Energy Transition : a major challenge for the historical actors




As evidenced by the latest report from the international energy Agency (IEA), published on 4 October, it must now reckon with the renewable energy. And this, more especially, underlines a study of the american institute IEEFA (Institute for Energy Economics and Financial Analysis) published on the same day, that their potential for disruption of electricity markets is without common measure with their hand in the production capacity installed. More and more competitive, they have a zero marginal cost which allows them to nibble a little at the use rate of thermal power plants, to the point of threatening their profitability, especially in markets where electricity demand stagnates or declines.

When renewables are threatening the kingdom of the fossil fuels

The authors of the study cite the Texas case. The kingdom of the fossil fuels, which is also one of the major power markets of the continent, the rapid development of solar and wind power is gradually coal-fired power plants at technical unemployment.

In Europe, the same causes have led to a drop in prices on the wholesale markets of electricity which, at 80 euros the mégawhattheure (MWh) in 2008, growing today between 30 and 50 € /MWh.

To illustrate the violence of the impact on the electricity markets of the collapse of the costs of renewables, the authors refer to the examples germans, E. ON and RWE, both of which have chosen to split in two, to separate the new energy of conventional energy.

The fruits of an early conversion to green energy

Citing Standard & Poor’s, the study reiterates the benefits to the operators of renewable energy, including increasing their capacity of production by enlarging them or renovating them, and play on the complementarity of their portfolio, often composed of several technologies. Those that have positioned themselves at the earliest have also been able to benefit from measures, particularly incentives, such as feed-in tariffs to be particularly beneficial for first years. Finally, according to S&P, the companies have undertaken to put more green in their portfolio would benefit from loan conditions most interesting.

And yet, even if there has recently been a proliferation of acquisitions in the sector, the energy treaty has long been considered the renewable with condescension. According to the IEFFA, they had enough to regret it. The institute also shows the link between the financial health of these companies and the serious and the earliness with which they have taken the measure of the revolution that is preparing.

150 billion of impaired assets in Europe between 2010 and 2016

IEEFA are two excellent students : the Italian Enel, for which 50% of the production capacity is already made up of renewable energy, is aiming for a production completely carbon free. The U.s. NextEra is the largest producer of wind power in the country and also has solar farms in Florida and Arizona. Conversely, the south African Eskom is in their eyes guilty of having missed the turn of the energy transition but also does not satisfy neither its customers nor its shareholders.

In Asia, the situation of Tepco, stuck in the fallout of the Fukushima nuclear disaster, opposed to this of AGL, an Australian initially positioned exclusively on coal, but which has taken on the challenge of renewables.

The authors remind us that the international energy Agency has estimated at $ 150 billion asset impairments recorded by the energy companies in europe between 2010 and 2016.

Late Conversion but resolved to Engie

For Engie, the study reminds us of the debt, the authors acknowledge its orientation, late but determined, to green energy.

Of course, investments are relatively recent in the fossil fuels (acquisition of International Power in 2012) and impairment of assets, fossil or nuclear, for a total of 33 billion euros from 2010 to 2016 have sealed its accounts and shall unscrew the Stock price.

But the transformation plan over three years announced in early 2016 tranche with the previous years. It is already translated by the sale of assets fossils in the United States, India and Indonesia, the closure is emblematic of the central australian of Hazelwood, the sale of the assets of Engie Brasil and the abandonment of its projects in South Africa and Turkey. The group is also disengaged from its nuclear projects in England and its stake in Westinghouse.

At the same time, wind projects, solar and even geothermal multiply almost everywhere, including in India, thanks to the purchase in 2015 of Direct Solar, which is well established in the sub-continent. Equity participation of 30% in the Chinese Unisun last April, or the acquisition of EV-Box, european leader of terminals of the electric vehicle charging, are other signs that the transition is committed.

The course of Purse as a witness

Moreover, IEEFA does not miss to note that the interim results of Engie reflect the progress of its transformation plan, with a turnover and a profit increase of respectively 1,6% and 3.5%.

On the basis of the enterprises they studied, the researchers calculated that since 2007, the value total global market of the main companies of the energy had melted from 67%. At the same time, those accumulated by the Italian Enel and the U.s. NextEra and the Australian AGL who came much later but with conviction, has jumped nearly 30%. What rally new followers…

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