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  • Shale revolution - The US: from a gas importer to a gas exporter
  • Winners and losers
  • China and coal --> Citi: " The flattening or peaking of thermal coal demand for power generation in China by 2020 is a likely scenario"
  • Transporting energy units: why is transportation important?
  • One ton of coal from US to China = $2.67/MMbtu
  • One ton of LNG from US to China = $5-$6/MMbtu
  • Transportation and oil

Energy Darwinism:

The Evolution of the Energy Industry

By: Sara Jensen, Elizabeth Jung & Caitlin White

YOU are an investor!

  • You are looking to invest in power generation in Germany
  • Germany needs to maintain the reliability of their power system
  • What do you need to take into account when considering what to invest in and how much to invest?

Fossil Fuels

Why Does this Matter?

Integrated Energy Cost Curve

  • Cost curves are normally separated by fuel or technology type
  • Integrated cost curve combines alternative energy, oil & gas, metals & mining (coal), and commodities
  • Sums of money related to these changes are vast
  • Energy markets are evolving quickly, and long term investment decisions must consider this
  • An understanding of these dynamics and the pace of this evolutionary change is crucial for any investor, owner, producer, or customer of energy.

The Evolution of the Energy Industry

Implications for Equipment Manufacturers

Solar & Wind

  • The prices of solar panels have been decreasing at a rapid rate
  • Uncertainty is key --> investments
  • Equipment orders will be affected by changes in the generation mix
  • Cost breakdowns differ markedly between technologies
  • Socket parity: "occurs when an alternative energy source can generate electricity at a levelized cost that is less than or equal to the price of purchasing power from the electricity grid"

Implications for Utilities

  • Wind shows base-load characteristics -> already competing with base load in some regions
  • Learning rates: speed of improvement in outcomes of a given task or situation relative to the number of iterations of that task
  • Differences in developed and emerging markets
  • Developed markets will see shift from traditional utilities to renewables
  • Stranded assets
  • Governments and grid expansion
  • Emerging markets will expand generation fleets due to increase in energy demand --> investment in grid

Global Energy Supply Infrastructure

  • Energy substitution in power generation is changing the cost curve
  • Cost curve: plots the cost of a commodity produced by an individual asset against the volume of reserves in that specific asset

design by Dóri Sirály for Prezi

Source: U.S. EIA: Estimated Levelized Cost of Electricity (LCOE) for New Generation Resources, 2019

In the past five years...

  • The US became a net petroleum exporting country
  • The US is generating more electricity from gas than coal
  • German utilities have profit warn with some gas power running for less than 10 days a year because solar has stolen peak demand
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