This year’s POWER-GEN Europe Confidence Index surveyed more than 800 power professionals. The results spotlight the countries and technologies which they believe will see growth in the coming years, writes Kelvin Ross

 

Credit: Ansaldo Energia

A new survey of more than 800 power industry professionals provides a fascinating barometer of the European energy market.

It presents a snapshot of the current top destinations for power equipment and services and also gives vital insight on those countries that the industry believes will be future investment hotspots.

And it also offers a glimpse of those sectors that are predicted to grow over the next 20 years, and those that are expected to see little growth or even dwindle.

The POWER-GEN Confidence Index surveyed 833 power players, ranging from chairs and chief executives to on-the-ground engineers, who work in all sectors of the energy industry.

The survey asked them for their views of the European economy and its knock-on effect for the power sector. It also gauged their opinions on the current top European destinations for the supply of power equipment and services; the countries that will be attractive investment locations in the next five years; and also the trends and technologies that will either rise or fall over the next two decades.

While the majority in the industry anticipate sluggish growth at best in the overall European economy for the next 12 months, the overwhelming view is that demand for electricity will increase – perhaps by around 3 per cent.

R&D spend in the European power sector is expected to keep pace although jobs are felt to be at risk: a reversal of 2015 when many felt headcounts would increase.

The trio of employment, R&D and total consumption is positively correlated with overall confidence in the European economy. However, while the majority expect to see investment in R&D as long as the economy does not shrink by more than 1-2 per cent, it is felt that the economy needs to grow substantially (+3 per cent or more) before new jobs are created.

Storage tops the trends

Respondents were asked to rank which topics they believed would be the most important to the European power sector, firstly over the next ten years, and then over the next 20 years.

Energy storage takes top place in both timeframes, confirming its importance to the industry as a means of grid flexibility and realizing the full potential of renewables.

The rise of both Smart Cities and Electric Vehicles, from rankings in the ‘teens’ for the next ten years to the top ten by 2036, shows that there is an expectation that these two areas – which many would say are inextricably linked – will feature heavily in the ‘smart’ energy world of 2030’s European cities.

Only five categories stay in the same position across both timeframes. Energy storage stays top and coal fired generation stays bottom. In between come managing the risk of blackouts (a given for any power company) and decarbonization of the electricity sector.

However, it is interesting that offshore wind is viewed as being vital for the whole of the next two decades. Onshore wind rises from 17th place to 2026 to 11th place by 2036.

Wave and tidal technologies came second from bottom with 5 per cent over ten years, and while rising only one place over the 20-year period, nevertheless polled 22 per cent of respondents, showing that the technology is seen as one that will eventually come to figure in the European energy mix.

Carbon capture and storage was similarly viewed, scoring 7 per cent of votes over the next ten years but increasing to 26 per cent over two decades.

Prepared for the challenges?

Having identified those areas of the power industry regarded as vital to the sector, the report then reveals the level of confidence that the respondents have in the preparedness of the industry in each case.

This reveals a lack of confidence in some highly important areas such as energy storage and cyber security.

This is understandable given that these are relatively new issues for the sector, but more surprising is the sentiment that the industry is underprepared for decarbonization and decentralization, both seen as central parts of the energy transition.

The one area where the industry feels unclear as to the level of importance and preparedness is in the role of prosumers, which may reflect a widespread uncertainly as to how this market will develop, or may be explained by the fact that this issue sits at the far end of the energy value chain for most of those completing the survey.

Confidence in the industry’s own readiness to meet the challenges of the next decade bore no relation to their confidence in the European economy as a whole.

The most vital trends and sectors over the next 10 and 20 years

New generation infrastructure

The Index asked industry players which European countries are currently the most significant for the inward supply of power generation equipment and services in relation to four areas: all types of new generation infrastructure; existing plant refurbishment & modernization; renewable energy generation; and conventional power projects.

In all four of the ‘current scenario’ areas, Germany, unsurprisingly, is the number one choice by a clear margin. The UK also appears in the top three of all four ‘current’ areas. A major factor behind this will be Britain’s Capacity Market, a government initiative designed to provide energy security by offering electricity providers a steady, predictable revenue stream on which they can base their future investments. It is also intended to incentivize investment in more sustainable, low-carbon electricity capacity.

Italy and France are the other two countries that figure in the top five of all the current scenarios, the latter having embarked on a path to wean itself off its dependence on nuclear by investing in cutting-edge gas-fired technology and also developing a domestic supply chain of wind and solar production after being a relatively late adopter of renewable technologies.

Poland comes second in the current scenario on conventional power projects, due to its dependence on coal and its commitment to building a new fleet of coal-fired power plants with the latest ‘clean coal’ technology. This also accounts for its high ranking in the equipment and services scenario (fifth place) and that of existing plant refurbishment and modernization (sixth place). It also in turn accounts for Poland’s omission from the renewable scenario.

Turkey also appears in all four scenarios, an indicator of the fact that it is seen as a country with vast power potential, primarily in the conventional arena but also for renewables.

When comparing the destinations for the inward supply of power generation equipment and services for both conventional and renewable projects, only Turkey, Poland, Russia and the Czech Republic are chosen as those that strongly favour conventional over renewables. The remaining – and majority – of the other countries all are seen as being hotspots for renewables more than conventional power. Sometimes the gap between the two is wide, such as Denmark, Sweden and Norway (all early adopters and now mature users of renewables) and Spain, thanks to a push in recent years to exploit solar power. For other countries the gap is much closer – just 1 per cent for France, 3 per cent for Italy and 5 per cent for the UK, highlighting the fact that these countries are on a path to a broad energy mix.

Investment hotspots

Those polled for the Index were then asked to name the countries they believed would see the most financial and/or capital investment over the next five years for the same four categories: all new generation infrastructure; existing plant refurbishment & modernization; renewable energy generation; and conventional power projects.

Examining the results provides a fascinating snapshot of where the power industry believes the money will be going in the next half-decade. Unsurprisingly, Germany is predicted to see more investment in renewables than conventional (55 per cent vs 40 per cent), but interestingly the same is true of the UK (33 per cent vs 22 per cent) and France (30 per cent vs 21 per cent). Poland, Russia, Ukraine and the Czech Republic all feature in the conventional power investment top ten, but don’t figure at all in the renewable top ten, while Italy, Turkey and Denmark make it into both.

Italy was chosen by more respondents as a destination for conventional investment in the next five years than for renewable investment – interesting when we consider that the earlier question that gauged its current standing as a destination for the supply of power equipment and services found in favour of renewables by 29 per cent to 26 per cent. This can perhaps be attributed to Italy needing to refurbish and modernize its conventional fleet in coming years.

Norway, Sweden, the Netherlands and Spain only feature in the renewable top ten. Indeed, the 13 percentage-point gap between renewables vs conventional investment for the Netherlands (17 vs 4 per cent) matches that of renewable standard-bearer Denmark (23 vs 10 per cent), highlighting the strides that the Dutch have made in integrating renewables into their energy mix and smart city models.

The biggest disparity between investment in renewables and conventional is seen with Poland – 30 per cent for conventional vs 9 per cent renewable. Equally interesting are the results for those countries that fall outside of the top 10 in each category. The results reveal that respondents felt there would be renewables growth in Portugal, Ireland, Finland and Austria, and equally strong conventional power business seen in Ukraine, Belgium and Hungary, while Serbia and Romania are seen as hotspots for business in existing plant refurbishment and modernization.

To download the 2016 POWER-GEN Confidence Index, please visit: www.powergeneurope.com/en_GB/power-gen-europe-confidence-index.html