source: German Ministry of Economics Energy turnaround in Spain driven by gas and renewables
120'000 Stagnation since financial crisis
100'000
80'000
60'000
Installed Installed Capacity MW in 40'000
20'000
-
Hydro Nuclear Coal Gas/Oil Others (CHP, waste,..) Wind PV CSP
Source: Red Eléctrica de España (Spanish TSO) Energy turnaround in the US driven by success of unconventional gas
U.S. dry natural gas production billion cubic feet per day trillion cubic feet History 2013 Projections 40 100 35 90 30 80
25 70 Shale gas and tight oil plays 60 20 50 15 40 30 10 Other lower 48 onshore Tight gas 20 Coalbed methane 5 10 Lower 48 offshore Alaska 0 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Source: EIA, Annual Energy Outlook 2015 Reference case Energy turnaround in China driven by dramatic economic growth China’s net electricity generation by fuel type, 1985– 2014 in TWh
6000
5000
4000 Other RES Wind 3000 Solar Hydro Other (Coal, gas) 2000 Nuclear
1000
0
Source: BP Statistical Review of World Energy 2015 Energy turnaround in the UK: History repeating
100% 400'000
90% 350'000
80% 300'000 70%
250'000 60%
50% 200'000
40% 150'000
30% 100'000 20%
50'000 10%
0% -
1920 1923 1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Conventional thermal CCGT Nuclear Renewables incl. Hydro Electricity supplied
Source: DECC – Department of Energy and Climate Change („Generated electricity“) Agenda
The German „Energiewende“ is just an example for other energy transitions taking place globally
There is no way back: “Energiewende” is a now global trend driven by innovation not by politics – and digital is a key element
The energy landscape becomes increasingly complex – also for gas
Investor owned utilities and the gas industry need to adopt their business models aggressively to this environment. There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don´t know we don't know.“ -Donald Rumsfeld - KNOWN Dynamic innovation and technology are KNOWNS driving changes on energy markets Examples global global Renewable energy: substantial size PV wind 318 GW 139 GW Europe 2014: 72% of new installations (22% in 2000) 1 GW 17 GW
2000 2013 2000 2013
PV: cost decrease beyond expectations 1980 1990 1990 1990 20001990 1990
1990 Price decreased by 20% 20101990
each time the installed capacity doubled Module price Module Cumulative production
Shale gas: technology „Hydraulic fracturing” 2012 US Gas Net importer Increasing gas resources with 42 bcm 2040 Net exporter change global macro economics with 165 bcm
Source: www.iea.org KNOWN Photovoltaic: KNOWNS Continuous cost reduction
PV system price, Germany PV electricity costs vs. end-customer [<100kWp System] costs [€ct/kWh] 40 End-customer price Germany 35 30 25 End-customer price Italy 20 15 PV costs Germany 10 5 PV costs Italy 0 2013 2013 2017 2019 2021 2023 2025
Investment for customers with high own consumption positive without subsidies Dependency on subsidies reducing by further cost reductions and additional appliances increasing the own consumption.
Source: http://www.photovoltaik-guide.de/pv-preisindex KNOWN Batteries: Costs have reached the turning point UNKNOWNS
Costs for batteries [€/kWh]
Investment in PV + battery: positive
Electric vehicles reduce costs for Li-ion batteries by > 50% by 2020. Market leader Tesla “Giga-factory” will produce more than the current global production volume
Source: UBS, Tesla, Umicore KNOWN Digitalization, Big Data & „Internet of things“: UNKNOWNS Integral part of our life in the future
Exploding data volumes
New smart home Appliances and internet 3rd generation of the internet – the Intelligent thermostat „internet of things” connects
Improved automation DSO-grid Control center intelligent grid 1 bn people via PCs Improved „operations management“ OMS 6 bn. People via mobile phones Roll-out of GIS in the grids 28 bn. „things” in 2020 Terminals & automated substations
Estimated annual Estimatedannual data Smart home and end customer data
Intelligent Power Meters
Today
Time
Source: based on EPRI (assuming a 1 million customers energy supply company incl. grid and sales activities) Example for digital handling in the energy sector KNOWN UNKNOWNS …rolls up the German installation market Start 2013 – today Germany’s largest installer
The first online based heating installer • Little assets, no working capital • State-of-the-art digitalization in a traditional market • Proprietary process fully integrated in an IT-architecture with unique planning tool
Three lasting cost advantages: • No on-site visit needed to create best offer • Installation within 1 instead of 2 days • Largest volume discounts in the sector
2013 2014 2015-2017
Source: E.ON Technology & Innovation Example of digital sales in the energy sector KNOWN UNKNOWNS … sells PV-systems online with an individual guarantee on performance In 2014 conversion rate of 15% in NL and an NPS of 73
Guaranteed monthly Attractive, costs and savings personalized are communicated offers in a transparent manner
Several options Simple, easy to use to choose for access for the customers customer
Outstanding after-sales communication to create excellent customer relationship
Source: E.ON Technology & Innovation Innovations will dynamically reinforce KNOWN UNKNOWNS each other “e-Home Energieprojekt 2020” Interdisciplinary field of research with technical & customer oriented questions: main research on VRDT* / batteries / customer satisfaction / e-Vehicles
Photovoltaic Air conditioning E-mobility Smart metering Transparent energy consumption Intelligent local distribution system Battery storage
Ad *: VRDT = Voltage regulated distribution transformer
Source: E.ON Innovation Center Distribution UNKNOWN UNKNOWNS
„Simply because you do not have evidence that something exists does not mean that you have evidence that it doesn’t exist.“ -Donald Rumsfeld -
Agenda
The German „Energiewende“ is just an example for other energy transitions taking place globally
There is no way back: “Energiewende” is a now global trend driven by innovation not by politics – and digital is a key element
The energy landscape becomes increasingly complex – also for gas
Investor owned utilities and the gas industry need to adopt their business models aggressively to this environment. The future energy system is highly complex and will have implications on all our businesses
Hydro Nuclear Power Customers Heat Gas CHP Energy Mgmt. Transm NG from . DK,NO,RUS Via transm- or distr. grid P2G
System Mgmt Industry System Mgmt System Mgmt Import/Export
Substation automation Wholesale Solar E-mob. - Price signalling PV thermal BG Distr. Energy Mgmt. fermentation MV/L Heat plant V System Mgmt BG gasification Individual family houses, PV business premises & offices
White Storage goods
Mini-/micro CHP Gas mob. Nevertheless, Europe will depend on energy imports for the foreseeable future
Mtoe Primary energy consumption EU 1,800 1,641 1,614 1,582 1,600 33 61 1,553 1,533 1,523 166 78 202 95 112 129 1,400 220 230 235 249 other RES 223 261 1,200 202 Bioenergy & Hydro 206 211 1,000 392 207 Nuclear 403 423 Gas 800 434 448 459 Oil 600 526 Coal 476 400 441 403 369 336 200 294 249 218 180 144 131 0 2012 2020 2025 2030 2035 2040
Source: IEA World Energy Outlook 2014, New Policies Scenario
21 Especially in gas new import sources required
Gas demand and supply Europe
[bcm]
600
Europäischer Importbedarf
2010 2015 2020 2025 2030
Import gap NOR NL Unconventionals UK Other
European consumption
22 Gas supply diversification needed for security of supply
Traditional sources Future sources
North
Sea North
Sea
Russia
Russia
LNG
)
(2 4. corridor 4.
North Africa (1) North Africa (1) Eastern Med(4)
LTCs Russia/ Nordth Africa LTCs Russia/ North Africa North Sea production LNG import 4th corridor Eastern Med
24 1) Pipeline-Supply 2) Aserbaidschan, Irak, Iran, Turkmenistan 3) Inkl. unconventional supply from 2015 4) Leviathan Complication: European market currently unable to attract LNG
Gas-Spot prices [€/MWh, nominal]
Fukushima Katastrophe 50 Rough Explosion 45 40 Lehman’s Bankrott 35 30 25 26 20 15 10 10 5 U.S. Shale Gas Boom 0 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15
U.S. Henry Hub U.K. National Balancing Point Japan-Korean Marker
Source: Platts Average until April 2014
25 Complication: Political tensions need to be taken into account in diversifying sources and transit routes ENTSO-G Analysis of impacts of Ukrainian transit stops
Source: ENTSO-G, TYNDP 2013-2022
ENTSO-G Modell: based on IP-capacities, storage capacity, import flex, market demand Modelling of gas flows, Assessment of supply disruption scenarios Sufficient flexibility (i.e. diversification and security of supply) in Western and Southern Europe Disruption of supply via Belarus affects Poland, disruption via Ukraine affects SEE
26 Security of Supply - Germany and Ukraine S. Augustin, M. Hüsken, R. Wagner Agenda
The German „Energiewende“ is just an example for other energy transitions taking place globally
There is no way back: “Energiewende” is a now global trend driven by innovation not by politics – and digital is a key element
The energy landscape becomes increasingly complex – also for gas
Investor owned utilities and the gas industry need to adopt their business models aggressively to this environment. Challenge #1: building smarter energy systems
Smarter Cleaner & better Integration of Renewables conventionals transport (power & gas)
Smart grids / Integration of micro-grids heat
28 Challenge #2: building smarter energy supply chains
Europe +95 bcma
21 (+21) 23 (+8) North America 90 (-19) Pacific Basin 38 (+38) +139 bcma from 2013
10 (+7) Middle East Asia Americas +21 bcma Middle East Asia 35 (+8) +344 bcma 4 (+1) +14 bcma 63 (-4) Africa 15 (+3) 121 (+91) Latin America 3 (-3)
Global LNG Atlantic Basin Oceania trade growth 2013-20 +29 bcma from 2013
+49% Seaborne LNG trade to 475 bcma by 2020 with Europe acting as a balancing market
Source: Wood Mackenzie Ready for a radical re-thinking in this context?
The world largest taxi company owns no cars.
The company owning the most media content globally does not produce content.
The globally most valuable trader has no inventory or stocks
The largest provider for accommodations owns no real-estate.
Source: E.ON Technology &Innovation; wetp@int E.ON is ready for radical re-thinking!
One of the globally leading energy company owns no power plants?
The world largest taxi company owns no cars.
The company owning the most media content globally does not produce content.
The globally most valuable trader has no inventory or stocks
The largest provider for accommodations owns no real-estate.
Source: E.ON Technology &Innovation; wetp@int Two leading companies for two energy worlds UNIPER Generation
Hydro Renewables Upstream Wind/Solar/Other
E&P
Global Commodities Distribution Global Commodities Germany
Other EU Countries
Customer Russia Power Generation Solutions Turkey Brazil
Distinct opportunities, mindsets and capabilities Challenge #3: Application of new technologies to drive future gas demand
High CO2 storage Gas Distributed Bio Gas Storage efficient Heat Methane mobility CCGTs Generation Pumps Analyzing the CCGT > 60% Improve technology, Market entry Commercial Lift the potential of potential of economics and of gas heat pumps production and gas mobility large storage in the environ-mental feed-in of bio energy system: impact of fuel cells methane linking power, gas and Stirling engines and heat
Power the main competitor?! heat bio gas LNG / CHP µ-CHP P2G Power pump (gas) methane mobility pipelines
Gas
Heat
Data exchange
RES, RES, Power / heat Bio fuel, Electro Electric in- in- Heat pump wood, Competitors mobility grid sulation sulation storage (electric) RES-E
34 One example for a smart energy partnership: the joint project „WindGas Falkenhagen“
35 Construction of one of Germany largest gas block heat and power plant by HanseWerk Natur
Customer situation
The district heating station in Stapelfeld, to the east of Hamburg, is part of the district heating system Verbund Ost. In Verbund Ost part of the heat is generated with inefficient boilers.
E.ON solution HanseWerk Natur builds a gas-fired CHP
with10 MWel to generate power for 21,500 households The flexible and highly efficient plant has a total efficiency of up to 95%.
36 Challenge #4: building smarter energy partnerships
38 Conclusion
Embrace innovation …if only to protect your existing business
Be part of the transformation Build smarter energy systems Build smarter global supply chains Support gas as part of the solution It‘s the innovation, stupid!
Rely on proven partnerships E.ON/Uniper appreciate their successful partnership with Swissgas Thank you for your attention