ENERGY MEGATRENDS Impacts and Opportunities. Presented by: Mark Gabriel

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1 ENERGY MEGATRENDS Impacts and Opportunities Presented by: Mark Gabriel

2 What is a Megatrend? A megatrend is occurring regardless of efforts to change its outcome No amount of personal, corporate, or governmental will or desire can prevent it from happening Megatrends can be nudged in certain directions, but cannot be stopped or altered in any major way R. W. Beck R M E L F A L L C O N V E N T I O N 2

3 Megatrend vs Market Trend Planning Megatrend Planning Envisions the future Provides planning longevity Improves business outlook Market Trend Planning Looks to the past to make decisions for the future May miss key insight Can result in financial loss R. W. Beck R M E L F A L L C O N V E N T I O N 3

4 Market Trend or Megatrend? Market Trend Megatrend Selling generation resources Buying Foreign Utilities Buying/Starting ESCOS Renewable Power Outsourcing Deregulation R. W. Beck 4

5 Five Megatrend Destinies Universally Impact the Energy Industry Destiny of the Carbon/ Capacity Conflict Destiny of Intelligent Infrastructure ENERGY INDUSTRY Destiny of Demographics Destiny of Business Model Evolution Destiny of Customer Engagement R. W. Beck R M E L F A L L C O N V E N T I O N 5

6 The Destiny of Carbon Constraints/Capacity Conflict Demand for new power sources will outstrip capacity the 50,000 MW challenge Demand for clean energy will outstrip the technology to supply it Public perception contrasts with the reality of the system R. W. Beck R M E L F A L L C O N V E N T I O N 6

7 The Destiny of Intelligent Infrastructure $28 billion will be spent in next 5 years in T&D alone, much of it adding intelligence to existing systems Only solution to a declining workforce is in automation Critical need to understand dynamic effects of linking communications, computing & energy R. W. Beck R M E L F A L L C O N V E N T I O N 7

8 The Destiny of Demographics 30% of all science and engineering degrees are held by people over 50; average age of a lineman is approaching 48 Expectations of service and needs for service is expanding Movement to warmer climates drives needs Generational expectations Aging workforce Movement to warmer climate Destiny of Demographics R. W. Beck R M E L F A L L C O N V E N T I O N 8

9 The Destiny of Customer Engagement SQRA (security, quality, reliability & availability) are at the core of this change Public will demand the Burger King model of have it your way Systems to manage customer interaction will be required in new and challenging ways R. W. Beck R M E L F A L L C O N V E N T I O N 9

10 The Destiny of Business Model Evolution M&A, asset divestitures and realignments will continue through the next decade Huge increases in the cost of generation and infrastructure will require new partnerships across industry lines Customers will demand new engagements with the industry Financial community will drive many of the changes R. W. Beck R M E L F A L L C O N V E N T I O N 10

11 The Janus Conundrum: Looking Back or Looking Forward Choice of Capital Investment Reliance on the Past Reliance on the Future Repair, replace, rebuild Status quo, current opportunity optimized System limited to yesterday s technology Reduced returns, limited upside, exposure to competition Invest in new generation of technology New business opportunities System expansion Competitive advantage Mark A. Gabriel, Visions for a Sustainable Energy Future R. W. Beck 11

12 Capturing Megatrend Opportunities Develop an understanding of the path and drivers Critical to map current competencies to future needs Focus clearly on resource needs to meet and lead the market R. W. Beck R M E L F A L L C O N V E N T I O N 12

13 Final Quiz: Market Trend or Megatrend? Market Trend Megatrend Selling generation resources Buying Foreign Utilities Buying/Starting ESCOS Renewable Power Outsourcing Deregulation R. W. Beck 13

14 10 Ideas About the Future 1. Stop waiting for the perfect solution and perfect technology. 2. Ensure that the business decisions focus on building your new commodity or service annuity, even at the risk of hurting the old. 3. Invest in infrastructure with no regrets: it may be costly in the short run but will pay off in the long run. 4. Technology is the enabler. 5. Begin speaking to your customers about your business in ways your mother would understand. R. W. Beck R M E L F A L L C O N V E N T I O N 14

15 10 Ideas About the Future (cont.) 6. Best in class will beat cheapest in class any day. 7. Excellent regulatory relations pays dividends. 8. Not taking action in re-envisioning your future is taking action in the wrong direction. Markets in pursuit of a new future will bypass companies standing still. 9. Adjacency will beat synergy any time especially companies seeking synergy for savings, and not to reinforce the commodity business. 10. There is no business more critical, and in peril, than the electricity sector. R. W. Beck R M E L F A L L C O N V E N T I O N 15

16 He that will not apply new remedies must expect new evils, for time is the greatest innovator. - Francis Bacon R. W. Beck 16

17 Questions? Mark Gabriel Executive Consultant & Principal (916) R. W. Beck R M E L F A L L C O N V E N T I O N 17