For more than ten years, energy companies have been facing a revolution in their business environment, creating both uncertainty and new business opportunities: full liberalization of the electricity and gas wholesale and retail supply, regulation of grid activities, development of wholesale markets generating strong price volatility, progressively constrictive legal obligations related to emissions of greenhouse gases, renewable energy and energy efficiency.
This revolution has driven a series of profound changes in the energy industry: the unbundling of regulated and liberalized activities, the development of new business models on the electric and gas value chains, the convergence between electricity supply and gas supply, the strong growth of renewable generation assets, the partial or complete withdrawal of public ownership in historical suppliers and the internationalisation and concentration of market players.
However these changes are far from complete and new challenges are constantly emerging:
- The market opening to competition is far from satisfactory in many countries and has not yet brought the benefits announced by its proponents: under the stimulus of the EU’s 3rd energy package, national market models as well as the business models and organisational structures of energy companies will have to evolve further with strong strategic and financial issues at stake.
- The consolidation of the energy sector is still in its infancy: small players have survived much better than initially anticipated and many large operators have not yet succeeded in penetrating certain key European national markets. These latter will need to acquire new international positions to compensate for future losses of market share in their home markets or accept mergers with players who are better positioned.
- Security of supply is more complex to achieve in a liberalised market. Moreover, it has also become an acute issue for the EU in a context of under-investment in electricity generation and recurrent gas crisis between Russia and Ukraine. Energy companies will have to finance major investment in electric and gas infrastructure, and develop their access to gas further upstream, all in an uncertain environment for both the demand and the supply of gas.
- Renewable energy still represents a minor part in the European energy mix. Achieving of the objectives of the energy-climate package constitutes a legal, regulatory, economic, financial and technical challenge for energy operators as well as for regulators and public authorities. The former will have to rethink their distribution grids, invest in winning renewable generation technologies and complementary flexible generation capacities, and develop new business models around green products and services. The latter will have to design new incentive schemes compatible with the objectives set up at the European and national levels.
- Finally, energy efficiency targets by 2020 constitute not only a risk for energy operators but also a formidable opportunity to develop new services.