#EYenergyforum

Benoit LACLAU

Global Power & Utilities Leader, EY

The countdown to reinvention

EY Energy Forum 2018

A number of core technologies are fundamentally set to change the electricity market

Solar PV

Battery storage

Electric vehicles

Microgrids

Home and building energy systems Peer-2-peer energy exchange

Smart meters

Artificial intelligence

Grid edge technologies

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EY Energy Forum 2018

0

100

200

300

400

500

600

700

800

2015 2020 2025 2030 2035 2040 2045 2050

The pace of change in Europe will be defined by three technologies: nonutility solar, battery storage and EVs

Source: Utility impact model central scenario Europe - EY analysis.

Fully delivered

cost of electricity

Cost of transmission

and distribution

Nonutility solar +

battery LCOE

Grid cost parity of

nonutility solar plus

storage systems

T&D parity with

nonutility solar

+ battery LCOE

Period of EV & ICE parity

(cost + performance)

* Analysis is based on average profiles. In each geography, there will be segments of the customer base for whom the economics improve much sooner.

1

2 3

US

$/M

Wh

EY Energy Forum 2018

Utilities can prepare for disruption by asking4 critical questions

Which of the three

disruptive tipping

points will impact you?

► Cost parity?

► ICE-EV parity?

► T&D cost parity?

When will your

stakeholders begin to

see disruption?

When will it be too late

to react?

What factors should

you track to keep

ahead these trends?

Q1: Which tipping points

apply to your utility

company?

Q2: When will each

tipping points apply to

your utility company?

What will the

magnitude of the

disruption be that

impacts your utility?

What will be the

direction of the impact?

Where will you

measure the impact?

► Revenues?

► Investment?

► Customers?

Q3: What will the impact

of this disruption be for

my utility?

What are the options

available in your

situation?

What are the

opportunities and

costs of being

proactive?

What are the

responses and costs

of being reactive?

Q4: What responses are

available to manage the

risks posed by these

tipping points?

Appendix

EY Energy Forum 2018

€143bn write offs

in the past 6 years

400 GW of Europe’s

around 900 GW installed

capacity is at a loss

or barely making profits

Market cap of top 20

utilities has been

halved from 1.3 trillion

Supply demand imbalance

3 key facts

A

B

C

This is the age of decarbonization,

digitalization and decentralization

Renewable penetration

New technologies gaining speed

Uti

liti

es h

ave b

een

slo

w t

o r

eact

A series of events is causing disruption and is driving transformational changes in developed economies

EY Energy Forum 2018

The mass adoption of solar surprised the market – as the levelized cost reduced, technology became increasingly cost competitive

Source: Navigant Research

4.42

2.93

2.42

2.73

2.26

1.89

4.35

2.03

1.75

4.00

2.51

2.05

0

1

2

3

4

5

2011 2014 2017 2020

North America Europe Asia Pacific Global Blended

5.410.6 11.7 13.5

16.018.8

22.410.5

9.111.3

12.7

15.6

18.7

22.9

1.9

2.6

3.12.7

2.8

3.4

4.0

1.5

2.1

2.32.0

2.8

3.9

5.5

0

10

20

30

40

50

60

2012 2013 2014 2015 2016 2017 2018

Asia Pacific Europe North America Rest of World

Average Solar PV Installed Price (US$/W) Annual installed distributed solar PV capacity by region (GW)

► Asia Pacific has become the market leader for installed distributed solar

PV followed closely by Europe► Growth in production and economies of scale have facilitated a continuous

decrease in the installed price of solar PV

EY Energy Forum 2018

The first tipping point for Europe occurs in 4-5 years…so utilities need to start acting now!

Source: Utility impact model central scenario - EY analysis

Oceania1

2

3

Europe

US – Northeast *

4 GCC

2021 2025-29 2041

2022 2025-29 2042

2031 2025-29 2039

2033 2025-29 2044

Low natural gas prices and cheaper utility-scale

renewable weighing on generation costs.

Consumers are embracing new innovative

technologies, like EVs, solar PV and storage

Low cost abundant oil and natural gas reserves

is limiting renewables deployment

High retail prices is accelerating residential take-

up of solar

Regions

* US is separated in 5 regions – The Electric Reliability Council of Texas (ERCOT), West Coast, Midwest, Northeast, Southeast. Northeast used for illustration

T2 T3T1

EY Energy Forum 2018

These three tipping points will be felt across ALL functions

and by ALL stakeholders

“Stranded assets will weaken

our balance sheet and

compromise our growth

program”

Investors/Creditors

“We are risking the ‘Death

Spiral’ if we continue to ask for

revised rates"

Regulatory

“Why are rates rising again

and so fast?”

Customers

“Is our resource portfolio the

right size?”

Operations

“Are we fighting macro trends

or are we leading them?”

Corporate Strategy

“All the targets in the market

seem over-valued”

Corp Development