Energy Industry Partnership Private Programme Background Papers

(1)

World Economic Forum Annual Meeting 2016

Energy Industry

Partnership Private

Programme Background

Papers

(2)

World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 Email: [email protected] www.weforum.org

No part of this publication may be reproduced or Transmitted in any form or by any means, including Photocopying and recording, or by any information Storage and retrieval system.

(3)

Energy Advisory Board

Briefing Paper

The Implications of a low oil

price world – Who pays the

price?

(This paper draws on analysis published in the International Energy Agency’s World Energy Outlook 2015 and Oil Market Report. See www.iea.org)

Prepared for the World Economic Forum Energy Community by the Energy Industry Partnership Advisory Board

Authors

– Fatih Birol, Executive Director, International Energy Agency, Paris; Chair of the Advisory Board – Lin Boqiang, Director, China Center for Energy

Economics Research (CCEER), Xiamen University, People’s Republic of China

– Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics, Harvard University, USA

– Daniel Yergin, Vice-Chairman IHS, USA.

Global oil prices have continued to dominate debate in the energy sector and beyond. Oil prices fell in 2014 and continued to decline throughout 2015. Accelerating supply, notably from North America, coincided with slower than expected demand growth, convincing Saudi Arabia and other key OPEC producers that an attempt at price defence through management of production would not be effective or warranted. The absence of an OPEC production cut has shifted the onus of finding demand-supply equilibrium onto the broader market. As ever, the oil price plays the role of market moderator. All producing countries and companies have had to consider how to live with reduced revenues, how quickly and how deeply they can cut operating costs and capital investments, and whether lower prices might stimulate a surge in global oil demand.

Demand is reacting while upstream investments are suffering

Low prices have already spurred a resurgence in global oil demand, which increased by around 1.8 mb/d in 2015 (+1.9%), relative to 2014 levels. This is well above the 0.9% average growth rate observed over the past ten years, but is short of the reaction seen with other similar episodes in market history (such as the 1986 oil price fall). There are three key reasons explain why this is the

case. First, China, responsible for around 60% of global oil consumption growth over the last decade, is entering a less energy-intensive phase of its economic development – a transition that is expected to subdue oil demand growth in this key market. Second, fuel-economy standards are more widespread globally and increasingly effective: three out of every four passenger cars sold worldwide are now subject to some form of fuel efficiency regulation. Third, the headline fall in global oil prices did not translate into similar price reductions for consumers. This was in part due to exchange rates effects, but many emerging economies, including China, India and Indonesia, also took advantage of the price decline to adjust end-user prices for oil products, either through subsidy removal or by raising excise or by transportation taxes.

The impact of falling oil prices is clearly felt most keenly by the oil and gas sector itself. Global upstream oil and gas capital investment in 2015 will be more than 20% lower than in 2014, and, maybe more importantly, there is likely to be a further fall in upstream investment in 2016. This would be the first time since the 1980s that the world has seen two consecutive years of decline in upstream oil and gas investments. But these investment cuts are not distributed evenly around the world, with those announced by

companies in North America, for example, are in excess of 30-40% in many cases. US tight oil production is therefore now stumbling: if prices out to 2020 remain well under $60/bbl, without a rapid evolution in drilling efficiency and technology learning, tight oil production in the United States will likely see a substantial decline in output. Fewer new projects also come through from many major non-OPEC countries, notably Russia, Canada and Brazil and so non-OPEC supply as a whole is expected to peak before 2020.

What if low prices become the ‘new normal’?

While oil prices are expected to head higher as markets work off the excess supply, an extended period of lower oil prices cannot be categorically ruled out. A combination of factors, such as sluggish near-term economic growth, a stable Middle East in which key producers look to increase their share of the market and resilient performance from key non-OPEC producers (particularly US tight oil), is just one permutation that could conceivably come together to keep oil prices lower for longer (namely, in a $50-60/bbl range well into the 2020s). If this were to occur, the lower prevailing prices would (unsurprisingly) boost to global oil demand (reaching 107 mb/d in 2040, according to IEA analysis), particularly in the transport sector, as they weaken the case for efficiency investments and for switching to alternative fuels.

(5)

Consumers would benefit but lower prices are not all good news

A prolonged period of lower than expected oil prices would also have major implications well beyond the energy sector, as changes in oil revenues and financial flows affects the performance of national economies. Oil importing countries clearly benefit, with every dollar saved per barrel of oil adding up to billions in savings for household budgets. However, lower oil prices also reduce the incentive for consumers to invest in more efficient energy technologies – resulting in hundreds of billions of dollars of investments not being made, and a less-efficient, more-wasteful energy system.

Low prices are not the only measure of energy security and, over the long term, the world’s reliance on very few countries, mostly in Middle East, would be pushed up in such a scenario, eventually returning to levels last seen in the 1970s. This concentration of global supply would be accompanied by elevated concerns about energy security, with Asian consumers (China, India and Southeast Asia countries), the final destination of a huge share of oil exports, particularly vulnerable. Oil producers and exporters, mainly OPEC countries and Russia, also lose out financially from low prices, as the volume gains from higher output are more than offset by the reduced revenue per barrel. In such a world, the revenues from OPEC oil exports are projected to average around half of the $1 trillion per year that they averaged between 2010 and 2014. Pressure would increase on the fiscal balances of key producers, exacerbating the risk that by scaling back public spending they will be unable to meet the aspirations of a growing population.

A prolonged period of low prices would also weigh heavily on the revenues, profits and valuation of oil and gas companies, although by concentrating on low-cost resources and favouring gas over oil, companies could help to ameliorate some of this potential loss of value. Yet new investments into upstream oil and gas projects are still necessary: 85% of future upstream oil and gas investments are required simply to compensate for declines in existing fields.

Where import prices are indexed to oil, natural gas prices would also stay lower. Gas demand in the power sector would therefore be higher as it displaces some coal, but is unlikely to harm the deployment of renewable energy sources, unless accompanied by changes in government policies. This is backed up by evidence to date, with there being little to suggest that lower oil or gas prices are yet undermining the policy case for support for low-carbon technologies, many of which continue to see steady reductions in cost.

Low-oil prices and climate action

The universal agreement coming from Paris-COP21 is nothing less than a historic milestone for the global energy sector. The global commitment to limit climate change, and the national pledges intended to stimulate climate action, are expected to boost investments in cleaner technologies and energy efficiency, and accelerate the transformation of the energy sector. For some, a key concern is that a low oil price environment slows down the pace for timely, concerted policy action on climate change. A prolonged period of low oil prices might weaken the essential policy support for renewables and energy efficiency, key pillars of the much-needed energy transition. However, lower prices also have the potential to facilitate some positive policy shifts, such as by increasing the momentum behind reform to fossil-fuel consumption subsidies or making it more politically practicable to introduce an effective or actual carbon price. Overall, fossil fuels, which currently account for over 80% of the world’s energy mix, are expected to see their share diminish over time, but are still expected to be a key part of the energy system for decades to come. This means that the world needs oil and gas producers to continue to invest in new supply for many years to come, especially as the great majority of these investments are needed simply to offset output declines and keep production at existing levels.

(6)

(7)

Global Agenda Council on the Future

of Electricity

1

_{: Busting the Myth for}

Transformation

By 2030, we can live in a world that is significantly more electrified, more connected, more efficient, more consumer-driven, more decarbonized--and one that has a material impact on other systems and sectors.

Key Trends in Transformation

2

1. The world is increasingly electrified. Global demand for electricity increases, regardless of efficiency, due to electrification of heating and mobility; to satisfy increasing demand in developing regions, and to provide access in emerging economies. New actors are entering the sector in an increasingly complex system, bringing technological innovation and new approaches, reducing demand (as is the current trajectory) on traditional centralized grids in developed countries and expanding its outreach to a scale never seen before. 2. Renewable energy has the greatest capacity

growth. By 2030, the electrification of the world will be driven mainly by increased deployment of readily available, inexpensive and abundant renewable energy resources. With decreased levelized cost of solar and wind – already competitive with traditional fossil fuel generation in many markets – renewables, and in particular solar PV, are among the most competitive technologies available for investment in new generation capacity that decreases import dependency, reduces fuel poverty and empowers citizens, consumers and producers.

Electricity Industries

Meetings – Briefing

Papers:

Global Agenda Council -

Electricity

3. Renewable energy and other clean solutions enable growing universal access to electricity. By 2030, access to affordable, reliable, sustainable and modern energy will be attained in a much more significant way, owing to falling costs in solar and hybrid power technologies. Access is fundamental to reducing poverty, improving health, better education and promoting economic growth.

4. Energy security increases as a result of indigenous clean electrification. Large renewables projects and related grid infrastructure across borders will foster cooperation between nations, contributing to lowering the risks that can in turn attract capital. Volatility of prices is reduced because of stable fuel costs, ensuring more resilience in vulnerable economies. Increased digitization of the system enables improved accuracy of weather and renewable resource predictions, allowing for more reliable and resilient deployment.

5. Distributed energy resource (DER) deployment is significantly increased. DERs aggregated with ICT technologies will function as reliable and flexible supply resources from the distribution side of the grid that will be dynamically integrated with existing sources, and in some cases will obviate the need for additional supply side resources. The increasing presence of DERs will significantly transform and create new business models for the existing power sector – and that of some adjacent sectors, such as natural gas, building and transportation. DERs will enable leapfrogging central-system grid infrastructure in developing counties to allow for cost-effective and more rapid access to electricity.

6. Energy storage provides critical grid services. A wide range of promising energy storage technologies are developed and deployed commercially, with costs driven down by the automobile industry. Low-cost renewables combined with increasingly cost-effective energy storage are replacing diesel generators and allowing decentralized power solutions that in turn spur emerging economy electrification and development. 7. Consumer engagement and choices shape

future electric growth. Consumers (large and small, households and businesses) in developing and developed economies are becoming increasingly able to store, produce, manage, buy and sell energy in an affordable, cost effective and profitable manner. New smart platforms and virtual market places support new business models, bringing consumers together, enabling individuals and communities to take control of their energy future, thus providing flexibility to existing, smart and distributed networks.

8. The system is more connected, resilient and secure.

By 2030 the electric system will be more connected and hybrid (a combination of centralized and distributed resources and grids), with countries and regions having different energy mixes depending on their resources. Connection remains important as a way for a “prosumer” to sell excess power and act as an

1_{Please see annex for the members of the Global Agenda Council} 2_{This pre-read focuses on the key drivers of the transformation that the}

world power sector is anticipated to experience during the next few decades: decarbonization, massive renewables penetration, consumer empowerment and progressive decentralization. The authors (members of the Global Agenda Council ) are aware that reliance on fossil fuels is a reality during this time and that the presence of nuclear power depends on political decisions at country level. Here we highlight the importance of trends in the power sector that we identify as becoming increasingly dominant in the coming decades.

(8)

“insurance policy” for continued supply; decentralized systems allow for efficient return to service in case of disruption. The electrification of transport enables electric cars to provide grid services, including storage. A more decentralized and intelligent grid reduces cyber and physical security risks.

9. The price of electricity may increase for some time, but then will decrease. Forecasting future energy prices is notoriously risky, but, as the system and infrastructure are upgraded and modernized, there is every prospect that prices will fall to reflect the lower costs of renewables over those of traditional fossil and nuclear generation.

10. Regulation improvements support and accommodate electric grid changes. A

comprehensive pricing system allows for supply and demand resources to efficiently interact, contributing to a maximization of social, environmental and economic welfare.

Requirements for Transformation

1. Political targets – particularly for carbonization - must be clear, transparent and consistent across time and policies. Mobilize political leadership to ensure appropriate policies are in place that include ambitious outcome-based targets for access, emissions and electrification, and that set out a road map to transition to sustainable, cost-effective, clean renewable resources.

2. Regulation should anticipate trends, eliminate barriers and create a favourable climate for investment. Regulatory interventions are needed to allow investments in a cleaner renewable generation mix, creating conditions for regulatory stability, innovation and transformation to generate benefits for all stakeholders. Cost-effective programmes and incentive policies should combine goals and means to achieve those goals, informed and led by regulators in a transparent and participatory process, and preventing decisions that may imply excessive costs, granting discipline and control to cross subsidies that may emerge from policy choices.

3. Power markets and platforms must open for all participants. Create transparent and open power markets that accept greater participation, embed location pricing for DER and move to more granular visibility of power markets.

4. Financing mechanisms must be clear and risk factors understood. Risk mitigation is needed for large projects that could include mechanisms such as Multilateral Investment Guarantee Agencies, Power Purchase Agreements with Multi-National Corporations; financial institutions that can underwrite risk; redirection of fossil fuel subsidies to clean energy; Green bonds; and military reserves. Risk mitigation is also needed for micro-projects to allow for greater democratization

of financing, including micro financing and other decentralized finance approaches that can provide for nimbler projects with shorter paybacks. Multilateral and bilateral funding mechanisms are needed for projects that are not commercially financeable.

5. Business and monetization models must evolve.

Cost-recovery mechanisms for utilities should be developed, allowing for evolution to new models and technologies that enhance the system; at the same time, grid participation should not be limited to utilities but open to additional players, including project developers, ICT providers and consumers themselves. In some developed economies, new viable business models of central grids need to develop to safeguard security of supply as distributed generation increases.

6. Consumers must be allowed to participate in all aspects of electrification. Consumers and communities must be engaged to take full advantage of the evolving grid, including being educated about the opportunities afforded to them by the new offerings and their own behaviour, and being able to freely compete for the provision of flexibility to the electricity system, equal to other forms of generation and capacity within energy markets. Off¬- or semi off-grid consumers should not be expected to pay excessively for their investments through having to compensate network companies for lost revenue regardless of the cost of the impact on the network.

7. Special provisions should be made to ensure universal access to electricity. Create a viable and stable business environment, supported by specific independent regulation and necessary subsidies for rural electrification, in particular for off-grid solutions – either permanently or as a bridge to eventual grid connection – but allowing for renewable-based off-grid production technologies.

(9)

Future of Electricity:

Attracting Investments to

Electricity Infrastructure in

Emerging Markets

Electricity markets in fast-growing economies face challenges that are different from those in more mature markets. Mature markets with stable demand for electricity are transitioning to a more sustainable mix of power generation technologies while continuing to support economic growth with affordable and secure power. Fast-growing markets are trying to serve voracious new demand for electricity as their economies grow, as more customers are connected to the grid and per capita consumption grows.

The World Economic Forum’s Future of Electricity report recognizes the need for policy to balance the objectives in the Forum’s energy architecture triangle: security and accessibility, short- and medium-term affordability and environmental sustainability. With over 1.2 billion people globally still lacking access to electricity, policy-making attention will likely focus on improving accessibility and affordability. But even as progress is made on achieving reliable and universal access, fast-growing markets will need to develop roadmaps that take advantage of new technologies to make their power affordable while increasing environmental sustainability.

Meeting the electricity demands of residential, commercial and industrial consumers in these fast-growing economies will require an unprecedented level of investment in fuel supply, centralized and distributed generation, and networks across the whole value chain. Much of the new capacity in fast-growing countries will come from renewables, which requires large capital investment upfront and correspondingly lower operational costs.

The combined effects of growing demand for electricity and rising capital intensity will mean that non-OECD countries will have to double their investment in electricity from about $240 billion3_{annually to $495 billion annually between 2015} and 2040 – $13 trillion in total – to satisfy growing demand and meet energy policy objectives, outspending OECD countries by 2 to 1.

Where debates in these markets used to focus on importing commodities to fuel conventional power stations, today’s discussions concentrate on importing capital to build renewable power alongside conventional power in order to

meet their Sustainable Development Goals as captured in their Intended Nationally Determined Contribution (INDCs) for the Conference of Parties hosted in Paris in December 2015.

Unfortunately, fast-growing economies have a mixed record of attracting private capital, with volatile returns in many of the largest markets and significant concerns among long-term investors about the transparency and reliability of policies and regulations, particularly where policy-makers have shorter-term political priorities.

Although 60% to 70% of the investment in electricity infrastructure in non-OECD markets has derived historically from governments or state-owned utilities, the scale of the investment necessary in the future will oblige policy-makers to look to private investors to fund most of the investment. To attract the required capital, fast-growing economies will need to improve the viability of investment in their power sectors. Eight recommendations have been identified for policy-makers, regulators and businesses to do this, just as the 2015 The Future of Electricity report focused on improving the investment climate in OECD countries.

Recommendations Policy-makers

Pursuing the most efficient pathway to achieving policy objectives

Policy-makers have an important role to play in encouraging the electricity sector to pursue the most efficient paths to achieve energy goals. They need to develop roadmaps that balance generation between conventional and renewable sources and between centralized and distributed models. They also need to catalyse “no regrets” investment in infrastructure to move fast-growing economies closer to universal access. By encouraging the adoption of energy-efficiency technologies, both on the demand side – through more efficient equipment and buildings, for example – and on the supply side – by upgrading inefficient power plants - the need for investments in new generation capacity could be reduced. Through all these measures, policy-makers support economic competitiveness while reducing the risk of policy instability due to adverse fiscal or stakeholder pressure.

Developing integrated policies that ensure parallel development of the power value chain

Policies need to be integrated across the power value chain to ensure that development of the upstream fuel supply, generation assets, transmission and distribution develop in harmony, and investors are not left with fully operational but stranded assets that cannot earn a return due to lack of fuel supply or lack of customer access. Integrated policies need to take into account not only the operational aspects such as planning regulations, but also economic factors such as import duties and regulated tariffs that impact the viability of various participants in the value chain.

3_{The Future of Electricity}_{report refers to the International Energy Agency’s}

New Policies Scenario from the World Energy Outlook 2014, which assumes “continuation of existing policies and measures as well as the implementation (albeit cautiously) of policy proposals, even if they yet to be formally adopted” (IEA WEO 2014).

(10)

Taking advantage of declining technology cost curves

As costs decline, non-OECD countries will add 34% more non-hydro renewables capacity than the OECD countries between 2015 and 2040. Moreover, the increasing digitization of energy assets offers the potential to improve operational efficiency and reliability, thus reducing both the delivered cost of electricity and emissions. Policy-makers should take advantage of the declining technology cost curve driven by the rapid rate of global deployment and avoid the urge to promote unique technologies that will likely remain at high cost due to a lack of scale. On the demand side, policy-makers should also take advantage of new technologies to improve energy efficiency.

Regulators

Providing a level playing field for technologies, reflecting carbon abatement and security of supply appropriately

Regulators need to structure power markets in ways that recognize the full value and costs of technologies, including carbon pricing. Regulations should be technology agnostic, taking into account issues such as flexibility, reliability, carbon-abatement properties, land use and the cost of securing fuel supply. This may also mean withdrawing fuel subsidies that support specific conventional generation technologies. In special circumstances, regulators might support new technologies that show promise in their particular market but only where there is a credible plan for the technology to become competitive in the medium term and subsidies are phased out.

Ensuring technically and financially viable operations across the value chain

Regulators can ensure the viability of the value chain by keeping it clear of financial obstacles. They should work with suppliers to reduce losses from non-metered supply and ensure that tariff subsidies or progressive tariff structures are fully funded. They need to ensure that the viability of generators is not threatened by fuel tariffs that can distort margins or raise demand for electricity beyond their capability to provide it.

Business and investors

Creating effective public-private partnerships to attract private sector capital

The private sector – business and investors – need to engage with policy-makers and regulators to make the governance and regulations concerning public-private partnerships clear, transparent and independent, so as to to ensure that investors can be confident in committing long-term capital.

Nurturing favourable investment environment

The private and public sectors together need to put measures in place to reduce risk and the cost of capital, allocating residual risks to the most appropriate market

participants. The private sector would do well to proactively engage with the public sector to align expectations for power sector profitability. Innovative financing schemes and a balanced approach to local content requirements will also help encourage investment.

Investing in education and R&D to address knowledge and human capital gaps

The private and public sectors need to work together to foster the development of universities and research institutes that produce the talent which will innovate, develop and manage the power sector in the decades ahead. Each country will prioritize these recommendations in its own way on the basis of its energy policy objectives for energy access and security, economic development and environmental sustainability. Prioritization will depend on a country’s economic and natural resources, the maturity of energy markets and policy objectives. In particular, this report looks closely at India and Mexico, two fast-growing economies and both at critical points in the development of their power markets:

– India’s rapidly growing economy has fuelled an intensifying demand for electricity with which supply has struggled to keep pace. Whereas investment in the past has come from government sources, in future India’s policy-makers aim to attract the majority of funding from private investors, which means addressing some of the structural issues such as unprofitable distribution companies, along with fuel issues and regulatory obstacles. Recognizing these challenges, India’s government has embarked on a series of progressive reforms, including integrated policies to ensure balanced development through the value chain, addressing losses that hinder the viability of the transmission and distribution businesses, nurturing a more favourable investment environment by decreasing finance costs, and recognizing the important role of renewables.

– Mexico’s economic growth over the past decade has been held back by the regulatory structure of some key sectors, including telecommunications, financial services and energy. To address these barriers and encourage the country’s economic development, Mexico has launched a series of reforms. In electricity, the reforms are guiding a transition from a state-owned electricity system to a new model that opens the door for private investment and multiple players in power generation selling into an efficient wholesale market. To ensure the viability of investment, Mexico is pursuing an integrated approach that supports development across the entire value chain and improves the flow of funds through the power value chain. Mexico will also need to ensure that the new market functions efficiently, enables attractive returns for investors and attracts the required scale of investment in conventional and renewable power.

(11)

Digital Transformation of

Industries - electricity

Electricity: uncovering customer

and societal value through digital

transformation

Digital transformation has immense potential to unlock $1.3 trillion of value for the electricity sector; the industry must now embrace digitization.

The electricity sector is ripe for realizing value from rapid digital transformation; we estimate that there is $1.3 trillion of value to be captured globally, from 2016 to 2025. By leveraging the building blocks of digitization, such as service platforms, smart devices, the ‘cloud’ and advanced analytics, companies in the industry have the opportunity to increase the asset life cycle of infrastructure, optimize electricity network flows and innovate with customer-centric products. New pools of value could also be tapped ‘beyond the electron’ by harnessing big data across sectors.

Five initiatives in particular, which range from managing the performance of assets, to real-time platforms, to integration of energy storage and customer solutions, can unlock respectively more than $100 billion over the next decade and must be prioritized for investment.

Digitization trends in the electricity industry

Yet the maturity of digital initiatives in the industry varies – from projects using advanced analytics to optimize assets and the widespread implementation of smart meters, to early moves by some utilities to manage and integrate distributed generation resources. Industry players agree on the need to make deeper customer engagement a priority and the pivotal role of digital technologies in making this a reality.

Energy technology providers are playing a key role in digitizing the industry, releasing a suite of smart turbines and panels, and sensors for commercial infrastructure. They are also developing connectivity platforms for industrial, commercial and retail customers. Established players and startups alike are experimenting on the fringes of the industry. The burgeoning home energy market is a case in point, with more than 100 (non-utility) actors capturing value. With higher potential business value, smart industry and smart city markets are following suit in the business-to-business (B2B) and B2B-to-consumer spaces.

As the sector continues to adapt to the various

transformations taking place, digitization must be a key priority and indeed, can support development of new business models to respond to these industry shifts.

Digital technologies have tremendous potential to contribute to growth in the sector and help deliver

exceptional shareholder, customer and environmental value.

Four themes – asset life cycle management, grid

optimization and aggregation, integrated customer services and beyond the electron – emerge for creating value (see Figure 1). Within each theme, a number of digital initiatives can be pursued, with our estimated ‘value at stake’ to enable prioritization.

(12)

Figure 2: Digital themes and initiatives across the value chain

Figure 2 below maps digital initiatives to the part of the electricity value chain that they relate to, from generation to consumption. Each initiative clearly illustrates how these digital themes are relevant to the electricity industry as it evolves over the next few years. Figure 3 maps value creation with benefits to industry and society.

(13)

Figure 3: Digital transformation of the electricity industry - potential benefit to industry and society

Source: Accenture research for the Digital Transformation of Industries project Where does value lie?

Value creation for both industry and society has become a ‘win: win’ and electricity players have an important role to play in translating the $1.3 trillion opportunity into tangible benefit. Our estimates of the societal benefits are modest and include just three factors; value creation for customers (worth $986 billion); reduction in carbon emissions ($754 billion); and net job creation ($271 billion). Digital initiatives offer great opportunity to decarbonize the energy system, with the potential to realize an estimated 15.8 billion metric tonnes of net avoided CO2 emissions.

Asset performance management provides the highest value addition to the industry at $387 billion, of which $276 billion is expected to accrue from the sale of smart sensors and software advisory. Energy technology companies are already profiting from this initiative, with sales of sensors for commercial infrastructure and software services.

Real-time supply and demand platforms, potentially worth $191 billion for industry could deliver more value ($632 billion) to society than any other individual digital initiative. This value derives primarily from cost savings to the customer and from reduced emissions. Customers could capture up to $550 billion of value from smart saving choices, with an incentive to postpone consumption during peak hours.

No matter what shape the electricity company of the future takes, digital is likely to be a fundamental part of it. This report offers an estimate of the value pools and a series of pragmatic recommendations that enterprises can take to digitally transform their operations and business model, and ultimately become a digital champion.

(14)

Members of the Global Agenda Council on the Future of Electricity 2015-2016

John F. Mogg European Adviser to the

Authority Agency for the Cooperation of Energy Regulators United Kingdom

Adnan Amin Director-General The International Renewable

Energy Agency (IRENA) United Arab Emirates

Antonella Battaglini Chief Executive Officer Renewables-Grid-Initiative (RGI) Germany

Leonardo Beltran

Rodriguez Deputy Secretary for Planning and Energy Transition

Ministry of Energy of Mexico Mexico

Fatima Foora Assistant Undersecretary of

Electricity Ministry of Energy of the United Arab Emirates United Arab Emirates

Katherine Hamilton Director Project for Clean Energy and

Innovation USA

Hiroaki Kitano President Sony Computer Science

Laboratories, Inc. Japan

Gregor Kumm Head of Corporate

Development ABB Ltd Switzerland

Philip Lewis Founder and Chief Executive

Officer VaasaETT Finland

Hildegard Müller Chairwoman, General Executive Management Board; Member of the Executive Board

German Association of Energy

and Water Industries Germany

Chinedu Nebo Minister of Power Federal Ministry of Power of

Nigeria Nigeria

Ignacio Perez- Arriaga Visiting Professor Centre for Energy and

Environmental Policy Research - MIT

USA

Gerard Reid Founder and Partner Alexa Capital United Kingdom

David Sandalow Inaugural Fellow, Center on

Global Energy Policy Columbia University USA

(15)