THE ENERGY INDUSTRY T I M E S
April 2018 • Volume 11 • No 2 • Published monthly • ISSN 1757-7365 www.teitimes.com
Embracing AI Intelligent
Although the energy sector is cooperation
embracing the benefits of artificial
intelligence, some argue that much
work is still needed.
Page 13
Data analytics and closer cooperation
with digital solutions providers are
key to driving generating asset
performance. Page 14
News In Brief
India and France accelerate
low-carbon transition
The drive to decarbonise the
energy sector, and in particular
the acceleration of solar energy
deployment, received a significant
boost during a recent visit to India
by a French delegation.
Page 2
Growing energy storage
market fuelling new
strategies
Energy storage solution providers
are racing to gain a competitive
advantage in the fast-growing US
energy storage market.
Page 4
Sluggish demand halts
Indonesian projects
Indonesia’s state electricity company
PT PLN has cancelled the allocation
of around 22 000 MW of power
projects, due to sluggish electricity
demand in 2017.
Page 5
France examines falling
offshore wind costs, as
Dutch see zero-subsidy
tender
Plans by the French government
to renegotiate the feed-in tariffs
awarded to six offshore wind farms
have been rejected by the French
Senate.
Page 6
Statoil goes green with name
change
Statoil says that its proposed new
name to Equinor will reflect the
company’s history as well as its
future strategy.
Page 8
News Viewpoint
The memorandum of understanding
signed between Saudi Arabia and
the UK on low-carbon technologies
is very fortuitous for both countries,
says Vicente Lopez Ibor Mayor
Technology: The cryptokilowatt
A new energy start-up hopes to
address the issue of rising energy
consumption in the cryptocurrency
sector – by building power plants for
its own coin mining operations.
Page 15
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Final Word
Solving the space-timeenergy
equation isn’t easy,
says Junior Isles.
Page 16
E.On and RWE reposition in
response to changing market
Teyssen and
Schmitz; weathering
the transition
Germany’s two leading utilities have agreed a deal, which they hope will equip them for the
future energy market and improve their strength in the international arena. Junior Isles
German energy giants E.On and RWE
are attempting to improve their competitiveness
in the international energy
market through a deal that will
help them navigate the challenges of
a sector that is going through rapid
transformation.
The former rival utilities recently
agreed a deal that will see E.On first
acquire renewables company Innogy
from RWE. The acquisition will be
followed by a series of asset swaps
that will leave E.On focused on regulated
energy networks and retail customers,
and RWE as a leading energy
producer with ownership of the renewables
businesses of both E.On and
Innogy.
Under the terms of the agreement,
E.On will buy RWE’s 76.8 per cent
stake in Innogy, the renewables energy
business that was spun out in 2016,
and table a €5.2 billion all-cash offer
worth €40 a share to Innogy’s minority
shareholders.
E.On will then transfer back Innogy’s
renewable energy assets as well
as its own to RWE. This will see E.On
become Europe’s largest operator of
electricity grids and retail, while RWE
will be the continent’s second-largest
producer of green energy.
The total value of both transactions
stands at up to €60 billion, with
E.On’s takeover of Innogy accounting
for €43 billion and the assets
handed over to RWE in the second
stage valued at €17 billion.
In addition to the transfer of E.On’s
renewables businesses, RWE will receive
a 16.67 per cent stake in E.On.
Additionally, E.On has agreed to
transfer a minority stake held by its
subsidiary PreussenElektra in Emsland
and Gundremmingen nuclear power
plants, currently being operated by
RWE.
There will also be a transfer of Innogy’s
stakes in the Austrian energy
supplier Kelag, as well as renewables
and gas storage businesses to RWE.
The transfer of businesses and participations
will be calculated from 1 January
2018. E.On will receive a cash
payment of €1.5 billion from RWE as
part of the contract.
The transaction is expected to close
by the end of 2019.
E.On and RWE had carried out restructuring
of their businesses as a
result of significant upheaval in Germany’s
energy sector. Both were hit
hard by the so-called Energiewende –
an accelerated shift towards renewables
following the decision to close
all its nuclear power plants in response
to the Fukushima Daiichi nuclear
power plant disaster in Japan.
The two utilities decided to break
themselves up. RWE spun-off its
green energy operations into Innogy,
while E.On created separately listed
Uniper to hold its conventional power
business. In January, it sold its 47 per
cent stake in Uniper to Fortum, the
Finnish utility
Explaining this latest move, E.On
CEO Johannes Teyssen said that
E.On’s business segments (Energy
Networks, Customer Solutions, Renewables)
all have growth potential.
“The new energy world is green,
digital, and distributed. Our customers
expect us to provide them with
innovative solutions that improve
their lives. We intend to meet these
Continued on Page 2
Fossil fuel firms cannot afford to ignore climate goals
Fossil fuel companies risk wasting
$1.6 trillion by 2025 if they base
their business on emissions policies
already announced by governments
instead of international climate
goals.
According to a report released by
Carbon Tracker, which models the International
Energy Agency’s 1.75°C
scenario for the first time, these companies
risk spending money on oil,
gas and coal projects that will become
uneconomic if the world accelerates
its efforts to tackle climate change.
Carbon Tracker compared demand
for fossil fuels in a 1.75°C world – the
mid-point of the Paris Agreement –
with demand in a 2.7°C world, looking
at oil, gas and coal production to
2035 and capital investment to 2025.
The $1.6 trillion figure represents
the difference between the estimated
$4.8 trillion of investment needed to
meet global fossil fuel demand between
2018 and 2025 under current
climate policies and the $3.3 trillion
that would be required if the Paris
agreement on reducing carbon emissions
was fully implemented.
The greatest risk is in the oil sector,
where $1.3 trillion of investment
would become uneconomic if governments
introduced measures such as
carbon taxes and stricter emissions
regulation. Nearly $230 billion of gas
projects and more than $60 billion of
coal investment were also threatened,
claims the report.
Private investors are at greater risk
than state-owned companies. They
are exposed to 88 per cent of the
spending on unneeded oil and gas
projects. For coal, private sector capital
spending in a 1.75°C world is half
the level under 2.7°C. The report
notes that investors are increasingly
focusing on an “orderly transition”
which minimises financial disruption
in the process.
“At present, governments’ policies
fall a long way short of the ultimate
goal committed to at Paris, but we
should expect a ratcheting up of international
efforts. Companies that misread
the signals and overinvest in
marginal oil, gas and coal projects
based on a false sense of security
could destroy shareholder value worth
billions of dollars,” said report author
Andrew Grant, senior analyst at Carbon
Tracker.
Last month a group of 22 Commonwealth
scientists urged stronger
action on climate, releasing the ‘Consensus
Statement on Climate Change’
ahead of April’s Commonwealth
Heads of Government Meeting
(CHOGM) in the UK. It includes signatures
from the official science
academies of Australia, India, Canada,
New Zealand, Bangladesh, South
Africa, the UK, and Pakistan, among
others.
The statement warns that countries
are not doing enough to limit global
temperatures to below 2°C as intended
by the Paris Agreement.
“Even if all countries meet their current
commitments to greenhouse gas
emission reductions, a global temperature
rise of more than 3°C above
pre-industrial levels is projected by
2100 according to current data,” it
said.
THE ENERGY INDUSTRY TIMES is published by Man in Black Media • www.mibmedia.com • Editor-in-Chief: Junior Isles • For all enquiries email: enquiries@teitimes.com
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