Deloitte: Nuclear disaster to shake up power and utility industries
24 May 2011
New York –In a new report from Deloitte Touche Tohmatsu Ltd (DTTL), suggests the recent natural disasters that led to a nuclear meltdown at the Fukushima nuclear plant in Japan will have far-reaching impacts on the global nuclear power industry.
The report, titled Empowering ideas 2011: A look at 10 of the emerging issues in the power and utilities sector,, offers insights into issues and trends in the coming year and identifies opportunities. This includes the high growth of unconventional gas and challenges related to the security of energy supplies.
“The impact of the events in Japan on the nuclear industry will be both profound and long-lasting,” said Peter Bommel, DTTL global industry leader for energy & resources. “As the demand for energy continues to increase, energy companies will face formidable challenges in balancing safety concerns with energy demands.”
DTTL’s report predicts that governments, utilities, and consumers will increasingly tap into energy efficiency and demand side management programs to address these challenges. Another trend, according to the report, is the growing importance of data analytics, which help companies analyze enormous data sets to create scenarios and make informed decisions.
“In tracing the top trends in this year’s report, it is clear that each issue will affect each company differently, depending on both their business model and on the jurisdictions in which they operate,” said Bommel, .
“The earthquake and resulting tsunami in Japan will have repercussions across the entire spectrum of power and utilities resources during 2011 and beyond. Perhaps the most important takeaway from this year’s report is the need for infrastructure risk management.
“Whether power and utilities companies use natural gas, coal, nuclear, or renewable energy, they will place new emphasis on infrastructure safety.”
The DTTL report outlines 10 ’forces’ (see listing below) impacting the global power and utilities sector.
- The future of nuclear: The post-Japan path. The Fukushima disaster will definitely result in a call for enhanced safety standards. Yet nuclear power is a large and stable contributor to baseload generation, and nuclear plants are carbon-free supplements for renewable sources. Therefore it’s easy to see that nuclear power will remain an important and strategic part of the global electricity mix for decades to come.
- Risk management: The new challenge. Electric power projects are some of the most complex in the power and utilities industry. The industry’s complexity and continued globalization drives high risk in capital projects, and failing to successfully execute these projects can significantly impact shareholder revenue. There appears to be a need for interoperability and efficient data management.
- M&A: Is it time to buy or sell? By and large, utility mergers are being driven by the challenge of finding growth opportunities within existing utility service territories. This is due to reduced customer demand and associated reduced opportunity for power generation or electric transmission investments. 2010 was characterised by a lack of mega deals, but several were prominent.
- An energy resource dilemma: Is natural gas the clear winner? Gas-fired generation will likely continue on a solid growth trajectory through 2035, although since the early 1990s, the growth has been somewhat slower than the rapid market expansion. Increased gas use in the power sector is sensitive to several market fundamentals, including the depth and longevity of the current shale gas boom and its impact on prices; the aggressiveness and pace of governmental policy actions to reduce carbon emissions; and the rate of market penetration by renewable energy.
- Driving performance in “smart” utilities: Data analytics to the rescue. According to some estimates, smart meters and smart grids will likely have utilities companies capturing metered data every 10 to 15 minutes during every hour of every day, which will dramatically increase data management processing. Further, the yearly data storage requirements for 500,000 meters reading every 10 to 15 minutes are estimated to be 200 terabytes, which will place severe constraints on many utility IT departments.
- Clean technologies: Which ones are leading? The most attractive location for investments during Q1 2011 in energy efficiency, bio-energy, solar, wind, water, and geothermal was the U.S., with 96 deals. There were 29 deals in the UK, 20 in China, and 18 in Germany. Investments in energy efficiency are likely to remain a trend for the foreseeable future in OECD nations such as the U.S. and the UK.
- Reversing course in LNG: From west to east. More and more Liquefied Natural Gas (LNG) is on its way to Asia, reversing a trend of only a few years ago when most of the LNG was being imported by the west. This is not just happenstance but rather a result of increasing demand in Asia and growing gas supplies in the US and Australia.
- Trends in carbon: What utilities can do now. What utilities can do is understand carbon exposure, use scenario analysis to understand the viability of the business model under a variety of carbon price scenarios, and prepare to provide more detailed disclosure on the company’s carbon impact to a host of parties from both the public and private sector.
- Renewable energy: Key trends and outlook. Since the end of the global economic recession, growth in the renewable energy industry continues to gain momentum, according to a number of recent studies. These studies indicate that while solar and wind energies remain the leading growth industries, hydropower projects are making a comeback, especially in Europe. Perhaps just as important is an emerging new link between natural gas and wind and solar power.
- Energy efficiency and demand side management: Status and outlook. Energy-saving programs that are administered by electric utilities comprise a rapidly growing sector of the demand-side management industry. Energy efficiency funding remains robust and continues to increase substantially in the U.S. and Canada. The combined total of energy efficiency program budgets for ratepayer-funded electric and gas programs reached nearly US$6.1 billion in 2009, up from $4.5 billion in 2008.
