THE MAJOR ENERGY USERS COUNCIL BUSINESS ENERGY ROADSHOW SERIES SPRING 2012

Transcription

1 THE MAJOR ENERGY USERS COUNCIL BUSINESS ENERGY ROADSHOW SERIES SPRING 2012 Supported by APX-Endex * Autoflame * British Gas Business * Corona Energy * EDF Energy * ENER-G * E.on UK * Gazprom Marketing & Trading Retail * Haven Power * Inenco * Kingspan Renewables * Local Green Energy * npower * Shell Gas Direct * SmartestEnergy * Total Gas & Power * The Chartered Institute of Purchasing & Supply * Water, Energy & Environment

2 Welcome and Roadshow Objectives Andrew Bainbridge Chairman The Major Energy Users Council

3 Assessing Energy Prospects and Reviewing the Options Andrew Buckley Director General The Major Energy Users Council

4 Roadshow theme: Putting the horse back infront of the cart

5 Major Energy Users Council Independent voice for larger users for past 25 years Provide support for energy purchasing,carbon/energy management and water cost control Market intelligence, supplier troubleshooting, networking meetings and training through the MEUC s Academy Membership is by annual subscription Club of energy users with no axe to grind

6 Today s Programme Three Market Outlook presentations for gas, electricity and prices Coffee and networking exhibition Three Energy Skills and Initiatives workshops Lunch and exhibition Debate on Planning for Future Energy Change Tea and Exhibition MEUC s Westminster Report

7 Haydock Park Outlook Team Gas Prospects Richard Street, Corona Energy Power Prospects Stephen Darch, Inenco Price Prospects Omar Rahim, Local Green Energy Combined Forum for Questions

8 GAS SUPPLIES FOR 2012 AND BEYOND Richard Street Regulatory Affairs Manager Corona Energy

9 Market Outlook: A period of change?

10 What has happened to Energy Prices Themes are Gasoil, LNG and Eastern Europe Gasoil: Iran Is the worst yet to come? LNG Japanese yet to bring nuclear reactors back Russia and eastern European tensions and its been a cold end to February

11 What has happened to Energy Prices

12 Bullish Outlook Winter/Spring Outlook Short/Medium range storage partially used Increasing Geopolitical Tensions Eastern Europe (esp Ukraine) Iran Israel threatening unilateral action, US Presidential Elections, Sudan Japanese nuclear power offline and no certainty on returns 60 cargoes to Japan so far this winter Zebruggee reloading LNG to Japan

13 Bearish Outlook Winter/Spring Outlook Average winter temperatures high (+/-) Euro still weak and Greece keeping it low Little demand growth Nordstream online Statoil production highs Battle for Britain

14 Long-term Outlook -Old Fundamentals of E&P Globalisation Tax Renewables/Carbon Energy Efficiency Shale

15 Long-term Outlook -New Energy Efficiency Shale & other E&P Innovation Fundamentals of E&P Globalisation Tax Renewables/Carbon Security of Supply

16 Supply Markets Summary Very low net margins in I&C gas Huge increase in risk & obligations Transporter risk (e.g. xoserve, DM service, User Pays) Unidentified gas costs Shorter balancing periods (incl. backbilling) Standards of Conduct SLC Smart Metering Green Deal Security of Supply

17 Supply Markets Summary Very low net margins in I&C gas Huge increase in risk & obligations Transporter risk (e.g. xoserve, DM service, User Pays) Unidentified gas costs Shorter balancing periods (incl. backbilling) Standards of Conduct SLC Smart Metering Green Deal Security of Supply Possibility of new smart products

18 Supply Markets -Bullish Smart products that use smart data to reduce balancing risk Renewable gas products (biomethane) Waste water Landfill gas Industrial waste via AD Liquid bm Energy Efficiency products that integrate with your purchasing strategy

19 Supply Markets -Bearish Homogenisation of the market Small independent suppliers are being squeezed out EU and UK look to have given up on markets System and process designs favour the Big 6 Balancing costs savings will not negate the other increased costs Other renewables favoured by the government over biomethane

20 GENERATION AND ELECTRICITY SUPPLY OUTLOOK Stephen Darch Senior Business Development Manager Inenco

21 Generation and Supply Outlook HaydockPark 7 th March 2012 understanding energy

22 UK Electricity Generation Current situation... Coal 25.8% Natural Gas 47.7% Nuclear 18% Renewables 6.6% Others 1.9% Welcome UK Electricity Generation Nuclear and Coal The Generation Gap

23 Nuclear and Coal Who turned out the lights? Coal Plants not complying Nuclear with EU Plants Large Combustion ending their Plant life Directive cycle Hinkley Didcot Point A (1,958MW) B (1,260MW) Ferrybridge(1,995MW) Dungeness Ironbridge(970MW) B (1,080MW) Kingsnorth(1,940MW) Hartlepool Tilbury (1,038MW) (1,190MW) Heysham Stage 1 (1,200MW) UK ELECTRICITY GENERATION MIX UK Electricity Generation Nuclear and Coal The Generation Gap Plugging the Gap

24 The Generation Gap? Increasing demand, reducing capacity... 39% growth by 2030? How will we plug the gap? And how will this effect price? Nuclear and Coal The Generation Gap Plugging the Gap New Gas Fired Plants

25 Plugging the Gap Gas LNG, Shale Gas... Prices & Availability? Renewables Wind, Biomass, Anaerobic Digestion, Solar PV... New Nuclear... Still timing uncertainties. The Generation Gap Plugging the Gap New Gas Fired Plants Dependence on Gas

26 Dependence on Gas In 2010 the UK became a net importer of gas Anticipated 80% dependence on gas imports by 2020 Gas will be plentiful...but at what PRICE? Global Issues i.e.; Japan s nuclear future? Possible impact... Volatile markets in the short term, more exposure to external factors e.g. geopolitical issues New Gas Fired Plants Dependence on Gas LNG Shale Gas

27 New Gas Fired Plants New gas fired generation came online in 2010/11 Increased gas prices mean much tighter margins for gas plant is it viable to build new gas plant? 2011/early Several gas fired plants went offline in favour of coal due to high gas prices and low margins Staythorpe Power Station Langage Power Station Plugging the Gap New Gas Fired Plants Dependence on Gas LNG

28 LNG The market for importing LNG overseas is booming We have developed the infrastructure to accommodate the largest tankers We need to secure flexible and adaptable contracts for long term supply Dependence on Gas LNG Shale Gas The Drive for Renewables

29 Shale Gas UK has potentially significant reserves US gas prices almost halved compared to UK Controversy over fracking LNG Shale Gas The Drive for Renewables Renewables: The Challenges

30 The Drive for Renewables Renewable volume currently 6.6% Supported by government / EU legislation Focus on offshore wind and microgeneration At the end of this year, 6 / 10 biggest offshore wind farms in the worldwill have been built in the UK All built over the period Shale Gas The Drive for Renewables Renewables: The Challenges Our Conclusion

31 Renewables: The Challenges Wind /Solar PV is intermittent more focus on Biomass? Feed In Tariff renewable subsidies have been controversially cut for Solar PV and Wind Contract for Difference Feed In Tariff... Still not enough detail to plan projects for this new scheme Intermittent generation and the increase in distributed generation means that an estimated 4.7 billionwill need to be invested into the electricity distribution network in the next 10 years The Drive for Renewables Renewables: The Challenges New Nuclear Our Conclusion

32 New Nuclear "2019 at the earliest" Tony Blair: "The new generation "We believe of nuclear power stations new nuclear can will be fired up be online in the UK by 2017" in 2016" "Up to 10 new nuclear plants by 2020" Renewables: The Challenges "First new nuclear plant due to be built by 2018." Fukushima: "Review to cause 3-month delay in UK nuclear programme" "Could open in 2020" 2010 New Nuclear Our Conclusion Who We Are

33 Our Conclusion Over the coming years, we are likely to see higher pricesand an increased risk of serious disruptionsto electricity supply. In light of this we have some recommendations: WHAT CAN YOU THE CUSTOMER DO??? ISO Have another look at ways of reducing energy consumption,paybacks will get shorter as prices rise Prepare emergency response plansin case of electricity interruptions Build your renewable project nowso that it is generating when prices start to rise Ensure your long-term budgets account for increased energy costs Look at ways of hedging against long-term price rises Look at ways of reducing imports for short periods by load shedding or selfgeneration New Nuclear Our Conclusion Who We Are What We Do

34 Questions What We Do Questions

35 Who We Are Inenco, NIFES, Inenco Direct Inenco established 1968 NIFES established 1953 Seven offices 400+ staff UK and Europe 14 different languages UK Ireland France Italy Spain Netherlands Belgium Germany Austria Czech Rep. Hungary Poland Slovakia Portugal Switzerland Sweden Denmark Norway Finland Romania Our Conclusion Who We Are What We Do Questions

36 What We Do Energy Procurement and Risk Management Low Carbon Projects Data Management and Reporting Building Services and Property Energy and Carbon Reduction People and Management Who We Are What We Do Questions

37 PROSPECTS FOR BUSINESS ENERGY PRICES Omar Rahim Director of Trading & Operations Local Green Energy

38 Major Energy Users Council Roadshows Spring 2012 PROSPECTS FOR BUSINESS ENERGY PRICES

39 Introduction Part of the Greengen Group 30 million in generation assets planned Energy procurement & Risk management specialists Owns the Energy Trader Daily brand, operates from our state-of-the-art trading floor (2,500+ subscribers) Servicing large energy users, providing RM, energy management and on-site generation Open-book

40 Contents What have prices done to date? What are the drivers for prices right now? Volatility What are prices likely to do? What should I be doing to manage my risk?

41 What have prices done to date? Brent Crude oil prices 2007 to date

42 What have prices done to date? NBP Summer 12 gas sees resistance in 2011, then falls to 14 month low mid-jan 2012 before bouncing sharply

43 What have prices done to date? Power prices continue falling from March 2011, hit 21-month low in mid-jan before bouncing in line with gas

44 What are the current price drivers? MACROECONOMICS SUPPLY/DEMAND FUNDAMENTALS GEOPOLITICS TECHNICAL ANALYSIS Eurozone Debt Emerging Market Demand LNG Storage Weather Iran Arab Spring Retracement of move down LONG TERM LCPD 2015 Shale development Japan/Asia demand

45 Volatility Markets are currently volatile and difficult to predict, after seeing a strong downtrend throughout 2H Day-Ahead Gas price Oct 2011 to March 2012

46 Volatility $ $120 Daily candlestick chart Brent Crude Rumour of explosion on Saudi pipeline, later denied

47 What are prices likely to do next? Market dynamics have shifted away from a strongly bearish market and have bounced aggressively since mid-jan 2012 Hedge fund volumes have returned to the market with increased long positions Oil reached 44-month high on Saudi rumours but Iranian premium still persists Prices may have reached their low in January Rebound quite aggressive, backed up by lack of LNG cargoes in to the UK Japan continues to attract LNG cargoes with just 2/54 nuclear reactors online Bearish arguments based around Eurozone debt crisis and potential double-dip recession We currently feel the upside potential is greater than the downside, and are advising clients of price rises in the medium to long term

48 What should I be doing to manage my risk? Buy smarter Buy more efficiently Reduce consumption Understand what is moving the markets market intelligence Have procedures in place to deal with multiple scenarios Proactive and robust risk management Eradicate inefficiencies within existing supply contracts and ensure maximum flexibility Cut out trading premiums by more efficient routes to market (e.g. APX HH trading, sleeving) Improve forecasting techniques Energy saving measures Demand-side management On-site generation

49 Contact details Omar Rahim Director of Trading & Operations Local Green Energy Editor Energy Trader Daily 3 Neptune Court, Hallam Way, Whitehills Business Park, Blackpool, Lancashire FY4 5LZ Tel:

50 ENERGY MARKETS FORUM Andrew Buckley Richard Street Stephen Darch Omar Rahim

51 Haydock Park Workshops 1. Making the Most of Demand Side Management Graeme Dawson, npower 2. Energy Performance Contracts Richard Scott, E-on Sustainable Energy 3. An Introduction to Energy Trading Howard Wright, APX Endex

52 The MEUC Energy Debate Planning for Future Energy Change

53 Planning for Future Energy Change Haydock Park Panel Mike Hogg, Shell Gas Direct Richard Street, Corona Energy David Taylor, Smartest Energy Eddie Proffitt, MEUC

54 MEUC Spring Roadshows Haydock 07/03/12 Planning for Future Energy Change Meeting our Future Energy Needs Mike Hogg GM Shell Gas Direct Copyright of Shell Gas Direct CONFIDENTIAL September

55 Meeting Our Future Energy Needs Topic Generic Coal Electricity Gas Oil Renewables Heat Comment / Issue Three Hard Truths: Doubling of global demand by 2050, no supply silver bullet, need to find solutions against the environmental back-drop. CCS: all parts (capture, transition & storage) proven working UK example? Which generation fuel? EMR & network investment ( 200 billion). Available, affordable & acceptable. Global market changes (nbusa Exports & UCG) Dwindling in I&C but still key in transport. Efficiency, electric, gas (GTL/CNG), hydrogen, bio-fuels? A key part of the mix. Timing / Cost / Subsidy? A reality in the UK now. Another way to look at the energy scene issues. Organisational Dumb down or wise up? Centre of the boardroom radar screen. Water A crucial focus -now and in the future. Demand side management: the cheapest molecules & electrons are the ones you don t use. Copyright of Shell Gas Direct Ltd CONFIDENTIAL October

56 MEUC s Westminster Report Eddie Proffitt, Head, MEUC Carbon and Gas Group Hugh Conway Head, MEUC Electricity Group Andrew Bainbridge MEUC Chairman and Head of the Water Group & Head of the Renewables Energy Strategy Group

57 Putting the horse back infront of the cart

58 THE MAJOR ENERGY USERS COUNCIL BUSINESS ENERGY ROADSHOW SERIES SPRING 2012 Supported by APX-Endex * Autoflame * British Gas Business * Corona Energy * EDF Energy * ENER-G * E.on UK * Gazprom Marketing & Trading Retail * Haven Power * Inenco * Kingspan Renewables * Local Green Energy * npower * Shell Gas Direct * SmartestEnergy * Total Gas & Power * The Chartered Institute of Purchasing & Supply * Water, Energy & Environment