European Energy Markets Observatory-18th Edition-Full Report

Utilities the way we see it
European Energy
Markets Observatory
EUROPEAN ENERGY MARKETS OBSERVATORY y 2015 AND WINTER 2015/2016 DATA SET - EIGHTEENTH EDITION
2015 and Winter 2015/2016 Data Set

18th Edition, October 2016
In collaboration with
Contents
Editorial by Colette Lewiner
The energy industry faces many obstacles on its journey
to successful transition
4
4
Climate Change Challenges

COP21: the Paris Agreement ushers in a new inclusive
approach to climate action
Advancing carbon pricing policies beyond Paris
European Climate Policies
20
Energy Transition
Global temperature is getting from record to record, nevertheless
2015 saw an encouraging stabilization of global CO2 emissions
30
20
22
24
30
Security of Supply and Energy Market Integration

42
Electricity 42
Gas Markets
52
Customer Perspective
Prices and Supplier Switching
Customer Experience Transformation
60
60
65
Innovation & Transformation in the Utilities and

other Energy companies
68
Utilities Financials
Finance and Valuation
86
86
Appendix Figures
93
Glossary 98
Country Abbreviations and Energy Authorities
102
Team and Authors
103
2016 Capgemini.
Reproduction in part or in whole is strictly prohibited.
European Energy Markets Observatory
Figures
Figure 6.6 Aggregated European electricity

switching rates (2015)........................................ 64
Topic Focus
Major energy events (2015 and H1 2016).......... 18
Figure 6.7 Aggregated European gas

switching rates (2015)........................................ 64
GERMANY: Led by the expansion of

renewables, energy transition is progressing
fast, but it still faces a number of challenges.... 33
Figure 1.1 Carbon pricing world map (2016)...... 23

Figure 2.1 EU-28 greenhouse gas emissions
evolutions and targets to 2020 and 2030.......... 24
Figure 2.2 EU-28 renewables evolution and
targets to 2020 and 2030.................................. 25
Figure 2.3 EU-28 primary energy consumption
evolution and targets to 2020 and 2030........... 27
Figure 7.1 The seven largest Utilities asset

impairments in 2015 and 2014.......................... 68
Figure 7.2 Megatrends in the energy sector...... 69
Figure 7.3 MIT-Capgemini Framework for
Digital Transformation........................................ 73
Figure 7.4 New business models framework..... 77
Figure 2.4 CO2 emissions in phase II and III

of the EU ETS (2008 to 2015)............................ 28
Figure 7.5 Perceived value potential for and

in Europe of selected innovation areas.............. 78
Figure 2.5 EUA and CER prices in the EU ETS

(2008 to 2016).................................................... 29
Figure 7.6 Cross-sector collaboration by

Sonnen GmbH .................................................. 82
Figure 3.1 New investments in clean energy

in EU 28: 2004 - 2015 ($bN).............................. 34
Figure 7.7 Perceived contribution of

stakeholders in large-scale energy innovation.. 84
Figure 3.2 European Green Market evolution

(main technologies) (2007 to 2015).................... 35
Figure 7.8 Main barriers to energy innovation

in Europe........................................................... 85
Figure 3.3 European Green Market evolution

(other emerging technologies) (2007 to 2015)... 36
Figure 8.1 EBITDA margins (2010; 2014; 2015). 86
Figure 3.4 Levelized costs of electricity (2015)

in EU-28............................................................. 37
Figure 8.3 Reported net debt and

leverage ratio..................................................... 88
Figure 3.5 Market share (new registrations) of

electric passengers cars................................... 39
Figure 8.4 Dividend per share in

(2006-2015)....................................................... 89
Figure 3.6 Sales of battery electric vehicles

(BEVs) in Europe................................................ 40
Figure 8.5 Dividends per share base 100

(2008-2015)....................................................... 90
Figure 4.1 Installed and decomissioned

generation capacity per type of source
(2015 versus 2014)............................................. 42
Figure 8.7 Standard&Poors credit ratings........ 92
Spain: The uncertain future of the Spanish

energy market.................................................... 41
Box 7.1 - The Energy Union needs an
integrated approach to research,
innovation and competitiveness ....................... 69
Box 7.2 - Utilities innovating towards a
sustainable energy world .................................. 71
Box 7.3 - Focus on energy marketplaces.......... 79
Figure 8.2 Generation margins (2010-2015)...... 87
Figure 8.6 Stock performances......................... 91
Figure 4.2 Electricity consumption in EU-28

(2011 to 2014 and 2020, 2025 projections)....... 43
Figure 4.3 Peak load generation capacity
and electricity mix (2008 to 2015)...................... 43
Appendix Figures
Figure 4.4 Current (2015) and future electricity

capacity mix (2020, 2025)................................. 45
Figure A.1 Peak load, generation capacity

and electricity mix (2015)................................... 93
Figure 4.5 Map of interconnections levels

and interconnections projects (2015)................ 46
Figure 4.6 Market coupling mechanisms
progress............................................................ 49
Figure 5.1 Gas consumption in EU-28 (Bcm).... 52
Figure 5.2 Share of domestic gas production,
piped gas and LNG Imports in domestic
consumption (2015)........................................... 53
Figure 5.3 Map of gas imports (2015)................ 54
Figure 5.4 LNG imports to Europe.................... 55
Figure 5.5 Map of pipelines and LNG
terminals projects (as of June 2015).................. 57
Figure A.2 Generating capacities projects

(as of June 2016)............................................... 93
Figure A.3 Yearly (2015 and 2016) and
winter (2014/2015 and 2015/2016)
average electricity spot prices........................... 94
Figure A.4 Average European electricity
spot price (2009 to H1 2016)............................. 94
Figure A.5 Electricity spot prices on the
main European markets (2015 and H1 2016).... 95
Figure A.6 Status of electricity price
regimes (as of June 2016).................................. 96
Figure A.7 Electricity retail market size (2016)... 96
Figure 5.6 Gas storage inventories in EU-28

(2010 to H1 2016)................................................. 58
Figure A.8 Residential electricity price

breakdown (as of June 2016)............................ 96
Figure 5.7 Gas spot prices

(2015 and H1 2016)........................................... 59
Figure A.9 Status of gas price regimes

(as of June 2016)............................................... 97
Figure 6.1 Average European gas &

electricity prices in 2015.................................... 60
Table A.10 Gas retail market size (2015)............ 97
Figure 6.2 Residential gas prices all tax

included and with PPP (H2 2015 and
% change with H2 2014)................................... 60
Figure A.11 Residential gas price breakdown

(as of June 2016)............................................... 97
Figure 6.3 I&C gas prices VAT excluded

(H2 2015 and % change with H2 2014)............. 61
Figure 6.4 Residential electricity prices
all tax included and with PPP (H2 2015 and
% change with H2 2014)................................... 62
Figure 6.5 I&C electricity prices
VAT excluded (H2 2015 and % change
with H2 2014)..................................................... 63
The energy industry

faces many obstacles
on its journey to
successful transition
Editorial by Colette Lewiner
Energy transition laws are being

implemented in European countries
and at European Union (EU) level.
While they vary from one country to
another, they have common aims:
decreasing greenhouse gas (GHG1)
emissions in order to limit the increase
in our planets temperature, increasing
renewable energy generation, and
shifting towards more distributed
generation and more autonomous
territories. These shifts are enabled by
the digital revolution.
Because this energy transition is
occurring in complex and inconsistent
European and national regulatory
environments, it is distorting energy
markets, weakening security of
electricity supply, and threatening
Utilities business models and
financial situations.
limate change:
the strength of the
COP21 agreement lies
in emissions scrutiny
With the commitment of 195 countries

to a global climate deal, COP 21
was a milestone in the fight against
global warming and on the path to
energy transition. The Paris COP 21
Agreement will start in 2020 and will
be binding for the countries that sign
it. For it to be enforced, countries
representing 55% of global emissions
needed to ratify it.
Following the positive announcements
at the G20 meeting in September
2016, that China and the USA (the
two biggest emitters) would join the
agreement, this agreement should be
ratified in 2017.
The Paris meeting was a real diplomatic
success and a catalyst for global
awareness of climate risks. It sets out
the ambition to keep the increase in
global average temperature below 2C,
above pre-industrial levels between
now and 2100.
Unlike the Kyoto protocol, the Paris
Agreement is based on a bottom-up
process. Countries submit their
Intended Nationally Determined
Contributions (INDC) and then review
them every five years to increase their
Greenhouse gases include carbon dioxide (CO2) and methane (CH4)
A Strategic Overview of the European Energy Markets
goal. The first review will take place in

2025.
During the COP21 meeting, the
INDCs were collated. The resultant
total pointed to an increase in the
global temperature of more than
3oC, underlying the need not only
for mitigation but also for adaptation
measures.
The Agreement recognizes the role

of non-state players as part of an
institutionalized action agenda
that will reinforce successive
national contributions.
In 2015, energy-related carbon
emissions remained constant for the
second consecutive year even though
the global economy kept growing
a sign that efforts to tackle climate
change may be bearing fruit faster
than previously thought. An upsurge
in renewable power around the world
was the main reason pollution levels
stalled, according to the International
Energy Agency.
The United Nations Climate Conference
to be held in Marrakech from
November 7-18, 2016 will focus on
the themes of mitigation of climate
change and innovation in adapting to
climate change.
Countries and regions are taking
concrete steps to reduce GHG
emissions. In mid-April 2016, the
National Development and Reform
Commission and the National Energy
Administration of China halted plans for
new coal-fired power plants in many
parts of the country, and construction
of some approved plants will be
postponed until at least 2018. This
announcement means that about 200
plants of 105 GW capacity may not be
completed.
China is aiming at reaching a peak in
carbon emissions by 2030. A recent
economic slowdown, policies to
2
discourage coal-fired power plants near

big cities, and a huge investment in
wind and solar energy helped reduce
coal use in China in 2015.
The EU was the first region to set
binding objectives for GHG emissions.
It first set an EU objective of 20%
reduction by 2020 (compared to 1990
levels), and consistent Member States
objectives were then negotiated and
allocated. Thanks mainly to renewables
development, economic slowdown,
and energy savings, this objective will
be met and perhaps even surpassed.
In 2014 the EU set a new objective of
40% GHG emissions reduction by 2030
(compared to 1990 levels).
In France, starting in 2017, a new
carbon tax of 30/t for coal-fired plants
should be levied and will accelerate
closure of these plants.
In 2016, the US Energy federal tax
credits for new wind and solar projects
were extended until 2020; they will
then be extinguished. Combined with
renewables energy costs drop, the total
renewable energy consumed in 2016
should increase by 9.5%2.
Like countries, funds and enterprises
have committed to reducing coal
usage. For example, Norways $860
billion oil fund will no longer put money
into 52 companies that are seen as
too reliant on coal; this is the biggest
ever fossil fuel related divestments by a
single investor.
The UN-backedPrinciples of
Responsible Investinginitiative was
signed by companies collectively
managing $59 trillion.
Utilities are also committing to phasing
out their coal-fired plants and to
developing renewable energies. For
example, ENGIE, the French utility, has
committed not to build any new coalfired plants worldwide.
Among OECD countries, Australia
has the highest coal electricity
generation percentage. AGL, Australias

biggest utility, recently opened solar
farms in New South Wales (a coalproducing state) with a combined
155 MW capacity (enough to power
50,000 households), showing AGLs
determination to replace fossil fuels with
renewable energy.
Many hurdles have
to be overcome
Barely a month after world leaders
signed the Paris Agreement, the global
commitment to renewable sources
faced its first big test as the price of
oil decreased to $30/bl. It has since
stabilized at around $50/bl (end August
2016). Low gasoline prices have made
driving more attractive and sales of
large vehicles have increased.
In the US, several nuclear power
plants that emit no GHGs have closed
and fewer are under construction
because of the competition from cheap
natural gas.
Since 2000, coal combustion is
responsible for 60% of the increase in
GHG emissions. Despite European and
other developed countries committing
to phase out coal combustion, coal
will still be used for decades to come
in developing countries, providing
electricity to hundreds of millions of
people. In China coal provides twothirds of the energy demand and in
India coal consumption is likely to
double by 2020. Even in Germany,
thanks to low international coal prices
and very low carbon prices, coal
plants are more competitive than gas
plants, and German CO2 emissions
are not decreasing despite growth in
renewable generation.
In this global context, it is vital to
continue investing in Carbon Capture
and Storage (CCS) technologies, either
by developing industrial prototypes
in order to benefit from lower costs
by scaling or by searching for new
technologies. Today, the initial capture
of CO2 accounts for 80% of the total
US Department of Energy forecast
cost partly because it reduces the

efficiency of the power plant by 30%.
Present CCS technologies are
competitive with a minimum $50/t CO2
price, which is 10 times higher than
mid-2016 prices!
It is worthwhile exploring new
technologies, as Exxon is doing by
partnering with FuelCell energy to
develop a new way to strip carbon
dioxide from the flue gases emitted by
power plants at a much lower cost.
Paris Agreement ratification
It is unclear whether the Paris protocol
will be enforced in 2016. On the one
hand, it has to be ratified by the US
Congress before the November 2016
presidential election and on the other
hand, the European process is slowed
down by lengthy negotiations with some
EU Member States, notably Poland, on
their individual 2030 goals.
Following the UK referendum result on
June 23, 2016, the UK will start a long
process of negotiating a new status
with the EU; it is not clear whether it
will continue to share the 40% CO2
reduction objective, or still be part of
the Emissions Trading System (ETS).
No doubt Brexit will make these
negotiations even more complex.
There are also doubts about whether
the US can meet its obligations under
the Agreement. In February 2016, the
Supreme Court blocked the Obama
administrations plan to curb GHG
pollution from power plants, which
was the centerpiece of his climate
change plan and the main way for the
administration to meet its targets under
the Paris Agreement. The plan will not
be put in place until legal challenges
by 29 states and several business
organizations have been resolved which
is unlikely to happen before 2017.
Carbon pricing
The business community expressed
disappointment around the fact that
carbon pricing didnt feature as strongly
in the text of the Agreement as it could
have, despite numerous business
leaders urging for a decision in this field
and asking for a price signal. A quick
decision on this point would reduce
uncertainties and orient decisions
towards carbon-free investments.
The most advanced carbon market in
the world is the European ETS system.
However, it needs profound changes in
order to deliver a credible price signal.
In 2015 the EU decided that in 2019
it would implement a Market Stability
Reserve (MSR) mechanism in order to
regulate the Energy Union Allowance
(EUA)3 price. This announcement
did not lead to a price increase and
in August 2016 prices stayed at an
extremely low 5/t.
While the principle of a market
exchange that does not create
additional tax is good, it is proving
difficult to implement.
Adaptation measures
Despite mitigation actions, the global
average temperature will increase
with numerous consequences on
agriculture, cities, industrial assets,
and so on. Adaptation measures
have to be taken in all countries and
technologies, and funds have to be
available. Disappointingly, no clear
decision on this point was taken in
Paris, and up to now the green fund
decided at the Copenhagen COP
meeting in 20094 has not received
significant cash commitment from the
developed countries.
In addition, companies and
municipalities must thoroughly assess
their climate change related risks and
take appropriate action.
A striking example relates to the 2011

Fukushima disasters: on the heels of
immediately following a destructive
magnitude 9.0 earthquake came a
tsunami that reached a run-up height of
30 meters in some areas.
Within the affected area were three
nuclear power plants: the two
Fukushima nuclear power plants
operated by the Tokyo Electric Power
Company (Tepco), and the Onagawa
Nuclear Power Station operated by
the Tohoku Electric Power Company.
Although the power stations shared
similar disaster conditions and nuclear
reactor types, their fates were very
different: while the Fukushima Daiichi
plant in particular experienced fatal
meltdowns, Onagawa managed to
remain generally intact. The most
obvious difference between the
Fukushima and Onagawa plants
is that Tohoku Electric took into
account surveys and simulations
aimed at predicting tsunami levels and
constructed its plant at 14.7 meters
above sea level. Tepco, on the other
hand, built the reactor at a much
lower elevation of 10 meters to save
construction costs.
At the beginning of the earthquake,
all three plants were shut down
automatically. However, there is a
need to continue to cool the reactor by
pumping water. As the grid collapsed
the pumps had to rely on backup
generators for their power supply. In
the Fukushima plant these backup
generators were flooded by the tsunami
and it is this absence of cooling that
triggered the reactors meltdown.
At the Onagawa reactor the backup
generators, installed higher above sea
level, were not flooded and the cooling
system continued to work.
EUA: the right to emit GHGs and in particular CO2
In Copenhagen, developed countries decided to mobilize, by 2020, $100 billion per year to finance developing countries adaptation actions
enewables costs
are continuously
decreasing is it enough?
Energies costs are on
a downward trend
There are two good reasons to support
the development of renewable electricity:
first, the world must significantly cut its
CO2 emissions; second, it has to be
prepared for a future in which fossil fuels
will be exhausted, or at least scarce and
thus more expensive.
As discussed above, reducing
emissions is an absolute necessity
and all available technologies and
regulations have to be implemented:
renewable energy, but also nuclear
power, energy efficiency, CCS, and a
high carbon price.
Many reasons economic slowdown
especially in China, an over-supplied
market, and Saudi policy protecting
market share explain the early 2016
oil price decrease to around $30/bl. Hopes
of coordination among producing
countries (including Iran) to limit
production pushed oil prices to around
$50/bl in mid-2016.
Unlike coal prices, which only slipped
by 4% to 51/t, gas prices have been
pushed down by 35% year on year5 as
Cheniere Energy has started offering
exports of US liquefied natural gas
(LNG) to Europe.
During the same period renewable
energy costs decreased but to a much
lesser extent than competing gas and
oil energy costs.
However, oil prices are governed by
supply and demand, by geopolitical
considerations, and by OPEC policies
that are difficult to forecast, whereas
renewables costs are governed
by technology improvements and

regulations that are more predictable,
so this picture may change.
Wind and solar energy are, with
hydropower, the main contributors
to renewable electricity generation
in Europe.
Onshore and offshore wind costs
Installation costs and wind speeds
vary widely, so it is difficult to pick a
single figure to quantify generation
costs. According to the European
Commission (EC), the onshore wind
levelized cost of electricity (LCOE)
ranges from 52 to 110/MWh.
Offshore wind LCOE is much higher,
ranging from 100 to 150/MWh.
In 2015 and during the first half of
2016, offshore wind installation costs6
decreased for the first time, bringing
down generation costs. For example,
in July 2016, DONG Energy won the
Dutch Borssele offshore wind project at
a price of 87/MWh7. During the same
period, worldwide onshore wind costs
fell by around 3%.
The first commercial project on floating
foundations was announced in 2015
(Hywind Scotland), providing the
potential to access high wind speed
regions in deep water.
Winds principal low-carbon generation
competitor is nuclear energy, and in
this respect prices for new nuclear
under the UKs contracts-for-difference
regime confirm that new onshore wind
is cheaper than new nuclear even
when grid costs are added (see below).
However, we can expect a series
effect on third-generation nuclear
reactors that would decrease their cost.
Photovoltaic solar installations (PV)
In 2015, global solar installations
increased by 34% over 2014 figures,
reaching almost 60 GW of new capacity.

Auctions delivered the cheapest prices
ranging from $30/MWh in sunny
Chile to 74/MWh in France and 80/
MWh in cloudy Germany8. Thanks to
technology innovation in inverters, as
well as continuous price reductions at
the panels level, the total installation
cost of utility-scale PV is expected to
decrease by a further 20% over the next
three years.
Investment in renewables is
growing but these energies
are still expensive
Worldwide, investments in renewables
were at a historic high level in 20159:
$286 billion was invested mainly in
solar and wind power. Conversely,
Europe saw lower investment in 2015,
at $58.5 billion, down 18% on 2014
and its weakest figure since 2006.
The UK was by far the strongest
market, with investment up 24% to
$23.4 billion. Germany invested $10.6
billion, down 42% with a move to less
generous support for solar and, in wind,
uncertainty about how a new auction
system will work from 2017. France
saw an even bigger fall in renewables
investments, of 53% to $2.9 billion
probably due to less investment in PV
and a period of uncertainty before the
new Energy Transition Law enactment.10
Since 2004, investments in renewable
energy in the EU amounted to 750
billion, representing more than a quarter
of global investment in renewables
although Europe has only 7% of the
population of the planet, reflecting the
political will of Europe to implement
rapidly perhaps too rapidly these
technologies. These sizeable investments
have allowed the current European
renewables fleet to be built, with a
nominalnameplate output of around 212
GW. However, when the capacity factor11
Mid-2016 compared to mid-2015
Global cost analysis, the year offshore wind costs fell, January 29, 2016 by David Milborow (Wind Power Monthly)
Enerpress, July 7, 2016
http://energyandcarbon.com/solar-revolution-continues-in-2016/
Source: REN21 (Renewable Energy Policy Network for the 21st century)
10
Bloomberg: www.bloomberg.com/company/clean-energy-investment/
11
Because the wind does not blow all the time and sun does not shine all the time, the renewable power capacity factor (energy produced / nameplate capacity)
is much lower than when fossil or nuclear fuels are used; i.e. a capacity factor of about 18% overall as opposed to some 85% for nuclear, coal and gas (Lionel
Taccoen, letter, Gopolitique de lnergie, no. 64, May 2016)
is included, the energy output that these

renewables contribute to the European
grid is only equivalent to around 40 GW.
Today, renewable energy is more
expensive than existing nuclear
electricity, which is also a low-carbon
technology. For example in France, the
official plan is to produce in 2023 an
additional12 43 TWh per year coming
from renewables. At todays prices for
each renewable energy and its capacity
factor, the investment cost would be
about 61 billion.
A smaller investment of 55 billion
would extend the lifetime of existing
nuclear plants for 20 years and would
produce 440 TWh per year (around 10
times more).
To become competitive without
subsidies, renewables costs have to
continue to significantly decrease.
It is forecast that by 2025, average
electricity costs could decrease by
59% for photovoltaic solar, 35% for
offshore wind, and 26% for onshore
wind compared to 2015.13
In addition to reducing panel costs,
obstacles related to regulations
(notably construction permits) and grid
management (notably electricity surplus
injection) have to be removed.
Effective R&D and innovation
efforts are needed
With 80 billion , the EU R&D
initiative, Horizon 2020 has an
equivalent funding to other large
Regions. However, because of
the complexity of the EC decision
process these funds are probably
less efficiently used than in the US,
for example.
A recent Capgemini report14 shows
also that, without a comprehensive
strategy for research and innovation
bringing together supply, demand
and regulatory aspects, the EU risks

losing its comparative advantage to
Asian and American competitors.
This is already the case with
specific technologies such as solar
PV and the EU faces similar risks
in other areas such as battery
storage, and electric, hybrid and
hydrogen mobility. The forthcoming
European Research, Innovation and
Competitiveness Integrated Strategy
(EURICS) is an important milestone
to redefine Europes competitiveness
and innovation strategy, and to align
all the pieces of the puzzle.
Some Utilities are taking a stake in
R&D and industrial manufacturing in
order to push down renewables prices:
A group of Europes largest energy15
companies has promised to cut
the cost of offshore wind farms to
80 / MWh by 2025, making them
closer to the cost of gas and coal
power stations, almost half of todays
average level.
In solar PV, the French Utility EDF
has created, with French research
centers, a Research Institute (IRDEP16)
whose purpose is to contribute to the
emergence of PV technologies with
low production costs.
In October 2015, Colas, world
leader in transport infrastructure,
unveiled Wattway, a solar road17.
The fruit of five years of R&D in
a partnership with the French
National Institute for Solar Energy,
Wattway is a PV road surfacing
concept, able to provide power to
street lights, signs and tramways,
as well as housing, offices and so
on. Colas has created a dedicated
unit to move from prototypes to
commercial implementation.
New renewables, such as marine
energies that use kinetic energy from
the tide or underwater currents,are
a potentially significant resource for

Europe. For underwater turbines, the
load factor is higher than offshore
wind (46-57%, compared to 30-35%
for offshore wind) and as the turbines
are much smaller than wind turbines,
their impact on the environment
is lower. Conversely, investment
and operating costs related to the
marine environment are higher (about
double that of wind turbines at equal
installed power).
The UK is the most advanced
European country in this area and
it also has the most substantial
natural resources. The Marine
Energy Action Plan 2010 from the
British Department of Energy and
Climate Change (DECC) aims to
save 17million tonnes of CO2 by
2030 and 60 million tonnes by 2050,
while creating 16,000 jobs. The UK
also has a world-class testing center
used by all international industrial
companies.
For these promising marine energies
to contribute to European renewables
generation, it is imperative that their
cost is significantly reduced.
New efforts are needed
While renewables implementation
allows decarbonization of electricity
generation and increased energy
independence, their deployment
should not be an end in itself. As
has been recognized in the 2030 EU
objectives and during COP21, the
real goal is to reduce GHG emissions.
Competitiveness of renewable energies,
as of other non-carbon generation
technologies, is thus crucial. Future
competitiveness requires new efforts to
lower direct costs (solar panels, wind
turbines, facilities construction prices,
cheap land for solar) but also indirect
costs, notably grid management and
related costs.
12
Compared to 2015
13
The Power to Change: Solar and Wind Cost Reduction Potential to 2025, International Renewable Energy Agency (IRENA) June 2016 report
14
Scaling up innovation in the Energy Union to meet new climate, competitiveness and societal goals by i24C prepared in partnership with Capgemini Consulting
15
Germanys two biggest power utilities RWE and E-ON, Vattenfall and Norwegian Statoil together with seven other companies including turbine makers such as
Siemens and General Electric
16
IRDEP: Institut de Recherche et de Dveloppement de lEnergie Phovoltaque, created in 2005
17
www.wattwaybycolas.com/
ignificant problems
are arising from
the renewables energy
share increase in
the electricity mix
This renewable share increase
is challenging grid management
Electricity grids have to balance
uncertain demand with an increasingly
intermittent supply due to renewable
energies not being schedulable. Grids
need to become smarter and will have
to be reinforced to connect the new
dispersed renewable installations.
In addition, when a massive shift
occurs from centralized large
generation plants to decentralized
smaller renewable units (as in
Germany), the grid has to be
redesigned and partially rebuilt. This is
complex and onerous.
For an average proportion (10-30%) of
intermittent electricity, the additional
grid costs translate into renewable
electricity having additional costs of
around 30%, which must be taken into
account while assessing renewables
competitiveness.
Once there is more than 30-40% of
intermittent electricity, the European
Physical Society, based on FrancoGerman studies, warns that grid
management solutions become very
expensive.18
At high levels of penetration, variable
renewable energy increases the
need for additional equipment or new
financial incentives that contribute to
system flexibility by matching electricity
supply and demand.
Battery storage is one option
allowing electricity supply
fluctuations management.
18
Different types of energy storage

systems provide solutions for
different challenges:
Increasing grid resilience

In association with PV installations,
providing schedulable electricity
to isolated sites in order to
replace expensive and polluting
engines generating electricity from
liquid fuels
Allowing self-consumption
from solar PV facility installed in
businesses and in homes
Helping consumers manage their
electricity bills
In a nutshell, energy storage is key to

enable higher renewable penetration
Batteries are the main technology
supporting renewable integration at
multiple scales, from domestic use to
utilities production. There are dozens
of different suppliers providing battery
storage systems.
Though battery storage technology
has made significant strides, several
key concerns must still be resolved for
the technology to achieve its potential.
These include an increase in safety and
performance along with a decrease
in cost.
Li-Ion batteries (Lithium-Ion) prices
have significantly decreased in recent
years. It is forecast that their price in
2020 will be half that in 2014, at around
$250/kWh for a battery module.
Tesla (and Panasonic) have a price
objective of less than $200/kWh. With
new technologies such as Zn-Air (zincair batteries), costs could drop below
$100/kWh in 2020-2025.19
As well as ensuring grid parity20, it
is important to compare electricity
prices provided by the grid to similarly
schedulable electricity prices provided
by renewables associated with
batteries (allowing this electricity to

be available irrespective of sun or
wind intensity). Today in continental
European countries such as Germany
and France, the so-called schedulable
renewable electricity prices are still
higher than grid prices. However in
more insular geographies , the gap is
starting to close.
Demand side management
objectives are to incentivize
consumers to adapt their demand
to more volatile generation and
take advantage of very low prices
when renewables generation is
high. Studies show that customer
information, time of use tariffs
and consumption aggregation
are usually good tools increasing
Demand Response. In addition,
competitiveness of specific
usages industrial processes taking
advantage of electricity periods
of low electricity prices should
be improved.
Aggregation: Many Companies are
offering to aggregate electricity
consumption and to sell peak shaving
services to grid managers. Energy
Pool is one of these companies
operating in the industrial sector.
For residential customers, who
account for roughly one third of
European electricity consumption,
the process developed by Swisscom
Energy Solutions, under the name
tiko, uses existing assets (heating
equipment, including heat pumps,
water boiler, and, in the future,
electric car batteries), which are
connected by broadband. Some
global/local intelligence is added
to these assets to transform them
into a virtual residential power
plant. By mid-2016, tiko had
6,500 participating households in
Switzerland and the savings per
customer were estimated at 75-150
per year.
European Physical Society Energy Group position paper July 30, 2015
19 EDF
source
Grid parity occurs when a renewable energy source generates power at an LCOE that is less than or equal to the purchasing power price from the
electricity grid.
20
Smart meters deployment: by 2020,

80% of EU customers should be
equipped with intelligent meters21.
After Sweden and Italy, who were
the front runners, many European
countries (such as Spain, France,
Norway and the UK) are deploying
smart meter programs.
The largest program is the Linky
deployment in France where by
2021, 35 million smart meters will
be deployed. By end 2016, 3 million
meters will have been installed mainly
with the G1 technology. However
after a testing phase, the G3 Power
Line Carrier (PLC) communications
technology has been chosen for the
following tranches.
This program is on time and within
the budget which should amount to
around 4bn.
Besides better grid management,
these smart meters will also
enable demand response and
energy savings
Power to gas: when the wind is
strong or when there is strong
sunlight, the wholesale price of
electricity becomes almost zero and
the question arises of how to use this
cheap electricity.
The production of either hydrogen
or methane (methanation) can take
advantage of this almost free energy
by using electricity to convert water
into hydrogen by electrolysis. The
hydrogen can then be combined
with carbon dioxide (CO2) to obtain
synthetic methane. This is particularly
attractive as it allows recycling of
CO2 produced by power plants.
The hydrogen or methane can be
either stored or injected into the gas
transmission system.
The cost is still too high but in 20152016, progress was made both in
21
22
R&D and in industrial deployment.

In early 2016, researchers22 boosted
the efficiency of water electrolysis by
using new electrodes. This modified
system generated twice as much
hydrogen than the classical platinum
electrode, thus increasing hydrogen
production competitiveness.
At the end of 2015, during the COP21
meeting, GRTgaz and its industrial
partners officially announced Jupiter
1000, the first power-to-gas project
to be connected to the French gas
transmission network.
While around 20 demonstrators are
already operating in Europe, particularly
in Germany, the Jupiter 1000 project
with a capacity of 1 MW is the first
facility of this size in France. It is
forecast that by 2050, the power to gas
sector in France could deliver 15 TWh
of gas per year.
This high renewable share
is disturbing the wholesale
and retail markets and
threatening security of supply
Wholesale markets
As the merit order takes only variable
costs into account (ignoring the capital
costs), wind and solar come first as
their fuel, wind or sun, is free. It is
thus difficult for plants having significant
fuel costs (as coal or gas plants) to
compete and as a consequence, these
plants are idle for too many hours per
year to be economically viable; so
operators are closing them.
According to EWA23, a net capacity
of 10.7 GW of schedulable electricity
(mainly coal and gas) generation was
retired from the market in 2015. The
combination of reduced demand and
yet more renewable energy additions
will force more closures until the
remaining coal- and gas-fired plants

canstabilize profits.
At the end of 2015 and in early 2016,
decreasing oil prices triggered a fall in
coal and gas prices. The low prices
of these commodities, combined
with the increase in the renewables
installed base, have pushed down
wholesale electricity prices to 22-26/
MWh compared to an average of 41/
MWh in 2015. Prices have slightly
recovered since. These very low
prices are threatening the financial
stability of electricity producers
that are not making profits even on
past investments. In France, where
regulated tariffs for industrial and
tertiary businesses have been finally
abolished, EDF and other Utilities are
now exposed for two-thirds of their
revenue to those low spot prices, and
their margins are dwindling.
Retail markets
Electricity retail customers pay for
renewables subsidies via special taxes
(such as the EEG Umlage24 in Germany
and the CSPE25 in France). Denmark and
Germany have large renewable installed
capacity and their household retail prices
are among the highest in Europe.
While still almost 50% lower than the
German retail price26, in 2015 retail
French prices increased by 4% mainly
due to the CSPE tax increase. In 2016
this tax will reach 7 billion, an 11%
increase compared to 2015 (and 17%
compared to 2014).
In Spain, where feed-in tariffs were
abolished in mid-201427, retail prices
have stabilized, showing the clear
link between the cost of renewable
energies and retail price increases.
To shield globally competitive, high
energy consuming industrial companies
from the negative impact of energy
2009, EU electricity and gas packages recommendation

The team from the Ruhr-University Bochum, the Technical University of Munich, and Leiden University published these results in March 2016 in the journalNature
Communications
23
http://www.ewea.org/fileadmin/files/library/publications/statistics/EWEA-Annual-Statistics-2015.pdf
24
EEG Umlage: tax relating to the German Renewable Energy Act (EEG)
25
CSPE: Contribution to Public Service Electricity: 70% of this tax is linked to renewables subsidies
26
16.8/MWh in France compared to 29.5/MWh in Germany (43% lower)
27
The law was passed in 2013 but began to be applied in mid-2014
10
transition, Member States including

Germany28 and to a lesser extent
France have decided to exempt them
from these related taxes. So it is small
businesses and residential customers
who bear the burden of the energy
transition cost. Despite the high degree
of concern for environmental matters
and a national will to shift to renewable
energies, one might wonder how long
these retail customers (especially
the Germans) will accept that they
have to pay such a high price for
their electricity.
Security of supply
Very large investments by the EU in
renewable energies have enabled
building a renewable nominalcapacity
of around 212 GW, contributing on the
European grid to a schedulable energy
output equivalent to around 40 GW.
In the meantime more than 70 GW29
schedulable capacity (mainly coal- and
gas-fired plants) was retired. Security of
electricity supply has thus deteriorated.
With stagnating consumption, there is
on average enough electricity available.
However, on high-demand winter
days with no sun and little wind, when
renewables dont generate electricity,
security of supply can be threatened
because gas plants able to connect to
the grid and deliver electricity in a few
hours or less30 are being closed down.
Capacity markets
One way to ensure security of electricity
supply during these tense periods
and to encourage new investment, is
to create capacity markets in addition
to existing energy markets. Capacity
markets are designed to ensure
sufficient reliable capacity is available
by providing payments to encourage
investment in new capacity or for
existing capacity to remain open.
28
Different types of capacity mechanisms

have been adopted in Europe:
Strategic reserves (Sweden, Finland):
capacity is placed in reserve, to be
used in exceptional circumstances.
These reserve plants cannot
take part in commercial energy
exchanges;
Capacity obligation (France,
delayed to 2017 by the current EC
investigation): electricity suppliers are
required to contract a certain level of
capacity from generators at a price
agreed between the parties;
Capacity auction: the total required
capacity is set several years in
advance by the Transmission System
Operator (TSO) or the Regulator.. The
price is set by forward auction and is
paid to all participants in the auction
up to the level of power requested.
As the various European countries
have adopted different capacity market
models, the EC questioned the risk of
distortion of competition.
For France, the Commission
is concerned that the capacity
mechanism envisaged may favor
certain companies over their
competitors and prevent new players
joining the market. The Commission will
also examine whether the objectives of
the mechanism could not be achieved
by less expensive measures and if the
proposed mechanism is appropriate to
encourage investment.
UK Brexit impact
On June 23, 2016, the British voted
to leave the EU. The impact of this
vote on the British energy market will
depend on the type of agreement that
will be finalized between the UK and
the EU after lengthy (at least 2.5 years)
negotiations.
Already, the UK is facing the risk of

price spikes this winter after a number
of plants finish their life in service31.
With more than a dozen power plants
due to close in the next decade, the
UK government needs to find 100
billion (11832 billion) to keep the lights
on nationwide after 2020. Financing
these investments could be more
difficult now33.
One question, among others, is
whether European Investment Bank
loans will still be available to UK
projects. The institution has lent 42
billion to the UK over the past eight
years, including 7.7 billion in 2015.
Almost half went to projects that fight
climate change.
In addition, uncertainty created by the
Brexit decision may slow investment
decisions in the energy industry for
two or three years, which would be
detrimental to the security of supply of
British electricity.34
Market reforms
To restore an electricity market
delivering meaningful price signals,
significant market reforms are urgently
needed. The EU winter package
will propose reforms on renewables
subsidies that some Member States
have anticipated.
While maintaining its objective of 45%
of renewables in the electricity mix
by 202535, Germany has, like Spain,
adopted a new law. From 2019, feed-in
tariffs will be abolished and projects will
be selected through bidding processes.
In this new context, onshore wind
capacity should grow by 2,800 MW
each year (equivalent in schedulable
generation to 600 MW); this is far less
In 2015 Germany had a net electricity use of 521 terawatt hours. Of that, 351 terawatt hours fell under the category of non-privileged end use and were thus
subject to the full EEG. The others (energy-intensive industries, railways) benefit from exemptions and consume 32% of the total electricity. www.agoraenergiewende.de
29
www.energypost.eu/ubs-closures-coal-gas-fired-power-plants-europe-accelerating
30
In France the new Bouchain combined cycle plant that was inaugurated in June 2016 by EDF and GE is able to reach its full power in less than 30 minutes
31
7 GW of closures were announced for 2016, equivalent to 11% of UK peak demand
32
At end of August
33
Fatih Birol, executive director of the International Energy Agency in an interview with Bloomberg, June 2016
34
Bloomberg, June 2016 note: reporters Jessica Shankleman and Anna Hirtenstein; editor Reed Landberg
35
Compared to 33% in 2015 www.bundesregierung.de
11
than the 4,750 MW capacity installed in

2014. In PV, the ceiling has been fixed
at 600 MW (not including residential
installations).
Northern Germany will reduce the
number of projects in order to lessen
their capacity surplus because
transmission lines to wheel renewable
electricity to other German regions are
not yet built.
In a nutshell, the previous very costly
system36 that guaranteed a fixed price
for renewables electricity output is
thus abolished, which should generate
substantial savings37 and slow down
investment in renewable electricity.
Conclusion
Costly development of renewables,
particularly solar and offshore
wind, is supported by subsidies
borne by retail customers who are
experiencing electricity price increases
while wholesale market prices are
decreasing.
In addition, these large subsidized
investments have undermined
traditional energy markets while having
a limited impact on GHG emission
reductions.38
To limit GHG emissions, a healthy
Emissions Trading Scheme (ETS)
market is vital. The exact MSR
mechanism that will apply in 2019 has
still to be approved by the European
parliament. This decision is on the
right track but will it be sufficient or is it
coming too late compared to the urgent
need to reduce GHG emissions?
mall is
beautiful
Energy transitions, combined with

technology changes, are increasing
customer desire for more information
and greater autonomy in managing
their energy consumption. The market
models are switching from centralized,
long-term planning management to
a decentralized customer-centric
approach. Customers, cities and
districts are willing to manage their own
energy needs. Small is beautiful!
Smart grids
Grid management has been greatly
affected by major changes that include
the increased share of renewables
in the electricity mix, the switch
from centralized generation to more
distributed, small-scale production,
changes in customer behavior, the
emergence of new technologies, and
the digital revolution.
To improve understanding of the
technical, regulatory, environmental,
economic and human challenges
posed by this new environment,
many smart grid demonstrators were
launched in Europe and elsewhere.
After 51 months of operation,
GRID4EU, one of the major European
initiatives, delivered its final report39.
This large-scale demonstration
project of advanced smart grids
solutions was led by six electricity
Distribution System Operators (DSOs)
from Germany, Sweden, Spain, Italy,
the Czech Republic, and France, in
close partnership with a set of major
electricity retailers, manufacturers and
research organizations. In total, the
consortium has 27 partners.
The project aimed to test innovative
concepts and technologies in real-life
36
37
38
39
environments, in order to highlight and

help remove barriers to the deployment
of smart grids in Europe. It focused on
how DSOs can dynamically manage
electricity supply and demand.
Among other conclusions, it highlighted
the need for DSOs to actively engage
with a wider range of stakeholders
such as regulators, end consumers,
distributed generators, equipment
manufacturers, information and
communications technology (ICT)
service providers, TSOs, suppliers
and aggregators. It also pointed out
that regulators, who usually focus on
ensuring investment adequacy and
incentivizing DSOs to cut inefficient
expenditure, have to move away from
short-term cost reduction incentives
to encourage DSOs to innovate and
integrate distributed energy resources
(DER) efficiently over the long term.
In addition to analyses of enabling
technologies and economic incentives,
there were extensive analyses of
consumers, with account taken of
critical subjective factors such as
motivation, trust in suppliers, and
privacy issues.
Smarter grids enable local energy
management initiatives and there is a
good appetite for them. Here are just a
few examples.
Smart local communities
development
Smart homes
Web-based services focused on energy
management, provided by Utilities,
service companies, real estate firms,
and GAFA (Google, Apple, Facebook,
Amazon) are finally giving substance to
the smart home concept.
Also, home self-consumption is
something customers want and,
In 2016, German consumers will be forced to pay 20 billion for electricity from solar, wind and biogas plants www.spiegel.de/international/germany
In 2014, the EEG Umlage represented 21% of the electricity price. It is forecast that this tax will increase until 2023 and then fall despite increasing shares of
renewable energy. The main reason is that starting in 2023, EEG funding for renewable plants from the early years with high feed-in tariffs starts to expire, and
new renewable energy plants produce electricity at lower costs. www.agora-energiewende.de
The observed reduction in GHG emissions in the EU is mainly due to economic stagnation and offshoring of industrial production. The renewables effect is lower
and ETS markets have had a very low impact
http://grid4eu.blob.core.windows.net/media-prod/29375/grid4eu-final-report_normal-res.pdf
12
thanks to technical and economic

developments, the number of
customers benefiting from it is growing.
For example, in 2016, the French
Ministry of Ecology, Sustainable
Development and Energy40 will launch
a 50 MW tender for self-consumption
targeted at the industrial, commercial
and agricultural sectors.
For the residential sector, EDF ENR41
presented in June 2016 a new selfconsumption PV offer, Mon soleil et
moi42, with electricity storage included.
Its goal is to exceed 3,000 installations
per year.
Smart cities
Cities consume more than two-thirds
of the worlds energy and account
for more than 80% of global GHG
emissions43. With continued urban
population growth44, it is important
to accelerate the deployment of
sustainable energy initiatives and find
ways to replicate best practice in cities
of all sizes.
Copenhagen, Stockholm and Oslo
were among the first 10 global cities
announcing that they had achieved
compliance with the ambitious climate
action plans of the Compact of
Mayors45 to make urban communities
more resilient to climate change46.
Many innovative energy solutions
have emerged or been tested at city
or district level. These include energy
efficiency initiatives, electricity, heating
and cooling supply systems, and
integration of renewables in the built
environment. They are being integrated
with transport systems, smart
construction, urban planning solutions
40
EDF ENR is the renewables EDF subsidiary
42
Mon soleil et moi: my sun and I
43
C40 Cities Climate Leadership Group
45
46
47
Research and innovation around

urban issues has long been supported
within Europe. Cities such as
Barcelona have created urban labs
to foster and test innovative projects
in a real environment. As a result of
urban planning innovation and the
mobilization of citizens and local
companies, the city now emits less
than three tonnes per capita of CO2
equivalent emissions, which is very low
compared to cities of the same size.
Smart districts
IssyGrid is one of the first French
intelligent energy networks at a district
level (near Paris). Created in 2012 by
a consortium of companies47, it was
completed in April 2016 with the aim
of sharing energy-related data as
widely as possible. Residents of homes
connected to IssyGrid can find out
their average power consumption over
the day and be informed six hours in
advance of the level of PV production
available hourly, allowing them to
choose the best time for their electricity
consumption. In the near future,
IssyGrid will include 2,000 dwellings
(5,000 inhabitants) and 160,000 m of
offices (10,000 employees).
Conclusion
Energy management decentralization is
what citizens desire and it is probably
a permanent shift. It has the advantage
of giving individuals better awareness
of electricity/energy consumption and
triggering modest use.
However, with the present low fossil

fuel prices the return on investment in
those projects is not attractive enough
to find financing and, except for some
cases (with little or no grid), those
decentralized operations are today
more costly than the classic centralized
solutions.
During this decade, and probably
the next, decentralized energy
management should coexist with grids
and centralized generation. Smart
meters will generate a lot of data that
will be collected by the DSO. This
data, containing rich information on
electricity or gas consumers standard
of living and way of life, needs to be
sanitized before being made publicly
available. Even so, the embedded
information is very useful to other
sectors (such as retail, banking and
telecommunications). The question
is, how could DSOs become data
service providers?
Distribution grid operators are fully
occupied in integrating renewables
and deploying smart meters. On the
other hand, the new autonomous
communities will generate less
electricity flow on transmission grids,
and the latter should stay stable
or even decrease. Thus, financial
investment in transmission grids has
to be carefully examined, notably
for interconnections that have to be
designed. in the context of a future
European grid pattern. If not, those
investments could become redundant.
France is late compared to Germany where 2.3% of the electricity consumption comes from self-consumption. Higher electricity prices in Germany than in
France, allowing bigger savings, explain the development difference
41
44
and waste and water treatment, as

well as ICT solutions for the urban
environment.
In 2014, the urban population accounted for 54% of the total global population, up from 34% in 1960, and continues to grow (WHO Global Health Observatory
data)
The Compact of Mayors is a global coalition of city leaders dedicated to reducing their GHG emissions
The EC describes a smart city as a place where traditional networks and services are made more efficient with the use of digital and telecommunication
technologies, for the benefit of its inhabitants and businesses
Bouygues Immobilier, Alstom, Bouygues Energies and Services, Bouygues Telecom, EDF, Enerdis, Microsoft, Schneider Electric, Sopra Steria and Total
13
W
With low electricity and
gas wholesale prices
and chaotic markets50,
the Utilities financial
situation is becoming
critical.
ill Utilities
succeed in their
transformations?
Large Utilities financials

are impacted
Low electricity and gas wholesale
prices and disturbed markets48 are
impacting Utilities top and bottom lines.
In Germany, electricity wholesale prices
fell from 60/MWh in 2011 to 22/MWh
in early 2016. The French price moved
from 56/MWh to 26/MWh over
the same period. European Utilities
wrote off a record amount from their
assets in 2015 bringing the total cost of
impairments to more than 100 billion
since the start of 2010.49
In 2015, 12 of Europes biggest energy
companies had to reduce the value of
their assets by more than 30 billion.
Peter Atherton at Jeffries said: Utilities
went through a golden period from
2002 to 2010 when rising power prices
meant that earnings roughly doubled
across the sector. They spent most
of the proceeds of that, buying each
other, inflating asset prices, and what
we are seeing now is the deflation of
that bubble.50
In Germany, E-ON and RWE are under
pressure from the countrys ambitious
Energiewende (energy transition)
and have implemented a structural
overhaul by separating their regulated
activities (renewables and grid) from
conventional power. At the request of
the German government, concerned
about the funding for decommissioning
costs, E-ON could not allocate nuclear
plants to Uniper (the spin-off company)
and had to retain them. As a result,
the Uniper portfolio will be limited to
fossil fuel power plants and to energy
trading. Despite the negative H1 2016
environment51, Uniper was listed on the
stock market in September 2016.
14
RWE took a different approach: instead

of carving out the older assets, it
split off the more attractive ones (its
renewables, grid and retail operations)
which should be listed on the stock
market by the end of 2016.
Despite the improvement expected
from these organizations restructuring,
the key to the fortunes of RWE and
E-ON in 2016 will be government
decisions on nuclear liabilities and
court rulings on the legality of shutting
down nuclear stations and on a nuclear
fuel tax.
In France, after writing down 8.7
billion worth of assets in 2015 and
generating a net loss of 4.6 billion
for that year, ENGIE is proceeding
with an organizational reshuffle in
order to confront the energy transition
challenges. Under the leadership of
its new CEO, Isabelle Kocher, ENGIE
is looking at greening generation
and pipeline installations, reinforcing
its services activities and adapting
to a more decentralized, customercentric approach. The Group intends
to divest upwards of 15 billion by
the end of 2018. In parallel the Group
will invest 22 billion over the same
period of which 10.5 billion will be
invested in infrastructures and 4.5
billion in services. For the longer
term, the Group is betting on digital
transformation and new technologies.
In 2015, EDF, which has many nuclearrelated challenges to overcome,
adopted a new strategic plan, Cap
2030, to establish its forward vision
and positioning in the energy transition
and renewables development context.
It also has a 10 billion divestment
plan that it has started to implement.
These divestments together with
new capital injection from the French
government should help finance Grand
48
Negative price intervals were also observed on the wholesale markets in 2016
49
Jefferies: www.ft.com/cms/s/0/5b2dd030-1e93-11e6-b286-cddde55ca122.html
50
Jefferies: www.ft.com/cms/s/0/5b2dd030-1e93-11e6-b286-cddde55ca122.html
51
Uniper suffered losses of 3.9 billion in H1 2016
Carnage a major safety improvement

and life extension program for existing
nuclear plants. In order to reinvigorate
the French nuclear industry, EDF
committed to acquiring a majority
stake in the Areva nuclear plant division
(valued at 2.5 billion). In addition, on
September 27, 2016, the board of EDF
took the decision to go ahead with the
construction of two new generation
nuclear plants (evolutionary power
reactors EPRs) at Hinkley Point in the
UK at an estimated cost of 18 billion.
In this context, EDF is expected to
divest partially from RTE, the French
TSO.
Incumbent companies are being
challenged by smaller Utilities players
but also by new entrants from different
sectors. A recent example is coming
from the oil sector.
Having acquired SunPower, the
American PV panels manufacturer, for
$1.4 billion in 2011, French oil and gas
major Total decided in 2016 to invest
$500 million per year in decarbonated
energies. Following this strategic
move, it acquired for 1 billion, the
battery company Saft (a complement
to its involvement in solar energy) and
Lampiris, the innovative new Belgian
entrant in retail electricity and gas,
realizing Totals ambition to become an
electricity and gas retail supplier.
Attempts by majors to enter the clean
energy sector are not new; however,
BP and Shell initiatives launched in
2000 have failed. In contrast, the recent
Total acquisitions are giving credibility
to its new strategy.
To improve their situation, Utilities
are using traditional remedies such
as cleaning their balance sheet,
changing their organization, spinning
off activities, implementing productivity
enhancement plans, and reducing

their capital investments. They should
also embrace a more customercentric approach by shifting to new
services and accelerating their digital
transformation.
Incumbents and new
players are both targeting
the services markets
Traditionally, Utilities have developed
services aimed at industrial or tertiary
businesses and local communities.
In Cofely, ENGIE has historically the
largest service activity despite the
2013 Dalkia acquisition by EDF. More
recently, Utilities have developed
internet-based residential services,
responding to customer requests and
generating revenue in a low capitalintensive sector, which fits well with
their high level of debt.
For example, British Gas offers home
services including the Hive Active
Heating system enabling heat control
at home or from a mobile, tablet or
laptop. This system should enable
customers to save up to 150 on their
energy bills.
In 2015, EDF launched an internetbased service e.quilibre. This
application allows EDFs residential
clients to analyze their energy
consumption, compare it (in kWh and
euros) with similar homes, spot high
energy consuming equipment, and
get personalized advice. By mid-2016,
it had been downloaded one million
times. In conjunction with its R&D
division, EDFs commercial division
is now measuring the real customer
benefits of this application.
established a strategic vision based on

shifting from a commodity company
to a services company in carbon-free
energy. Toon, a smart home system,
is an example of the services promoted
by Eneco. The system includes a
display connected to the full electricity
and heating network that is installed
in the home. It also has a special
application used on smart phones and
tablets.According to Eneco, Toon users
save 10% of their energy consumption
on average52. In addition to generating
monthly recurring revenues from related
services53, Toon increases the number
and quality of Eneco customer contacts
and customer loyalty is improved (with a
churn reduction of more than 60%).
The shift from selling commodities to
selling services is a real trend. It is,
however, easier for smaller Utilities
to embark on that journey. Scaling
up innovation and accelerating go
to market requires a refreshed
organization, mindset and agile
collaboration mechanisms, which are
more difficult, or at least slower, to
implement in incumbents.
With low barriers to entry, competition
in services will be strong, notably from
new players like GAFAS, real estate
companies like Bouygues immobilier54
in France, or telecom companies, for
example.
Finally, it is unclear how much
customers are ready to pay for such
services. In the future, it is probable
that offering these types of services
will become mandatory if Utilities want
to increase client satisfaction and
decrease churn.
The most striking example of this shift

to services is Eneco, a medium-size
Dutch Utility. Since 2007, when Jeroen
de Haas was appointed CEO, it has
52
A caveat is that the scale of the savings largely depends on the user
53
400,000 units will be sold by 2016
54
In June 2016, Bouygues immobilier launched its new connected house Flexom
15
Utilities should implement their

digital transformation faster
In this dual context of managing energy
transition while improving profitability,
it is imperative that Utilities engage
completely and quickly in implementing
their digital transformation.
Digitalization will allow

improved operational
processes through the
whole value chain
Digitalization will allow improved

operational processes through the
whole value chain from generation
onwards, with collaborative platforms
facilitating engineering work and user
friendly 3D digitized plans, through
transmission and distribution with
smarter grids, to easier, cheaper and
more agile internet-based customer
relations. Research & Development will
also benefit from gathering of big data
and smart modeling, enabling complex
local and global energy systems
optimization.
Studies57 show that on average,
process digitalization enables
cost reduction of around 20%. For
example, nuclear sector engineering,
procurement and construction (EPC)
firms have reported time and cost
benefits from using 3D technology,
including a 15% increase in operational
efficiency during the initial plant design
and engineering phase.
Having become used to more
advanced customer experiences
in other sectors, such as retail or
telecommunications, consumers now
expect new and higher standards in
their relationships with energy suppliers.
Through smart meters and increased
web-enabled customer touchpoints,
Utilities should be able to improve their
customer knowledge, enabling them to
improve relationship quality by reacting
faster and better to client requests.
In addition, DSOs will gather large
amounts of data, a very useful basis
for helping local communities manage
55
56
16
Capgemini Consulting/MIT
IDC survey
their electricity and gas needs. This

data has strategic importance. In 2016,
the French electricity DSO (Enedis)
has created open data access for data
related to generation, consumption
and grid investments. This data will
be available in an aggregated form
for groups of around 2,000 homes.
For the future, they plan to reduce the
aggregate size.
Web-based services generate new
revenue and decrease customer churn.
Also, by increasing their use of the web
as a customer channel, Utilities will
reduce their costly call-center activities.
In summary, digitalization of client
relationships generates up to 30% cost
reduction while enhancing quality.
Knowing that the top three priorities for
European Utilities leaders are increasing
operational efficiency, lowering cost and
implementing new business models58,
one wonders why Utilities (especially
incumbents) are not bolder in their
digital transformation.
There are various reasons, all related
to human factors: accustomed to a
monopolistic environment, employees
of Utilities and their associates are
struggling to adapt to a rapidly
changing world; there is a fear of
sizeable negative consequences on
employment; and finally there could be
a lack of internal capability. However,
even if many employees are resistant to
change, the new generation aspires to
it, and not moving quickly enough will
deprive Utilities of their key talents.
Despite these obstacles, and given their
deteriorating financial situation, Utilities
must act quickly and take control of
their own transformation. If they dont,
external factors will restructure them,
and probably not in an optimal way.
o what has changed

in the European
energy markets, and
what needs to be done?
The trends observed in previous
years have been further accentuated:
chaotic electricity markets, even lower
wholesale prices, increasing retail
prices, an insignificant CO2 price on
the ETS, renewables cost decreases
but still high subsidies paid by the
end customer, and threats to security
of supply.
However, COP21 has created a new
mindset on climate change threats and
has put downward pressure on GHG
emissions. Countries and companies
now have to act to reduce fossil fuel
utilization, and this is challenging in an
environment of low oil and gas prices.
The underlying EC
philosophy is unclear
More than a decade ago, most people
thought that these markets should be
liberalized, by allowing customers to
choose their suppliers. This is still true,
although all customers are not equal,
as very large energy consumers dont
pay for all energy transition taxes, and
poorer customers get reduced prices to
combat fuel poverty.
However, over the years, the system

has been re-regulated, notably through
the Third Package59 and the EnergyClimate Directive imposing relatively
short-term, ambitious goals for
renewables expansion. Consequently,
Member States adopted costly market
rules favoring renewables generation.
These costly policies have destabilized
the wholesale markets and the Utilities
financial situation while increasing retail
prices and threatening the security of
electricity supply.
In addition to unclear market design
principles, the EUs lack of agility also
contributed to this chaotic market.
For example, the ETS system for CO2
prices is not incentivizing users to shift
to low-carbon energy sources, and
successive reforms have been unable
to establish a viable market.
While it is essential that the European
Union accelerates putting in place the
necessary reforms, in particular in the
carbon market and the financing of
renewable energies, the major utility
players need to transform themselves,
notably by embracing innovation and
inventing new business models to grow
profitable revenue streams.
I hope you enjoy reading this 18th
edition of the European Energy Markets
Observatory.
It is now imperative
that EU market policy
undergoes
fundamental
change;
if it doesnt,
existing Utilities
(which must also
reform themselves)
will get into even
more trouble and
the much needed
investment in
electricity and gas
systems will not
occur.
Colette Lewiner
Senior Energy Adviser to Capgemini Chairman
September 2016
57
https://ec.europa.eu/energy/en/topics/markets-and-consumers/market-legislation
17
Climate
change
Major energy events (2015 and H1 2016)
Jan 1 - June 30
July 1 - Dec 31
Latvia leads the EU Council Presidency
Luxembourg leads the EU Council Presidency
March 16
Global energy-related CO2 emissions
stalled in 2014 at 32.3 Gt
Electricity
Gas
Sos & market integration
Energy
transition
May 7
European Parliament reaches deal
on ETS Market Stability Reserve
June 16
EU on track to
meeting 20% renewable
energy target (15.3% in 2014)
January 1
Europe introduces
new energy efficiency measures
Feb 10
Russia and Turkey agree
on onshore route for gas
pipeline project
Companies
Rules
May 26
Norway overtakes
Russia as largest
gas supplier to
Western EU
April 22
EU charges Gazprom with
abusing market position in
Poland, Hungary and six
Feb 25
other Member States
Commission launches
plan for Energy Union
June 30
EU-Russia-Ukraine's
trilateral gas talks in
Vienna end without
agreement
Feb 23
France and Spain complete Santa
Llogaia-Baixs power interconnection
(capacity doubled to 2,8GW)
Jan
Feb
February 26
GDF Suez
bounces back with
2.44 bn profits
in 2014
March 11
E.ON posts a record
net loss of 3.2bn
April
May
June
June 3
EDF and Areva merge
reactor businesses
Apr 24
GDF SUEZ changes
its name into ENGIE
July 14
Iran nuclear
deal
Sept 25
Russia and
Ukraine agree on
gas supply for winter
June 15
Commission sets up High
Level Group to drive forward
key electricity infrastructure
projects in South-West Europe
March 12
Italy and Slovenia
couple their
electricity market
March
Oct 1
Merger of Luxembourg
and Belgian gas markets
Jun 17
EU agrees to extend
sanctions against Russia
Feb 26
Norway and Denmark officially
inaugurate the Skagerrak 4
HVDC interconnector
2015
July
Aug
Aug 10
E.ON give away
its hydropower
assets for b1
Sept 08
European Commission
approve GE-Alstom deal
Sept
Oct
2015
Oct 21
Signature of the
contract between EDF
and CGN on Hinkley
Point
Sept 29
Total Energie Gaz
allowed to sell electricity
March 26
The EC refers Hungary to Court and
proposes fines for failing to fully
transpose EU energy efficiency rules
FITs: Feed-in-tariffs
EC:
European Commission
EP:
European Parliament
MS:
Member States
Source: Various industry sources - Capgemini analysis, EEMO18
18
July 31
Offshore wind power
reach 10GW capacity
June 18
June 18 The EC refers Romania to court for failing
The EC refers Greece to court to adopt an emergency plan
and gives Germany a final warning in case of gas supply disruption
regarding the transposition of
the Energy Efficiency Directive
Jan 1 - June 30
July 1 - Dec 31
Netherlands leads the EU Council Presidency
Slovakia leads the EU Council Presidency
Nov 29 - Dec11
UN Climate Change
Conference in Paris,France
Dec 12
Paris Agreements
On Climate Change
May 20
The renewable energies industry
employs 8,1 million people
Feb 11
Solar capacity rose
by 8GW in 2015
Jan 27
Solar capacity rose
by 59GW in 2015
March 24
286 b$ invested
in renewables
June 27
New gas interconnection
agreement between
Bulgaria and Greece
Jan 15
Gas export from
Gazprom to Europe
rose by 9% in 2015
March 3
The EC agrees Greek
financial aid for the
Trans-Adriatic pipeline
Nov 25
Gazprom stops
Ukraine gas supply
April 4
Agreement for a closer energy
cooperation between Belgium
and the Netherlands
Dec 16
Lituania inaugurate
interconnection with
Sweden and Poland
5
2015
Nov
2016
Dec
Jan
Nov 18
Enel buy back
Green Power
Dec 9
EDF leave
the CAC 40
June 27
Ofgem agrees on the
interconnection project between
Norway and Scotland
Feb
March
April
May
June
July
2016
June 10
May 10
DONG Energy sells Uniper split from E.ON
its gas distribution network
June 9
to Energinet.dk for 309m
DONG Energys IPO
Feb 3
May 27
Vattenfall reports a
June 8
Fortum acquires
net loss of B2.1
Total launch a
Elokem for 700m
M950 OPA on Saft
March 9
Jan 4
June 1
E.ON announces
ENGIE set up its new
ERDF becomes
June 3
a net loss of B7
matricial organisation
Enedis
EDF decides to acquire Areva reactor businesses
May 10
Enel announce that it would sell B1 assets
in 2016 and B6 from now until 2019
Nov 19
The EC refers Greece to Court
for failing to comply with obligations
under the Energy Performance of
Buildings Directive
June 23
Leave wins UKs referendum on EU
Jun 26
The EC refers Poland to
Court of Justice of the EU
because of restrictions to
some imported biofuels and
biofuel raw materials
19
Climate Change
Challenges
In collaboration with I4CE - Institute for Climate Economics
COP21: the Paris Agreement ushers in a new inclusive

approach to climate action
limate Change
Challenges
In December 2015, as the culmination

of a four-year negotiating period,
190 Parties to the UN Framework
Convention on Climate Change
(UNFCCC) reached a landmark
international climate agreement in Paris
at the 21st session of the UNFCCC
Conference of the Parties, or COP21.
The Paris Agreement provides a clear
signal and a solid framework for climate

action and covers issues dealing with
greenhouse gas (GHG) mitigation,
adaptation and finance from the year
2020.
This new Agreement marks the end
of the strict differentiation between
developed and emerging markets that
shaped earlier commitments, replacing
it with a common framework that
commits all countries to put forward
Objectives of the Paris Agreement

With the aim of strengthening the global response to the threat of climate change,
the Paris Agreement defines three main objectives:
1. Mitigation
To contain the rise of global mean temperatures well below 2C above preindustrial levels by 2100 and to pursue efforts to limit warming to 1.5C.
To reach global peaking of GHG emissions as soon as possible.
To achieve net-zero emissions before the end of the century.
2. Adaptation
To enhance support and capacity building for adaptation, and address loss
and damage.
3. Finance
To make finance flows consistent with climate objectives.
To mobilize at least $100 billion in climate finance annually, to be transferred
from developed to emerging markets between 2020 and 2025.
20
Climate Change Targets - COP21 and Mitigation Policies
their best effort. COP21 also marks the

advent of a new regime of international
negotiations based on voluntary effort,
calling on all Parties to submit Nationally
Determined Contributions (NDCs) that
encapsulate nationally appropriate
climate mitigation and adaptation plans.
The NDC process successfully received
162 submissions representing 189
country pledges, and in New York on
April 22, 2016, the Paris Agreement was
opened for signature. As of September
22, 2016, 187 UNFCCC Parties have
signed the Agreement and 60 have
formally ratified, including China, the
USA and Brazil, bringing the total global
emissions covered by the Agreement
to more than 47%. NDC pledges will
come into force once the Agreement
has been ratified by at least 55 Parties
representing at least 55% of global
emissions. At that time, the legally
binding reporting and review provisions
of the Agreement will come into effect.
The Paris Agreement introduces several
provisions that can help support and
advance climate change mitigation and
adaptation.
In particular, it introduces special

features that maintain a high level
of ambition while building trust and
creating avenues for cooperation
between Parties. It introduces:
A ratcheting mechanism to ensure
that Parties do not decrease climate
ambition over time. This will be
supported by information obtained
from a global stocktake, which
will review implementation of the
Agreement regarding mitigation,
adaptation, climate-related finance,
and technology transfer.
A transparency framework to
enable Parties to track progress
towards NDCs with reviews every
five years, and to ensure that
emissions reductions are not
double counted.
Cooperative approaches that
enable Parties to collaborate towards
achieving NDCs.
Mechanisms to reflect common
but differentiated responsibilities,
such as a financial mechanism to
facilitate the movement of climate
finance from developed to emerging
markets, a mechanism for loss
and damage, and a mechanism
to enable technology transfer
between Parties.
Avenues for non-state actor
engagement in achieving the
Paris Agreement objectives and
Party pledges.
In view of the broad framework
outlined by the Paris Agreement, these
special features will require further
discussion and negotiation by the
Parties. Leading up to, and following,
the 22nd Conference of the Parties
to the Convention (COP22), several
different work programs will negotiate
and develop the required rules and
methods to effectively implement
the Agreement, in preparation for its
coming into force.
nhancing international
climate action by
putting a price on carbon
Leading up to COP21, more than half of
Party NDCs mentioned carbon pricing
as a potential option to meet climate
objectives. Currently, carbon pricing
policies have been implemented by
40 governments and more than 20
subnational jurisdictions, covering 4.3%
and 8.8% of global GHG emissions
respectively.
The decisions that give effect to the
Agreement recognize the important
role of providing incentives for emission
reduction activities, including tools
such as domestic carbon pricing
(Decision 137 applicable to nonParty stakeholders). While the Paris
Agreement itself does not explicitly
mention carbon pricing, it does offer
the basic regulatory architecture
required to support the implementation
of effective carbon pricing policies
at domestic and transnational level,
without prescribing any particular
mitigation tool. In particular, Article 6 on
cooperative approaches highlights
that international cooperation can play
an important role in the achievement
of NDCs, and leaves room for the
adoption of carbon pricing policies to
be implemented jointly by Parties.
Article 6 introduces the possibility
of internationally transferrable
mitigation outcomes (ITMOs),
which could allow for bilateral and
multilaterally transferred emissions
reductions to count towards the
fulfillment of a Partys NDC. It also puts
forward a mechanism for sustainable
development, available to all Parties
and private entities to benefit from
mitigation activities resulting from
emissions reductions that can also be
used by another Party to fulfill its NDC.
The Paris Agreement

offers the basic
regulatory architecture to
support effective carbon
pricing policies
In 2016, carbon pricing

policies have been
implemented by
40 governments
and more than
20 subnational
jurisdictions
representing more than
13% of global GHG

emissions
21
Advancing carbon pricing policies beyond Paris
ultilateral stakeholder
dialogues and
action on carbon pricing
As well as the Paris negotiations, several
parallel initiatives to the UNFCCC process
have emerged to help facilitate the
achievement of NDCs. For instance, on
September 5, 2016, the G20 reiterated its
commitment to sustainable development,
to strong and effective support, and
to actions to address climate change,
reaffirming the importance of energy
collaboration for a cleaner energy future
and sustainable energy security that also
fosters economic growth. Political signals
from international assemblies such as
the G7, G20 or Major Economies Forum
(MEF) are important to encourage other
players to buy into the concept of carbon
pricing, whether at the regional, national,
subnational or company level. To
respond to this growing interest in carbon
pricing adoption and implementation, the
international community is increasingly
building its knowledge base in an effort to
scale up the adoption of effective carbon
pricing policies.
Government carbon
pricing initiatives
At the international level, several
multilateral initiatives have emerged
that create opportunities for public and
private stakeholders to hold further
discussions on carbon pricing. One
example is the G7: in 2015, it initiated
a Global Carbon Pricing Platform that
aims to share countries experiences
and encourage discussion on advancing
the development and linking of carbon
markets. Building on this noteworthy
initiative by international leaders, COP21
saw a swell of support for carbon pricing,
culminating in a Ministerial Declaration led
by New Zealand calling for countries to
show support for carbon markets as a
tool in the ambitious global response to
climate change.
22
Stakeholder dialogues
supporting carbon pricing
Non-governmental organizations
have also had a strong influence
on the political interest in policies
that put a price on carbon. This is
demonstrated by the Carbon Pricing
Panel, launched by the World Bank and
IMF, and comprising heads of state and
provincial leaders. In 2016, it challenged
the world to expand carbon pricing
to cover 25% of global emissions by
2020 (double the current level), and to
achieve 50% coverage within the next
decade. In addition, the World Banks
Carbon Pricing Leadership Coalition
(CPLC), launched at COP21 in 2015,
has received support from more than
74 countries and 1,000 companies.
These are only a few of the ambitious
initiatives that seek to provide evidence
and technical support for putting a
price on carbon.
oluntary internal
carbon pricing in
the corporate world
The consequences of climate change
are becoming increasingly apparent
and continue to pose economic and
environmental risks to companies and
their stakeholders. Due to this growing
threat to business as usual (BAU),
businesses are exploring the adoption
of policies that reflect and adapt to a
more carbon-constrained business
environment. This is a relatively new
trend and has yet to be fully established
within the business community.
However, there have been several
examples of companies incorporating
the cost of present and future climate
risk by setting an internal carbon price.
This provides several benefits to
companies by protecting operations
Climate Change Targets - COP21 and Mitigation Policies
from the impact of climate change and

by helping them anticipate the cost
of future mandatory carbon pricing
legislation. It can also be a strategy to
effectively direct business investments
towards low-carbon technologies.
In 2016, CDP (formerly the Carbon
Disclosure Project) reported that 517
large companies say they now apply
an internal carbon price as part of
their strategic decision-making (an
increase from 437 companies in 2015).
Additionally, 732 companies reported
that they intended to implement a
carbon pricing instrument within the
next two years.
There are several ways a company
could choose to incorporate the cost of
carbon, including, but not limited to:
A shadow price, which allows
companies to evaluate the sensitivity
of investments by modeling the cost
of carbon emissions when assessing
the profitability of potential or planned
projects. For example, the SUEZ
group integrates a shadow price
within each of its investment projects
by taking into account the carbon
price trajectories of mandatory
national or European carbon markets;
An internal price (taxes, fees or
trading systems), which assigns an
economic value to each metric ton
of CO2e (carbon dioxide equivalent)
emissions. For example, Socit
Gnrale applies a 10/tCO2e price
levied annually on the operations of
each business unit according to its
GHG emissions that year;
An implicit carbon price, which
can be applied where a company
calculates the implicit cost of its
emissions based on the retrospective
calculation of, for example, the annual
cost of achieving a 5% reduction
in emissions.
Figure 1.1 Carbon pricing world map (2016)
British
Colombia
California
11.5
Sweden
27.6 13.9 Alberta***

13.9
Manitoba
Ontario
Qubec
11.5
Denmark
Iceland*
21.2
20
RGGI
4.4
Mexico
0.91.8
38.6- Norway* 29.6- 96

54.4
133.6
Ireland
France
Portugal
Finland
nc
23
3.5
UK
77.4 17.3
22
5458
Estonia
Latvia
Slovenia
Kazakhstan**
Switzerland
8.3
China
1-6
South Korea
13.3
2.6
Japan
Saitama
NC
Tokyo
9-54
EU 5.5
4.5
Chili
7.5
2016 CO2e price given

in /tCO2e:
South Africa
Emissions
Trading Scheme
New Zealand
7.8
Scheduled Emissions
Trading scheme
Carbon Tax
Schedule Carbon Tax
* Rate varies by sect or/energy product, ** ETS suspended until 2018, *** The 2015 Specified Gas Emitters Regulation (SGER) price is the fee paid into the Climate Change and Emissions Management
Fund, set at 10.9/tCO2e. The Carbon Competitiveness Regulation (CCR) will replace the SGER in 2018, at which point, an economy-wide carbon price of 21.8/tCO2e will be set.
China ETS pilots: Beijing, Chongqing, Guangdong, Hubei, Shanghai, Shenzhen and Tianjin
RGGI: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, Vermont
Note: Prices were calculated using exchange rates provided by XE.com on 8 july 2016
Source: Institute for Climate Economics (I4CE) for EEMO18
However, internal carbon pricing need

not be constrained by any existing
definition, and companies can be
creative when exploring policies that
help internalize the cost of carbon. For
example, Microsoft has implemented an
internal tax based on its energy usage,
with the revenue going into a common
fund that invests in furthering corporate
environmental sustainability.
OP22 and
the road ahead
On April 28, 2016, the UNFCCC COP

steering committee revealed the
Moroccan Presidencys roadmap
devoted to action for COP22, which
will take place from November 7-18,
2016. COP22 in Marrakesh will be a
crucial stage in the advancement of
the objectives outlined in the Paris
Agreement. It is the first step in a long
process to define the mechanisms and
modalities that will operationalize and
support the Agreement and its parts.
First and foremost, the Moroccan

Presidency aims to build on the efforts
of COP21 to mobilize Parties to ratify
the Agreement before COP22, and to
increase involvement from non-state
actors and governments involvedin
the Lima-Paris Action Agenda (LPAA).
From a technical perspective, COP22
will endeavor to begin the process of
developing rules and modalities to
support the enhanced transparency
framework that will enable the tracking
of Parties progress towards the
achievement of NDCs. Additionally, this
COP will be charged with developing
the action plan that will mobilize
climate finance and assist in
technology transfer and capacity
building.
23
European Climate Policies

Figure 2.1 EU-28 greenhouse gas emissions evolutions and targets to 2020 and 2030
6,000
5,500
-22%
in 2014
-20%
in 2020
MtCO2e
5,000
-40%
in 2030
4,500
4,000
Historical GHG emissions

Reference scenario 2016*
2020 and 2030 targets pathway
3,500
30
20
25
20
20
20
15
20
10
20
05
20
00
20
95
19
19
90
3,000
Note: * The EU Reference scenario 20161, prepared for the Commission, presents projections for developments in the EU energy
system up to 2050. It starts from the assumption that policies agreed at EU and Member State level until December 2014 will be
implemented.
Source: Institute for Climate Economics (I4CE) with data from Eurostat and the European Commission, 2016.
The European Union (EU) committed to a 20% GHG emissions

reduction target by 2020 compared with 1990 levels, excluding GHG
emissions from the land sector but including those from international
aviation. There are two main policy instruments to achieve this target:
The European Union Emissions Trading Scheme (EU ETS), which
limits GHG emissions from more than 12,000 heavy energy-using
installations and EU airline flights. Sectors covered by the EU ETS
except aviation have to reduce their emissions by 21% by 2020
compared to 2005 levels;
The Effort Sharing Decision (ESD), which covers emissions from
road transport, buildings, agriculture and waste. EU countries have
taken on national binding targets for the period to 2020, which will
collectively deliver a reduction of around 10% in total EU emissions
from the relevant sectors compared to 2005 levels. Targets range
from a 20% emissions reduction by 2020 (from 2005 levels) to a
20% increase, reflecting differences in wealth and starting points. To
achieve these targets, a linear path is defined for each Member State,
which sets a maximum annual amount of emissions for each sector.
However, Member States can resort to flexibility mechanisms, such
as a carry-forward or banking of emissions allocations, and transfers
between Member States.
he 2020 energy and

climate package:
on track to be achieved
but lacking longterm credibility
The 2020 energy and climate package

sets three targets at the European
level, in terms of greenhouse
gas (GHG) emissions reduction,
renewables and energy efficiency.
A 20% reduction in GHG
emissions already achieved
In 2014, GHG emissions in Europe
had decreased by 22.9% compared
to 1990. The projection of GHG
emissions based on Member States
existing policy measures shows the EU
is on track to reach the 2020 target.
Emissions covered by the EU ETS
were lower in 2014 than the goal for
2020. A significant surplus of emission
allowances has built up, undermining
the schemes credibility (see next
section). With regard to ESD goals,
12 countries have already reduced
their emissions and met their national
targets. Emissions increased in five
countries, but remained within national
targets; 11 Member States are still
above their national reduction targets.
EU Reference scenario 2016: Energy, transport and GHG emissions trends to 2050. Downloadable from: https://ec.europa.eu/energy/sites/ener/files/
documents/REF2016_report_FINAL-web.pdf
24
Climate Change Targets - European Climate Policies
Figure 2.2 EU-28 renewables evolution and targets to 2020 and 2030
200
27.0%
in 2030
150
7.5%
30
29
15%
20
28
20
27
20
26
20
25
20
24
20
23
20
22
20
21
20
20
20
18
20
17
20
16
20
15
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
20
20
Overall, biofuel remains the most

important renewable energy source
in the EU. In 2014, solid biofuels,
renewable waste, biogas and bioliquids
provided 64.1% of the total gross
consumption of renewable energy.
In the power sector, renewables
grew steadily, accounting for 27.5%
of electricity generation in 2014, to
be compared with 14.4% in 2004.
Hydropower remains the largest
source, even though wind and solar
power are growing the fastest. In
the transport sector, renewables are
increasing slowly, notably because
of political uncertainty around the
future development of biofuels, which
since 2011 have had to comply with
sustainability criteria as defined in the
Renewable Energy Directive.
04
20
50
19
Gross final consumption of energy

from renewable sources (left axis)
Contribution of renewable energy from heat pumps
Derived heat produced from renewables
Final renewable energy for heating and cooling
Renewable energies for transport*
Other renewables for electricity generation
Solar power
Wind power
Hydropower**
Share of energy from renewable (right axis)
Historical share of RES in final
energy consumption
100
30%
22.5%
20.0%
in 2020
16.0%
in 2014
Mtoe
On track to achieve the EU 20%

renewable energy target by 2020
According to 2016 Eurostat data, the
share of renewable energy reached
16% of gross final energy consumption
in the EU in 20142 (figure 2.2), almost
doubling its 2004 share of 8.5%. This
increase was mainly driven by support
schemes and falling costs for renewable
technologies. In 2014, 9 Member States
had already met their 2020 targets,
and the share of renewable energy in
gross final energy consumption ranged
from 4.5% in Luxemburg to 52.6% in
Sweden.
Notes: *except electricity; **pumping is excluded.

The EU 2020 strategy includes

a target to increase the share of
renewables in gross final energy
consumption to 20% by 2020, with
a specific target of a 10% share
in the transport sector. Member
States have adopted national
targets under the Renewable
Energy Directive(RED), which
vary according to each countrys
starting point and potential: from
10% for Malta to 49% for Sweden.
Member States published National
Renewable Energy Action Plans
(NREAPs) in 2009, explaining how
they intended to achieve their target.
Each NREAP describes the national
renewable energy targets for the
different sectors (electricity, heating
and cooling, and transport), the
planned mix of different renewable
technologies, and the policy
measures to be implemented.
The EU strategy defines

a target of a 20% share
of renewables in gross
final energy consumption
by 2020, with a specific
10% target in the
transport sector.
According to 2016
data, the share of
renewable energy
reached 16%
of gross final energy

consumption in the
EU in 2014
http://ec.europa.eu/eurostat/statistics-explained/index.php/Energy_from_renewable_sources
25
The sum of the 28

indicative targets
amounts to a primary
energy consumption of
1,526.9 Mtoe in 2020,
which is only equivalent
to a 17.6% decrease
compared to the
baseline scenario, and
falls short of the 2020
target.
Additional effort is required

to meet the 20% increase in
energy efficiency target by 2020
To reach the EUs 20% energy
efficiency target by 2020, Member
States have set their own indicative
national energy efficiency targets.
Among the most ambitious targets
are those of Austria, Belgium, France,
Germany, Malta, the Netherlands,
Sweden and the UK. The sum of
the 28indicative targets amounts
to a primary energy consumption
of 1,526.9Mtoe in 2020, which is
only equivalent to a 17.6% decrease
compared to the baseline scenario,
and falls short of the 2020 target. An
assessment4 by the Commission in
November 2015 stated that despite
the achievements of previous years,
additional efforts were needed in
particular in the buildings, transport
and generation sectors to close the
gap with respect to the 2020 target.
In industry, energy consumption
decreased significantly, with the
economic crisis and structural changes
contributing to the drop, in addition to
energy efficiency measures. Variation
in energy intensity remains significant
between Member States.
The EU set a target of a 20% increase in energy efficiency by 2020, which

corresponds to a decrease of 20% in primary energy consumption compared to
a baseline scenario established in 20073. The 20% reduction corresponds to an
absolute target of total primary consumption below 1,453 Mtoe (million tonnes of
oil equivalent) at the EU level (figure 2.3) or final energy consumption below 1,086
Mtoe. It is equivalent to a 13.4% reduction in primary energy consumption in 2020
compared to 2005 levels. The Energy Efficiency Directive (EED) also establishes
a set of binding measures to help incentivize more efficient use of energy at all
stages of the energy chain, from production to final consumption. Under the
Directive, Member States have to draw up National Energy Efficiency Action
Plans (NEEAPs) every three years, to explain their estimated energy consumption,
planned energy efficiency measures, and expected improvements.
he challenge of
designing a credible
2030 energy and climate
package in line with EU
long-term objectives
Although the European Council agreed

in October 2014 on a climate and
energy framework for the EU until 2030,
and adopted targets on GHG emissions
reductions, renewables and energy
efficiency, discussions around the
proposed legislation are still ongoing.
These targets for 2030 were submitted
to the UNFCCC on March 6, 2015
as the EU intended NDC (iNDC), but
in 2016 the EU debate is developing
around the EU Commission proposals
for each piece of this package.
A 40% GHG emissions
reduction target by 2030
EU leaders have agreed on a target of
a 40% reduction in GHG emissions by
2030, compared to 1990 levels, which
is in line with the lower end of the longterm EU goal of an 80-95% reduction
by 2050. The 2030 target is to be
delivered through reductions in ETS
and non-ETS sectors of 43% and 30%
respectively, compared to 2005 levels.
On July 20, 2016, the Commission
published a legislative proposal for
an Effort Sharing Regulation for the
period 2021-2030. This uses the same
methodology as the current ESD and
sets binding annual GHG emission
targets for Member States, covering
non-ETS sectors of the economy. The
proposed Regulation maintains existing
ESD flexibilities for EU countries and
provides two new flexibilities: some
eligible Member States would be
allowed to achieve their national targets
by covering some emissions in non-ETS
The EU Baseline scenario 2007 presents projections for developments in the EU energy system up to 2030. It can be downloaded from: https://ec.europa.eu/
energy/sites/ener/files/documents/trends_to_2030_update_2007.pdf
Starting with the 2005 base year and updated in 2013 to account for the accession of Croatia, this scenario simulated trends and policies as implemented in the
Member States by the end of 2006, without assuming that targets set in the different Directives would necessarily be met.
Report by the Commission to the European Parliament and the Council Assessment of the progress made by Member States towards the national energy
efficiency targets for 2020 and towards the implementation of the EED 2012/27/EU as required by Article 24(3) of EED 2012/27/EU, downloadable from: https://
ec.europa.eu/energy/sites/ener/files/documents/1_EEprogress_report.pdf
26
2,000
1,900
1,800
-20.0%
in 2020
-16.3%
in 2014
1,700
-27.0%
in 2030
1,600
1,500
Historical primary energy consumption
1,453 Mtoe
Reference scenario 2016*
1,400
Baseline scenario 2007**

1,300
30
20
25
20
20
20
15
20
10
20
05
20
00
20
95
19
90
1,200
19
At this stage, targets for

renewables and energy
efficiency are not intended
to be nationally binding
The European Council has endorsed
a binding EU target of at least 27%
for the share of renewables in final
energy consumption by 2030, and
an indicative target of 27% for energy
efficiency compared to the 2007
baseline scenario (figures 2.2 and 2.3).
These figures are not to be translated
into nationally binding targets. In
June 2016, the European Parliament
published its resolutions on renewable
energy progress5 and on the EED6. It
reiterated its earlier position in favor of
at least a 30% share of renewables in
final energy consumption, and of a 40%
energy efficiency target for 2030, both
with national binding targets, and stated
that significantly higher ambition is
desirable. The Commission will present
proposals for the revision of the EED
and the RED by the end of 2016.
Figure 2.3 EU-28 primary energy consumption evolution and targets to 2020 and 2030
Mtoe
sectors with EU ETS allowances that

would normally have been auctioned;
and Member States will be allowed
to use some credits from the land
use sector, with certain conditions, to
meet their national targets. While these
flexibilities increase the cost-efficiency
of the policy, they also decrease its
ambition to a certain extent. National
targets for emissions reductions range
from 40% to 0% in 2030 compared to
2005 levels. This proposal is currently
under consideration and the European
Parliament will vote on it at the end
of October 2016, after which it will be
voted on by the Council.
Notes: * The EU Reference scenario 2016 presents projections for developments in the EU energy system up to 2050. It starts
from the assumption that policies agreed at EU and Member State level until December 2014 will be implemented. ** The EU
Baseline scenario 2007 starts with the 2005 base year and accounts for policies implemented until the end of 2006.
The EU Commission is
expected to publish
legislative proposals
for the revision of the Energy
Efficiency and of the
Renewable Energy Directives
for the period post-2020 by
the end of 2016
European Parliament resolution of June 23, 2016 on the renewable energy progress report: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=
EN&reference=P8-TA-2016-0292
European Parliament resolution of June 23, 2016 on the implementation report on the EED: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=
EN&reference=P8-TA-2016-0293
27
he EU ETS
The EU ETS is on track to

achieve its 2020 target but its
credibility has been undermined
GHG emissions from fixed installations
within the scope of the EU ETS
decreased by more than 15% in 2015
compared to 2008 and amounted to
1,800 MtCO2eq (megatons of carbon
dioxide equivalent), which is below the
2020 cap of 1,816 MtCO2eq.
The EU ETS was launched in 2005 with the aim of setting an annual emissions
cap for high-emitting sectors in the EU. Within the cap, companies receive or buy
emissions allowances that they can trade with one another as needed. Each year,
they have to surrender enough allowances to cover all their emissions. The EU
ETS covers around 12,000 industrial plants and power stations in the EU and in
Iceland, Liechtenstein and Norway, as well as aircraft operators for flights within
this zone, representing approximately 45% of total GHG emissions. The EU ETS
is now in its third phase, and is being revised for the post-2020 period. In this third
phase, a single, EU-wide cap on emissions applies. The cap on power plants and
other fixed installations decreases annually by an amount equivalent to 1.74% of
the average annual total quantity of allowances issued by Member States in the
period 2008-2012, which will lead to a 21% reduction in 2020 compared to 2005
levels. A separate cap applies to the civil aviation sector, equivalent to 95% of the
average annual level of emissions in the years 2004-2006.
Figure 2.4 CO2 emissions in phase II and III of the EU ETS (2008 to 2015)
2,500
Other
2,000
Ceramics
Glass
MtCO2e
1,500
Paper
Lime
Cement
1,000
Refining
Steel
Other combustion
500
Power sector
15
20
14
20
13
20
12
20
11
20
10
20
09
20
20
08
The decrease in emissions has been

particularly sharp in the power sector,
driven in particular by the increasing
penetration of renewable energy
sources. A surplus of allowances
has been building up in the EU ETS
since 2009, amounting to around
2.1 GtCO2eq in 2013. In 2015, it
fell to around 1.78GtCO2eq as a
consequence of backloading, which
consisted of postponing the auction
of 900 million allowances over the
period 2014-2016 until 2019-2020.
The deployment of renewables had a
strong impact on emissions reduction,
but as the renewables objectives were
taken into account when the cap was
set, only achievements in excess of
those objectives have an impact on the
surplus. However, the EED, which was
enforced in 2012, after the cap was set,
was not taken into account, and neither
was the use of international Kyoto
credits7. The unforeseen economic
downturn in 2008-2009 also had a
significant impact on the surplus.
This surplus undermines the credibility
of the EU ETS and its price signal.
Low carbon prices (figure 2.5) may
lead market participants to disregard
early abatement options. The low
prices may also delay investment
in the development of low-carbon
technologies. Finally, they could lead
to investments in carbon-intensive
technologies in the short term, which
is referred to as carbon lock-in.
These effects increase the cost of
decarbonization in the long run. The
indications are that the EU ETS needs
to be urgently revised and, in particular,
the price signal restored to provide
strong support for the development of
low-carbon technologies. Uncertainty
around Brexit is another factor
undermining the credibility of the EU
ETS and making its revision all the
more necessary.
Source: Institute for Climate Economics (I4CE) with data from EUTL, 2016
The Kyoto protocol defined two project-based mechanisms, the Clean Development Mechanism (CDM) and the Joint Implementation (JI), which generate carbon
credits from CO2 emissions reductions linked to projects implemented respectively in non-Annex B and Annex B countries. In the EU ETS, operators are allowed
to use CDM and JI carbon credits between 2008 and 2020 for their compliance under some quantitative and qualitative limits.
28
In particular, the Commission proposed:

To change the linear factor by
which the emissions cap is reduced
annually from 1.74% to 2.2% after
2020, which would deliver a 43%
reduction in emissions from ETS
sectors in 2030 compared to 2005;
To keep the share of allowances to
be auctioned by Member States, and
not freely allocated, at the same level
as in phase 3 (on average 57%);
Not to allow the use of further
international credits for compliance in
the period after 2020.
Figure 2.5 EUA and CER prices in the EU ETS (2008 to 2016)
30
EUA spot prices
25
CER spot prices
/tCO2e
20
15
10
16
20
15
20
14
20
13
20
12
20
11
20
10
20
09
20
08
0
20
Towards phase 4: the proposed

reform package to modify the
EU ETS is still under discussion
An initial step in the reform of the EU
ETS was the backloading measure,
agreed in 2014. A second step will
be the implementation of the Market
Stability Reserve (MSR), agreed in
2015, whose objective is to regulate
the long-term surplus by applying
thresholds for the total amount of
allowances circulating in the market.
The MSR will be implemented in 2019
but will not be sufficient to address the
surplus, due to the interaction between
the EU ETS and complementary climate
policies. Finally, as a third step in July
2015, the European Commission
published a proposal for the reform of
the EU ETS Directive, which is currently
being discussed by the European
Parliaments Environment and Industry
committees.
Source: Institute for Climate Economics (I4CE) with data from ICE Futures Europe, 2016
The first discussions around this

legislative proposal in the European
Parliament have emphasized the need
to assess the interaction between the
EU ETS and other climate and energy
policies at European and national levels,
and to raise the possibility of increasing
the level of ambition after the first UN
global stocktake in 2023 and every five
years thereafter.
The Industry committees final vote will
take place in October 2016, and the
Environment committees in December
2016. The European Parliament plenary
vote is scheduled for February 2017
and tripartite negotiations should start
in March.
29
Energy Transition
Global temperature is getting from record

to record, nevertheless 2015 saw an
encouraging stabilization of global CO2
emissions
For the first time,
temperatures in 2015
were about 1C above
the pre-industrial era
(late 19th century)
Global CO2-energy
emissions
stagnated
in 2015
after 4 years of
continuous increase.
30
The global average surface temperature

in 2015 beat the previous temperature
record set in 2014. For the first time,
temperatures in 2015 were about 1C
above the pre-industrial era (late 19th
century) 8. This record is part of the
current long-term trend:
fifteen of the sixteen hottest years on
record have happened in the current
century. This trend is due to continue
as the average temperature in the
first six months of 2016 was 1.3C
warmer than the pre-industrial era.
As a reminder, The Paris Agreement
committed to pursue efforts to limit the
temperature increase to 1.5 C.
Global CO2-energy emissions
stagnated in 2015 after 4 years of
continuous increase (+8.3% between
2010 and 2014, with an almost flat
increase 2014)9. It is only the fourth
World Meteorological Organization
Enerdata, Energy Statistical Yearbook 2016
10
IMF
11
Capgemini estimation from BP figures
12
IEA
Energy Transition - Energy Transition Policies
time in 40 years that a decrease or

a stagnation of CO2 emissions is
observed. Two metrics can explain
this trend. First, growth in final energy
consumption was limited to 0.7 % in
20159 despite a 3.1% growth of global
GDP10 thanks to an important decrease
of the energy intensity (-2.6% in 20159),
mainly driven by non OECD countries.
Second, a 0.9%11 reduction of carbon
intensity of the global energy mix (CO2energy emission / Total Primary Energy
Supply) was achieved, especially thanks
to the increasing share of renewables in
global electricity production (+2.8% in
2015) and to the coal-to-gas switching.
The two main polluting countries are
good examples. China continued to
drastically reduce coal in its power
generation mix (-10% in 2015 compared
to 2011, as part of the answer to cities
air pollution issue12). The US pursued
its switch from coal-to-gas encouraged

by falling price of natural gas from
hydraulic fracturing and anti-coal
environmental regulationsfrom the
Environmental Protection Agency and
other federal regulators. As a result,
US generated more electricity from
natural gas than coal in 2015 for the
first time ever.
The fossil fuel divestment
movement is accelerating
The fossil fuel divestment movement
observed within the electricity
generation industry in 2013-2014
expands in 2015 to the financial
institutions sphere, benefiting from the
COP 21 context. The ONG 350.org,
which records all public and private
institutions divestment commitments,
registered around 500 institutions
accounting for more than 3400
billion of assets in December 2015,
to compare with 181 institutions
representing 50 billion of assets in
September 2014.
While the forerunners were rather
NGOs, cities, universities and
foundations, several private sector
companies and pension funds recently
joined the movement and accounted
for 95% of the assets at the end of
2015. Among the more prominent are
the philanthropic foundation Rockefeller
Brothers Funds, the Norwegian
Sovereign Wealth Fund, the French
insurance and assets management
group AXA and the Swedens pension
fund AP2.
Apart from the moral and ethical
motivations behind the fossil fuel
divestment campaign, institutional
investors pursue forms of divestment
for financial reasons, as investing
in fossil fuel assets become more

risky and may deliver lower returns
given stricter climate policies (for
instance regarding CO2 emissions) and
technological change.
Investing in fossil fuel

assets become more
risky
On the specific point of shale gas,

Europe saw little if no changes in 2015,
except that the imports of shale gas
from the US were shipped to Norway,
Brazil, France and Portugal during
Q2 2016.
The term divestment covers several
types of commitment. While some
institutions decide to fully disinvest
from all fossil fuel assets, funds and
private companies mostly opt for partial
divestment, meaning they choose
to withdraw their investment from a
company based on their own criteria,
often related to the level of revenue the
company generates from coal activities
(coal mining, power generation from
coal-fired plants).
However, the efficiency of divestment
is still questioned by some institutions
such as Harvard University, which
estimates that keeping the shares is
more efficient as investors keep their
voting right and their influence.
Oil majors did significant moves
in a series of green investments
International Oil Companies are starting
to move into green mainly due to the
recent fall in oil prices, to the pressure
on turnover growth and margins
evolution and lastly to the growing
global commitment to tackle climate
change. For example, Total, Shell and
Statoil have created New Energies
divisions dedicated to low-carbon
energies. Significant green investments
are also representative of this shift,
International Oil
Companies are
starting to
move into
green
mainly due to the

recent fall in oil
prices, to the
pressure on turnover
growth and margins
evolution and lastly
to the growing global
commitment to
tackle climate
change.
31
with Total acquiring the battery

manufacturer Saft for 950million,
Shell planning to spend $1.7billion in
capital investment and $200 million
annually on acquisitions and Statoil
partnering with E.ON on a 1.2 billion
offshore wind farm project in Germany.
ExxonMobil is working with FuelCell
Energy to develop a novel CCS method
by connecting carbonate fuel cells to
a power plants exhaust, getting in
output a concentrated CO2 more easily
stored and transported while generating
electricity (whereas current CCS
technologies consume power).
Oil prices collapse is a threat
to further developments in
Energy Efficiency (already
observed negative impacts
on transport sector), but
seems to have no impact on
renewable power expansion
IEA estimated that low oil prices can
make the world lose nearly 15% of
achievable energy savings by 2040:
$800 billion that will not be spent on
improving the efficiency of cars, trucks,
planes and other consumer equipment.
Tangible impacts are already observed
on the transport sector. Chinese,
American and European consumers
are moving away from energy efficient
vehicles (favored when oil prices were
higher) to fuel-intensive Sport Utilities
Vehicles (SUV). In 2015, SUVs outsold
any other type of passenger vehicle in
Europe for the first time ever, ahead of
compact and subcompact segments,
while electric mobility represents 1% of
sales in most advanced countries (see
below paragraph 4).
At short term Energy Efficiency steadily
pervades in the development of
equipment, appliances, IT, and new
buildings, while efficient renovation of
existing buildings remains a challenge
that would be encouraged by higher
energy prices.
Lower price of oil did not globally
impact the development of renewable
32
power generation since 2015 was

a record year both in terms of
investments and installed capacity.
Several reasons can explain this
decorrelation:
They operate in different markets:
very little oil is used to generate
electricity and therefore do not play a
role on the electricity supply side
Renewable power generation
resisted lower gas price driven by
lower oil, as energy investment is
long term (changes in the spot price
of gas do not in themselves derail
investment).
They are not in direct competition
since gas actually complement
intermittent renewables.
Renewables enjoy improving
economics in addition to the support
their benefits.
The global dynamics of energy is
more and more located in emerging
markets which still have huge need
for new power capacities to sustain
their economic growth.
GERMANY: Led by the expansion of renewables, energy transition is

progressing fast, but it still faces a number of challenges
Regarding regulatory developments, the 2017 revision
of the Renewable Energy Sources Act was passed by
parliament in July 2016. The 2017 version addresses three
key points: 1) maintaining the existing priority of renewables
expansion, 2) keeping the costs of the EEG at a minimum,
and 3) ensuring transparency and fairness in tenders.
Also in July 2016, the Digitization of Energy Transition
Act was passed. Smart meter rollout will start in 2017 for
customers whose annual electricity consumption exceeds
10,000 kWh; from 2020, it will include private households
using more than 6,000 kWh per year.l In addition, strict
regulations regarding technical standards and data
protection, are stipulated.m
Throughout the year fracking remained a contested
issue. In April 2015, the German government submitted
a legislative package containing various bills aiming to
significantly restrict fracking explorations.n However,
the attempt was halted by the Federal Assembly due to
unresolved issues among the coalition partners, and the
final decision was postponed.o The proposed legislation
was put on hold until recently, when the coalition partners
reached an agreement and the amended proposal was
passed in June 2016.p The new law grants federal states
the right to decide whether to allow conventional test
drilling in their territory, while unconventional hydraulic
fracturing (fracking) is prohibited indefinitely.q
In the area of electromobility, at the end of 2015 more than
40 models, of which 29 are serial products, were offered
on the German market.r However, despite an increase in
the number of licensed electric cars on German roads, the
total number of about 55,000 vehicles clearly falls short of
the reference goal for 2016 of 200,000.s At the same time,
the expansion of the necessary public infrastructure is
lagging behind expectations, as economic feasibility proves
difficult owing to the small number of cars in use.t Despite
these challenges, leading German car manufacturers
continue to view electromobility as a key pillar of their
business strategies. As an example of this, VW recently
announced its intention to increase revenue share from
electromobility to 20-25% by 2025.u
In many regards, the past year can be seen as a year

of extremes. Driven by a sharp increase in wind power
generation (+50%), the total share of renewable electricity
production in Germany set a new record, reaching 30%
(32.5% for domestic electricity consumption). For a single
energy source, this is the largest share ever recorded in the
German electricity mix, making renewables the mainstay
of the electricity market.a As priority in the merit order is
given to renewable energy sources (RES), conventional
ones in particular hard coal are increasingly replaced
or exported.b In addition to the contribution of renewables
peaking at 83% of electricity consumption in August
2015,c the resilience of the system was proved on several
occasions especially during the partial solar eclipse in
March 2015, when nationwide large-scale fluctuations in
solar-based electricity had to be dealt with.d
However, sustainable reduction of electricity consumption
is progressing slowly. The stated goal of a 10% reduction
by 2020 compared to 2008 has only reached 3.4%
and is still proving challenging.e One explanation is
that decoupling electricity consumption and economic
growth is a slow process and the economy grew by
1.7% overall in 2015.f A second issue arises in the area
of climate protection. Because electricity generation from
coal-fired plants increased (+2.7%) while that from nuclear
power plants decreased (-5.6%), greenhouse gas (GHG)
emissions showed a slight increase in the last year (+1%).g
The resulting overall decrease of only 26% compared to
1990 puts at risk the goal of 40% reduction by 2020.h
Due to increasing generation capacities and the fact that
German wholesale prices are among the lowest in Europe
(second only to Scandinavia), the German export balance
increased to 61 TWh (+50%).i Wholesale prices decreased
further to an average of 31.6/MWh and are even lower
at 30/MWh on the forward market. By the same token,
negative electricity prices went up from -15.55/MWh to
-9/MWh.j However, while this can be seen as a promising
development, the total number of hours with negative
prices nearly doubled from 64 in 2014 to 126 hours in
2015.k
a
b
c
d
e
f
g
h
i
j
k
l
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Bundesministerium fr Umwelt, Naturschutz, Bau und Reaktorsicherheit (2014). Aktionsprogramm
Klimaschutz, p. 10
Rdl & Partner (2016). Erneuerbare Energien: Erfahrungen und Trends weltweit, p. 13
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13.07.2016 from: http://goo.gl/wmT8iy
Nationale Plattform Elektromobilitt (2015). Ladeinfrastruktur fr Elektrofahrzeuge in Deutschland, p. 7
Frankfurter Allgemeine (2016). VW setzt auf Elektroautos, retrieved 13.07.2016 from: http://goo.gl/MKYU7a
33
nvestments in the
renewable energy
sector fall again in
Europe by 22% down
to $46.3 billion, and
increase worldwide
up to $286 billion
of investment will not be overtaken in

2016. 2015 may remain a record year
for a few time. Three types of energies
have benefited from this trend: 73% of
the global added renewable capacities
comes from wind (63GW) and solar
PV (47GW) and 23% from hydropower
(35GW).
With $286 billion investment

and 151 GW added capacities,
2015 has been a record
year for new renewable
energies worldwide
2015 has been a fine vintage for
renewable energy. According to
Bloomberg New Energy Finance, global
investment in this sector has reached
$286 billion in 2015, +5% compared
to 2014 and six times the figure set in
2004, accounting for 151 GW renewable
energy capacity added, +12%
compared to 2014. It represents alltime renewable records both in terms
of investments and installed capacity.
According to the last figures published
by Bloomberg New Energy Finance
it is almost certain that such a level
Such a level of
investment will not be
overtaken in 2016. 2015
may remain a record
year for a few time.
Figure 3.1 New investments in clean energy in EU 28: 2004 - 2015 ($bN)
Yearly new investment in clean energy. This includes

investment into all asset classes except EST asset finance
and R&D, which are compiled on an annual basis only
119.5
110.7
79.6
85.9
80.5
65.6
56.2
59.5
45.7
46.3
32.3
22.8
Wind
2004
2005
2006
2007
2008
solar
2009
Other
2010
Running average
2011
2012
2013
2014
2015
Note: Total values include estimates for undisclosed deals. Excludes corporate and government R&D, and spending for digital
energy and energy storage projects (reported in annual statistics only).
Source: Bloomberg New Energy Finance
34
For the first time developing countries

($155.9 billion) have invested more than
developed ones ($130.1 billion).
Furthermore, the trends vary from
one region to another. On the one
hand, APACs investments have
kept increasing since 2004 reaching
$179 billion (+11% compared to
2014). Likewise, with $78 billion (+4%
compared to 2014) AMER has followed
the same dynamic since 2013 after a
decrease between 2011 and 2013.
In this global picture one country has
set itself apart. One third of the total
investments has been made by China
($102.9 billion), as much as to add 48%
(30.5 GW) of the 63 GW wind power
capacity added globally; 32% (15 GW)
of the global 47 GW solar PV new
capacity installation and 55% (19.4 GW)
of the 35 GW hydropower capacities
that came online in the world.
Europe enters now in a phase
of maturity compared to other
regions, with a decrease
of 22% of its investment in
renewable down to $46.3 billion
EU investments have kept on falling
in 2015 (-22%) down to $46.3 billion.
Investments are almost back to
2006 level ($45.7 billion) and -61.7%
compared to the $119.5 billion record
in 2011 (see figure 3.1). This significant
drop may both reflect a weakening of
the renewable market attractiveness
and a maturity of the sector in the old
continent. Europe which had in 2014
the global leadership in renewable
energy installed capacities is no longer
in a first position in 2015 with a total of
Figure 3.2 European Green Market evolution (main technologies) (2007 to 2015)
2008
100%
Top 3 countries ranked by:
90%
Capacity year on year growth rate [%]
80%
Capacity
2010
DE
IT
2011
70%
UK
60%
Solar
Growth
(abs.)
DE
FR
NL
Growth
(%)
PL
SE
Installed
capacity1
Growth2,3
(absolute)
DE
UK
DE
IT
IT
FR
1 In MW, over the last year (2015)

2 Over the last year (2015)
3 Relative growth additionally displayed for
solar PV
UK
2009
2007
50%
2015*
40%
Offshore Wind
UK
DE
DK
2012
30%
2007
20%
DE
2009
2008
2013
10%
Biogas
DE
UK
0%
DE
IT
FR
IT
Bio Energy
UK
NL
DE
SE
UK
2010
UK
AT
DE
2011 2012
2015*
2013
2014
2015*
2015*
Onshore Wind
DE
ES
UK
Hydropower
DE
FR
FR
IT
ES
PL
ES
FR
IT
2015*
2015*
-10%
0
50
100
150
200
250
300
350
400
Electricity production [TWh]
* 2015 data are estimated

Source: IRENA Renewables Energy Statistics 2016 Capgemini analysis, EEMO18
497 GW for all renewable technologies

compared to 504 GW in China.
level, reaching an amount of almost

3.1GW.
Wind and solar PV represent the

majority of the capacities added
around the world. The European Union
makes no exception to this statement.
The additional capacities in GW are
increasing in 2015 (see figure 3.2),
benefitting from the investment in the
previous years 13.6 GW were added in
2015 (+23% compared to 2014), with
an investment of $24.3 billion (-22%
compared to 2014). The EU market
now accounts only for 22% of the new
wind power capacity added globally.
Onshore wind amounts to 10.5 GW of
new capacity due to an augmentation
of 8.7% compared to the year before.
Offshore wind benefits from a larger
increase of 38.8% compared to 2014s
In 2015, 7.3 GW (+3% compared to

2014) solar PV were added through
an investment of $18.8 billion (-15%
compared to 2014). Germany
accounted for 19% of the new PV
installations.
Europe is no longer
in first position in
2015 with a total of
The success of wind and solar power

should not hide the progress made
by other types of energies in 2015
(see figure 3.3). Overall, $4.6 billion
were invested in the other renewable
energies in the entire European
continent ($3.2 billion only if European
Union is considered). $3.2 billion were
dedicated to bioenergy, i.e. biogas,
solid and liquid biofuels. $1.2 billion
were invested into geothermal energy
for all renewable

technologies
compared to 504 GW
in China.
497 GW
35
Figure 3.3 European Green Market evolution (other emerging technologies) (2007 to 2015)
2009
30%
Top 3 countries ranked by:
Liquid Biofuel
UK
DE
DK
Capacity year on year growth rate [%]
25%
IT
Installed
capacity1
Growth
(absolute)
UK
NL
DE
UK
DE
IT
IT
FR
20%
1 In MW, over the last year (2015)
2008
15%
2012
10%
Urban waste
2010
2007
DE
IT 0%
FR
Pumped storage
PL
FR
DE
SE
UK
2013
IT
ES
UK
AT
DE
ES
FR
IT
2015*
2015*
2015*
2014
-5%
0
10
15
20
Electricity production [TWh]
* 2015 data are estimated

Source: IRENA Renewables Energy Statistics 2016 Capgemini analysis, EEMO18
and the rest in hydropower and marine

energy ($100 million each).
80% came online in Italy and 20% in

Germany.
More precisely in the EU in 2015,

1.4 GW of bioenergy has been
installed (-15% compared to 2014).
It is interesting to notice that after a
decrease of the global capacity in
2014, urban waste increases again
by 3% due to 146MW added mainly
in the UK (100MW). Geothermal
installed capacities have experienced
a relative larger increase (8.6%) in the
EU with an absolute growth of 70MW
(+80% compared to 2014) from which
Marine energy capacities located in

European waters remained stable at
247MW, with a slight increase of 1.2%
compared to 2014.
36
DE
FR
Geothermal
5%
2015*
DE
ES
UK
2015*
2011
Marine Energy
DE
UK
DE
In conclusion, with less financial

investment, Europe is nevertheless
steadily developing its renewable
capacity, and its industry works
at extending the array of available
technologies (offshore, marine,
geothermal, etc).
25
30
35
The decreasing cost

trend will continue
According to Bloomberg Energy
Outlook 2016, new utility-scale solar PV
LCOE is expected to drop down 60%
from a $74-$220/MWh range today, to
Today, offshore wind is still quite

expensive compared to other green
technologies but the trend is also
in the decreasing direction. In June
2016, the CEOs of 10 major wind
actors committed to lower offshore
LCOE to 80/MWh by 2025 (ADWEN,
ENECO, GE, VESTAS, SIEMENS,
Figure 3.4 Levelized costs of electricity (2015) in EU-28
400
350
Levelized cost of electricity [/MWh]
Moreover, records in terms of LCOEs

have been registered worldwide in 2016:
for solar PV in Chile (25.6 /MWh), Dubai
(2714/MWh), in Mexico (33/MWh), in
the USA (34/MWh) and in Germany
(70/MWh), for onshore wind in
the Netherlands (72/MWh) and in
Morocco (27/MWh).
VATTENFALL, EDP, E.ON, IBERDROLA,

RWE, STATOIL), provided stable
regulations and countries cooperation
takes place. In March 2016, Siemens
had already announced that 72%
of its 2020 target of 100/MWh had
been accomplished, mostly thanks to
technical improvements. A few weeks
earlier, the European Commission also
declared its intention to reduce offshore
wind LCOE to 100/MWh by 2020 and
70/MWh by 2030.
Peak capacities
Fossil fueled capacity

Energie
Nuclear capacity
300
250
Average
Median
Base capacities
Semi-base and intermittent capacities
200
150
100
50
0
yd
N
ro
at
ur
da
al
ga m
s
pe
ak
C
oa
lp
ea
k
O
ns
H
yd hor
N
e
ro
at
ru win
ur
nd
al
of
ga
-r
U
s
iv
til
s
e
em
r
ity
-s
i-b
ca
as
le
e
s
C
oa olar
ls
PV
em
i-b
O
ffs
as
ho
e
re
w
in
d
Ex
is
tin
g
nu
So
cl
ea
lid
C
r
oa
bi
om
lb
as
as
e
s
co
fir
Bi
G
i
n
om
e
g
as oth
er
s
m
in
al
ci
ne
ra
N
ew tion
So nuc
le
lid
ar
bi
om
as
s
Bi
og
as
Onshore wind and solar PV

are becoming more and more
competitive compared to coal,
natural gas & new nuclear
According to Bloomberg Energy
Outlook 2016, in Europe, onshore
wind and solar utility scale PV became
cheaper in Europe in 2015 while coal
and gas-fired plants increased due to
assumptions including lower utilization
rates and slightly higher carbon prices13.
The largest European solar farm built
by Neoen near Bordeaux - France
(300MW capacity) is a good illustration
of the falling PV prices. Its electricity will
be sold at 105 /MWh, a lower price
than the estimated one of new nuclear
plants (e.g. 110 /MWh for the two new
nuclear reactors Hinkley Point C). This
figure is still above the market electricity
price but shows the global shift in
competitiveness.
a central estimate of around $40/MWh

worldwide for average sunny country
outside any records in 2040. This
evolution will be mainly explained by an
increase of experience in such projects,
allowing for economies of scale in
various domains like supply chain or
operating costs. Meanwhile, onshore
wind LCOE reduction (Bloomberg
expects it to drop by 41% by 2040)
will be mainly due to capacity factor
increase. In parallel, an increase of
carbon cost for black technologies, as
recently announced in France for coalfired plant (floor-price could be fixed
at 20/ton in 2017 compared to the
current EU Emissions Trading System
of about 6/ton), would imply a direct
LCOE peak for these technologies, thus
reducing their competitiveness.
evelized costs :
onshore wind and
solar PV are becoming
more and more
competitive compared
to coal, natural gas
& new nuclear
Source: BNE, Eurelectric Capgemini analysis, EEMO18
13
Mainly due to Market Stability Reserve reform
14
Exchange rate: 1 = 1,1$
37
nergy Storage competitiveness is coming at

striking distance in the future decade
(for some applications)
Significant capital costs

decreases are expected
for some technologies
(-47%16 for Li-ion and
-38% for flow battery)
during the next 5 years.
Storage costs are still declining but

according to a report released by
Lazard on LCOS15 (Levelized Cost
of Energy Storage), they are still not
cost-competitive against conventional
alternatives to energy storage such
as gas peakers and diesel engines.
The costs are also highly dependent
on the use cases (for example, a flow
battery used for improving transmission
grid performance has a LCOS of
US$290-US$892/MWh compared to
US$721-US$1657/MWh for residential
applications).
Adding the effect of subsidies to these

trends and stacking multiple use cases
(current deployment of batteries is
mostly for single-use cases) could
ensure market development for energy
storage. Teslas Powerwall, Sonnens
Ecomodel, Schneiders Ecoblade,
Nissans xStorage are representative of
such commercial initiatives directed at
residential usage, especially in Germany
and Italy.
The only battery technology on a single

use case which stands out today is the
lithium-ion battery providing frequency
regulation to the grid (US$211US$275/MWh) compared to the cost of
a gas peaker for the same application
(US$165- US$218/MWh).
However, the same report shows that
a number of combinations are within
striking distance. Firstly, according to a
survey performed by Lazard, significant
capital costs decreases are expected
for some technologies (-47%16 for Li-ion
and -38% for flow battery) during the
next 5 years, impacting directly their
LCOS (e.g. US$173- US$207/MWh for
Li-ion providing frequency regulation
and US$217-593/MWh for using flow
batteries on the transmission system).
Furthermore, in the Electric Vehicle
sector, Tesla predicts that its new
Gigafactory inaugurated in July 2016,
could produce 30% cheaper battery
packs17 by 2020, its current capital cost
being less than US$190/kWh(battery
capacity) (as stated by Teslas VP of
Investor Relations).
15
16
17
38
Energy Transition - Renewable Energies
Lazards Levelized cost of storage analysis version 1.0, LCOS consists of CAPEX, Operating &
Maintenance costs, charging/discharging and taxes for storage technologies
Medians
A complete battery pack typically adds 20% to the cost of cells according a battery expert at Dosima
Research
lectric mobility: all

brands have now
developed one or more
battery car models
Electric vehicles, Battery Electric
Vehicles (BEVs) and Fuel Cell Electric
Vehicles (FCEV), are developing at
different paces. BEVs require less
complex infrastructure for refill and all
brands have now developed one or
more battery car models, while FCEV
are at an earliest stage of deployment.
Figure 3.5 Market share (new registrations) of electric passengers cars

Norway
2015
Q1
2014
2013
Netherlands
Sweden
Switzerland
Denmark
United Kingdom
France
BEV markets in Europe are

now developing, yet with
various momentums
Norway, a wealthy country with only
5.3 million population, ranks first
with the highest sales in Europe in
2015 (26,757 vehicles) and also the
country with the highest EVs market
share (above 25%, see figure 3.5).
The strong support mechanisms put
in place starting in the 90s (fiscal
incentives, free parking, free charge,
access to bus lanes) definitely made
Norway a success story in the clean
vehicles deployment.
France has also developed aggressive
support mechanisms to support
BEVs rise, mainly with purchase
subsidies and national infrastructure
development. For S1 2016, France has
the highest level of BEV sales across
Europe (see figure 3.6), a market
dominated by Renault Nissan Alliance
cars (Zo and Leaf). EV market share
has sustainably exceeded 1%.
The UK and Germany BEV sales have
surged in the last years, thanks to
new incentives. Germany invested
mainly in R&D from 2011 to 2014.
Now that all German car brands have
commercialized BEVs, Germany put in
place direct subsidies in order to trigger
the market.
EU (average)
Belgium
Austria
Plug-in hybrid and full battery electric vehicles

Full battery electric vehicles
Plug-in hybrid electric vehicles
Germany
0%
5%
10%
15%
20%
25%
Source: European vehicle market statistic, pocket book, 2015-2016
At the opposite, Denmark and

Netherlands decided to step back
on fiscal incentives and BEV sales
decreased accordingly, as can be
observed on the figure below.
In 2015 in Europe, the most sold model
was the French Renault Zo (18,700+),
while the American Tesla Model S and
Nissan Leaf completed the podium
with 15,500 vehicles sold. In 2016,
Renault Zoe and Nissan Leaf are ahead
of the field, as announcements of new
Tesla models make customers wait.
The strong support

mechanisms put in
place starting in the
90s (fiscal
incentives, free
parking, free charge,
access to bus
lanes) definitely
made Norway a
success story
39
Figure 3.6 Sales of battery electric vehicles (BEVs) in Europe
30,000
26,757
2013
2014
2015
2016 S1
25,000
22,187
20,000
18,649
15,068
15,046
13,954
15,000
13,381
12,216
10,710
10,000
8,804
8,222
7,370
Source: Automotive battery electric vehicle (BEV) market report 2015-2016
All carmakers develop the BEV range

of offers. For instance Volkswagen
announced it would develop 30 BEV
models by 2025, including standalone
models as well as electrified version of
classic cars.
Heavy vehicles focused
on city usages
Very little offer exists for electric trucks,
batteries being not yet adapted for
long trips. However, electric busses
are developing, especially with rising
concerns regarding local pollution in
dense urban areas. For now, Chinese
companies (BYD, Yutong) have
a clear domination over the market
but European companies such as
Volvo or VDL in Netherlands also
fight in this early stage market. For
instance, Bollor who developed
the BlueCar, also industrialized
BlueBus and BlueTram for public
transportation purpose.
40
FCEVs keep at an early

stage of development
Historically, Germany has invested
a lot in the deployment of FCEV
infrastructure (H2 filling stations) as
FCEV was more adapted than BEV
for German usage (higher autonomy
for larger cars). However, the market
faces difficulties to grow as expected.
New FCEV models, such as the Toyota
Mirai, will probably enable to speed up
FCEV rise.
In France, another strategy is currently
deployed. Up to now, filling stations
that are highly CAPEX intensive are
being installed in clusters with identified
usage: for instance, a small H2 filling
station is installed in an industrial zone
for specific needs (La Poste vehicles).
This enables to create a mesh of filling
stations covering the territory before a
large scale deployment.
m
iu
lg
Be
ria
st
Au
ly
Ita
n
ai
Sp
2,159
3,275
2,471
1,926
2,133
1,881
1,572
1,422
1,478 1,509 1,456 1,431
1,524
1,422 1,160
916 1,484
774
923
1,059
845
786
648
353
er
nd
rla
he
er
itz
Sw
nm
De
la
ar
nd
K
U
er
an
ce
an
Fr
or
ay
1,913
1,688
1,311 1,523
647
271
3,585
3,477
2,785
2,012
th
2,699
4,025
4,042
Sw
ed
en
5,609
5,265
et
5,000
6,290
Spain: The uncertain future of the Spanish energy market

During the last few years, Spain has been at the forefront
in the development of renewable energies, but recently
that trend has changed. A good example of this is that
Spain has fallen from the top five in terms of annual and
cumulative photovoltaic (PV) capacitya and is also close to
losing its leadership in wind power capacity.
The reason behind this is regulatory change introduced
by the government. The previous policies, based on big
subsidies, boosted the development of renewables but
continues to have a significant impact on electricity bills:
today, the cost of renewables represents 24%b of the
electricity bill for Spanish consumers.
Despite the apparent lack of alignment with the Paris

Agreement on climate change, there is an explanation for
this tax. The overall cost of the system includes the cost
(past and present) of policies for boosting renewables.
Without the tax, this cost would have to be borne by the
rest consumers (those without PV facilities), increasing the
final price of electricity, reducing the competitiveness of
renewables, and consequently necessitating new subsidies
that would further increase the electricity price. This effect
has been called the death spiral. It would have impacted
not only on the system, negatively affecting renewables
development, but also especially on those consumers
without the resources to install self-consumption capacity.
a
b
(2
01
6)
u
So
The future of the sun tax legislation is uncertain. After the

Of the renewables cost of 9,655 million in the energy bill,
approval of the Royal Decree, a majority of members in
2,879 million is the yearly payment established by the
the Spanish parliament (except the ruling party members)
government to clear the debt generated by its decision
signed an agreement to derogate the Royal
not to transfer the cost of subsidizing
Spains electricity bill ( millions)
Decree and to promote new measures aimed
renewables to the final electricity price.
at boosting self-consumption. In spite of
This decision caused a Tariff Deficit, a
this agreement, the current political instability
huge cumulative debt for the Utilities, that
VAT: 9,745
in Spain caused by lack of agreement
exceeded 30,000 million by 2013. At
Distribution:
25%
5,014 13%
between the parties after two consecutive
that point, the Spanish government
elections, and a probable third one,
established an explicit energy
Electricity tax:
2,257 6%
contributes to the uncertainty of the future
policy objective of avoiding any
Transport:
regulatory framework.
circumstances that might increase the
Cost of
1,674 4%
renewables:
tariff deficit or lead to a similar situation
9,655 24%
Other regulated costs:
297 1%
It is not only renewables that will be
in the future.
affected by forthcoming regulatory change.
Energy cost:
10,870 27%
rc
Plant owners and operators of conventional
This objective is the basis of the Royal
is
e:
lys
RE
na
N
iA
sources
such as combined-cycle gas turbines
Decree on self-consumption approved in
21
n
i
m
2016
, EEMO18-Capge
(CCGT) will see how the government establishes the
2015. The Decree establishes two premises.
conditions and framework for hibernation mechanisms.
Consumers with PV systems up to 100 kW are not paid
The timescale is not yet clear; following a draft Royal
for surplus electricity exported to the grid and the most
Decree with related proposals, the market awaits
controversial one, consumers will have to pay towards
official publication.
the overall cost of the system, even though the energy
they consume is produced by their own PV systems. It is
Despite the old-fashioned attitude shown by the Spanish
important to understand that some of the system costs are
government regarding self-consumption, there are signs
included as a variable part that depends of the amount of
of commitment to the transformation and liberalization of
energy consumed from the net
the market. An example is the introduction of demand-side
management measures such as the 2014 Voluntary Price
This surcharge, the so-called sun tax, was seen by the
for the Small Consumer (PVPC), which changes the former
market as a barrier to PV development in Spain. Based on
calculation method based on quarterly auctions to an
the International Energy Agency 2013 Levelized Cost of
hourly price based on the real market cost for that period.
Energy (LCOE) for PV studies and projections Spain would
have already reached grid parity for new-built rooftop PV
Whatever happens, the coming months are going to be
systems if the sun tax had not been imposed.
significant for the Spanish energy market.
http://www.ren21.net/wp-content/uploads/2016/06/GSR_2016_Full_Report.pdf
Source: Capgemini estimate based on official figures (National Market and Competition Commission, November 24th 2015, 2014 Electric Sector
Definitive liquidation report, results analysis compared to the annual projection of cost and incomes of the electric sector,
41
Security of Supply
and Energy Market
Integration
Electricity
espite
decommissioning
of installed capacity and
greater consumption,
security of supply was
maintained in 2015
due to increased net
generation capacity
Figure 4.1 Installed and decomissioned generation capacity per type of source
(2015 versus 2014)
Fossil fuel technologies
Low carbon technologies
15,000
Decommissioned and new installed capacity [MW]
10,000
8,000
1,867
0
-1,122
-2,962
-5,000
-4,254
E-ONs power-generating capacity

fell by 23% in 2015 due to the sale of
generation operations in Spain and Italy,
the decommissioning of a gas-fired
power plant in the UK, and hard coalfired capacities in Germany.
12,800
11,791
4,714
5,000
3,305
2,339
8,500
990
436 239
232
68 119 45 4
-15
-370
-518
-424 -281
370
100
1 4
239
RWE also reduced its conventional

capacity by 1 GW with the closure of
Littlebrook oil-fired power plant in the UK.
-1,825
-3,282
2014
New capacity (MW)

Decommissioned (MW)
2015
-7,257
-10,000
-8,051
18
Security of Supply and Energy Market Integration - Electricity Markets
Currently, more than 45% of Enel

generation output comes from zeroemission resources and Enel aims to
achieve carbon neutrality by 2050.
ro
lh
al
hy
ENTSO-E, Electricity in Europe 2015
Sm
Source: EWEA Capgemini analysis, EEMO18
yd
dr
SP
rC
rg
La
le
ar
la
So
uc
N
ce
an
al
th
eo
G
er
te
as
ro
yd
H
as
om
rP
la
So
Bi
d
in
l
W
oi
el
as
Fu
oa
-15,000
42
Overall EU generation capacity

increased by 1% in 2015. During this
period, significant decommissioning
occurred corresponding to a net fall
of -9 GW and -1.7 GW respectively
in fossil fuel and nuclear capacities.
These decreasing capacities are mainly
related to the shutdown of nuclear
power plants in Germany and Sweden
and the closure of several thermal
power plants in Belgium and the UK.
Moreover, several major European
Utilities are maintaining their strategy of
reducing the share of fossil fuel in their
generation portfolio:
Over the same period, net capacity

of installed renewables increased
by 21.7GW mainly due to new wind
farms, with 12.8 GW installed in 201518.
Security of supply was

maintained in 2015 and H1 2016
despite some countries facing
difficulties during summer 2015
Despite a hot, dry summer in 2015,
most European countries managed
to secure generation adequacy with
no specific balancing problems or
unexpected issues. However, Poland
faced difficulties in covering the forecast
load due to lack of additional available
imports and long-lasting heatwaves
that increased non-usable capacity.
Belgium also faced some difficulties in
maintaining security of supply due to
planned outages in its generation and
transmission capacities combined with
low wind and solar input20.
19
4,000
CAGR 2011-15:-
3,500
Electricity consumption in EU-28 [TWh]
3,035
3,000
3,042
3,001
CAGR 2015
0.3%
3,237
3,110
2,989
2,957
-25:+0.8%
1.1%
2,500
2,000
1,500
1,000
500
0
2011
2012
2013
2014
2015
2020
2025
Source: ENTSO-E database Capgemini analysis, EEMO18
Figure 4.3 Peak load generation capacity and electricity mix (2008 to 2015)
600
1,000
900
800
700
590
8%
47%
11%
47%
13%
47%
600
16%
49%
18%
20%
21%
50%
52%
53%
500
543
300
544
537
400
527
560
550
540
530
525
530
200
520
100
0
580
570
55%
556
555
27%
Peak load [GW]
Overall electricity consumption

increased in 2015 due
to economic growth and
more extreme weather
conditions than in 2014
Overall electricity consumption
reached 2,989 TWh in 2015, up 1.05%
compared to 2014. The majority of
EU-28 countries saw an increase in
their electricity consumption thanks
to an overall 1.8 % rise in the EU GDP,
and to a colder winter and a warmer
summer in 2015 compared to 2014.
French consumption lead by the
important share of electric heating
increased by 2.2% over the period.
Spain and Italy also faced their highest
monthly electricity consumption in the
last 15 years, due to the summer 2015
heatwave19. With a colder winter than in
2014, the maximum peak load reached
542 GW in 2015, representing a 1.15%
rise but still lower than the 557 GW
peak of February 2012.
Figure 4.2 Electricity consumption in EU-28 (2011 to 2014 and 2020, 2025 projections)
INet generating capacity and peak load [GW]
This growth was chiefly supported by

Germany with 6 GW of newly installed
wind capacity, but Poland, France and
the UK also contributed with additional
wind capacities of 1.3 GW, 1 GW and
970 MW respectively in 2015.
510
53%
53%
53%
51%
50%
48%
47%
45%
2008
2009
2010
2011
2012
2013
2014
2015
Fossil-fueled capacities
Low-carbon capacities
500
of which intermittent capacities
Peak load (right-hand axis)

During winter 2015/2016, system

adequacy was ensured with no major
disconnection or load reduction.
Adequacy risks initially forecast for
Belgium were reduced thanks to the
return of two nuclear plants (2 GW).
Despite the Beznau nuclear plant being
off-grid (720 MW), below-average river

water levels, and water reservoirs less
full than usual, Switzerland managed
to overcome the adequacy challenge
faced during the end of 2015.21
Agora Energiewende, Energy Transition in the Power Sector in Europe: State of Affairs in 2015 / DG Energy, Quarterly Report on European Electricity Markets Q3 2015
20
ENTSO-E, Winter outlook and summer review 2015/2016
21
ENTSO-E, Summer outlook and winter review 2015/2016
43
ecurity of supply
will be at risk in
several countries due to
the expected increase
of intermittent energy
in the mix over the
2015-2025 period
Demand is expected
to increase by
0.8% per year

over the coming
decade
Overall NGC is expected

to increase by 132 GW
during 2015-2025 mainly
driven by new RES
installed capacities
Demand is expected to continue

growing over the coming decade
ENTSO-E predicts that demand
will increase by 0.8% per year
over the coming decade22 due to
favorable economic growth forecasts.
Switzerland, Belgium, Northern Ireland
and Great Britain, with respective
growth of -0.05%, 0.06%, 0.06% and
0.14%, expect their consumption to
stagnate during 2015-2025. In contrast,
24 of the 34 countries studied are
expected to face annual consumption
increases above the 0.8% EU average.23
Net Generation Capacity
(NGC) is expected to
increase by 2025 due to
significant commissioning
of renewable capacities
Overall NGC is expected to increase
by 132 GW during 2015-2025. This
trend will be mainly driven by the
243GW increase in installed renewable
capacity, compensating for the
decrease of 111 GW in conventional
capacity. Wind and solar power
capacity are expected to grow by 96%
and 71% respectively, with 131 GW and
67 GW additional installed capacities.
Each countrys forecast increase in
wind generation capacity depends on
the related pipeline. Some of these
pipelines contain major projects:
In the UK, the East Anglia ONE
offshore wind farm (>700 MW)
awarded its wind turbine contract
22
23
44
in April 2016 and is expected to be

operational in 2020;
In Germany, after a record year
of wind power commissioning in
2015 (+6 GW), the final investment
decision for the Arkona wind project
(385 MW) was taken in April 2016
with full operation expected in 201924;
In the Netherlands, the existing
Wieringermeer wind farm will be
repowered by replacing 93 old
turbines with 100 new, more efficient
ones, increasing the capacity from
130 MW to 400 MW by 2019.
As a result of the increasing capacity of
renewables, the low-carbon capacity
share of the total energy mix is
expected to reach 68% by 2025.
The planned decrease in the NGC
of conventional electricity sources is
likely to affect all types of conventional
sources, with forecast decreases of
73% for oil, 37% for hard coal, 27% for
lignite, 21% for nuclear, and 18% for
gas installed capacities over the 20152025 period. In particular, the planned
decreases in hard coal and gas would
represent 40 GW and 38 GW of
installed capacity. These trends can
be explained by German and Belgian
nuclear decommissioning policies; strict
EU policy regarding emissions, which
affects ageing fossil fuel generation
assets in several countries such as the
UK, Spain and Italy; and the currently
challenged economic viability of gasfired plants. Because of this, RTE
(a French TSO) forecasts an overall
decrease of 15 GW in Western Europes
gas installed capacity, led by Spain (-6
GW) and Italy (-4.5 GW), over the period
2015-2020.25
ENTSO-E, Scenario outlook and Adequacy forecast, June 2015

Capgemini Consulting Analysis on 34 countries based on ENTSO-E, Mid-term Adequacy Forecast Data
Package July 2016 and ENTSO-E, Statistical Factsheet 2015
24
Enerpresse 11562, April 2016
25
RTE, Bilan prvisionnel Edition 2015
Figure 4.4 Current (2015) and future electricity capacity mix (2020, 2025)
Fossil-fueled
capacities
2025
4%
15%
2020
9%
4%
3%
16%
17%
2015
14%
17%
21%
20%
24%
% of
total mix
42%
37%
32%
13%
12%
9%
Year
2015
2020
2025
6%
20%
5%
7%
Coal and lignite

Gas
Other fossil fuels
Nuclear
Hydro
Wind
Solar
Other RES
12%
Year
% of
total mix
2015
2020
2025
58%
63%
68%
12%
15%
Low-carbon
capacities
9%
Low-carbon
capacities should
reach
68%
of the total EU-28

mix in 2025
15%
Growing intermittency in
the energy mix will put
more pressure on peak
load management
In its 2020 base case scenario, the
ENTSO-E 2016 Mid-term Adequacy
Forecast indicates that Bulgaria,
Cyprus, Finland, France, Great Britain,
Greece, Ireland, Italy, Northern Ireland
and Poland could face adequacy
issues in 2020 due to their positive
Energy Not Supplied (ENS)26. RTEs
2015 analysis suggests that the
proposed closure of the Fessenheim
nuclear power plant in 2016 would
particularly threaten Frances security
of supply during winter 2017-2018, as
26
27
the related predictions for ENS and

Loss Of Load Expectation (LOLE)27
could reach 12.9 GWh and 3.25 GWh
respectively. Part of the solution for
the expected adequacy issue could
rely on development of European
interconnections with an expected
average contribution of imports to
France of around 8-10 GW during peak
load hours over the next five years.
Bulgaria, Cyprus,
Finland, France, Great
Britain, Greece, Ireland,
Italy, Northern Ireland
and Poland could face
adequacy issues in 2020
ENS is the energy not supplied by generating system due to the demand exceeding the available
generating and import capacity (ENTSO-E)
LOLEis the number of hours in a given period (year) in which the available generation plus import
cannot cover the load in an area or region (ENTSO-E)
45
riven by renewable
energy sources
(RES) integration,
significant transmission
system operator
(TSO) investments are
expected to ensure
a fully flexible grid
and European green revolution.

These scenarios are defined in terms
of several parameters such as share of
RES, CO2 emissions, electric vehicles
implementation status, etc. estimated
based on two main axis:
The prevalence of the Energy Policy
framework implemented (National
versus European)
The pace of implementation of the
Energy roadmap toward 2050 (On
track versus Delayed)
The future European energy

mix is having a notable impact
on the high-voltage grid
In its 2016 Ten-Year Network
Development Plan (TYNDP)28 ENTSO-E
looked at four vision scenarios
corresponding to four different energy
mixes that may emerge by 2030 :
Slowest progress, Constrained
progress, National green transition
The results for each model showed

significant variation in exchanged
energy (in terms of volume and
direction, i.e. import versus export)
between European countries,
highlighting the strong impact of
the energy mix on the future grid.
ENTSO-E then studied future grid
investment needs (to reach the target
interconnection ratios of installed

generation capacity of 10% in 2020
and 15% in 2030 for every country)
against these four models of the future
energy mix.
In the medium term, TSOs
improve the grid by investing
in the right place to reduce
electricity peninsulas
As shown in figure 4.5, several
countries are still below the 2030 target
of 15% interconnection and the majority
are electricity peninsulas29 that require
better grid connection. This picture has
driven interconnection development for
a few years, with some progress during
2015-2016 such as between France
and Great Britain with the 1,000 MW
ElecLink project that will start before
the end of 2016 and last approximately
36 months (see figure 4.5). The
Figure 4.5 Map of interconnections levels and interconnections projects (2015)

Level of interconnections
Countries
< 5%
5% & < 10%
FI
SE
10% & 15%

Skagerrak 4
(Kristiansand / Tjele)
12/03/2015
> 15%
Cross-border
interconnections
commissioned in
2015 and H1 2016
NO
IE
LV
DK
UK
LT
NL
FR
Eik (PL) / Alytus (LT)

09/12/2015
CZ
Wesel (DE) / Doetinchem (NL)
2017
Vierraden (DE) / Krajnik (PL)
2017
> 1,000 MW
UK - FR
ElecLink (Eurotunnel private link)
2018
1,000 MW
DK - DE
Ishj / Bjaevershov (DK) - Bentwisch (DE) 2018
400 MW
ES - PT
Fontefria (ES) - Vila Nova de

Famalico (PT)
2018
UK - BE
Richborough (UK) / Zeebrugge (BE)

NEMO link
2019
1,000 MW
CH
SI
FR - IT
Grande-Ile (FR) / Piossasco (IT)
2019
1,200 MW
Meeden (NL) / Diele (DE)
2019
> 300 MW
DK - NL
Endrup (DK) / Eemshaven (NL)

COBRA cable
2019
700 MW
IE - UK
Woodland (IE) / Turleenan (UK)
2019
600 MW
NO - DE
Tonstad (NO) / Wilster (DE) NordLink
2020
1,400 MW
DE - AT
Isar (DE) / St Peter (AT)
2020
> 2,000 MW
HU
RO
HR
ES
PT
Baixas (FR) /Sta Llogaia

(ES) 23/02/2015
IT
BG
GR
Note: The European Council requires each country to have a minimum import capacity level equivalent to 10% of its installed capacity
Source: European Commission, ENTSOG - TYNDP, various sources Capgemini analysis, EEMO18
28
ENTSO-E, Ten-Year Network Development Plan (TYNDP) 2016
29
The 4 main electricity peninsulas are : Ireland and Great Britain, Iberian Peninsula, Italy and Baltic states
46
1,500 MW
NL - DE
SK
AT
Capacity
increase
DE - PL
PL
DE
BE
LU
Expected
date
DE - NL
EE
NordBalt
17/02/2016
Projects of priority
cross-border
interconnections
Projects of cross-border
interconnections
Grande-Ile to Piossasco line between

France and Italy is also progressing
with completion expected by 2020.
Finally, the launch in February 2016 of
the NordBalt cable between Sweden
and Lithuania should put an end to
Baltic electricity isolation.
In order to better drive those
investments, ENTSO-E identified in the
2016 TYNDP the main boundaries
that isolate peninsulas and the
defined level of interconnection (in
MW) required by 2030. The expected
project portfolio should guarantee
the expected transmission capacity
except for the Iberian Peninsula, which
appears to be the most congested.30
In the longer term, the
increasing share of RES
to be integrated means
that TSOs will concentrate
their investment efforts on
improving grid flexibility
The large majority of European TSOs
consider RES integration in the grid
as one of the main challenges for the
future. As in 2014-2015, ENTSO-E
considers variable RES integration
to be the primary investment driver:
investments totaling 150billion
are expected in the years to
come, uncluding an approximative
70-80billion for the period up to
2030, with most investment relating to
direct RES connection to the grid or
to construction of grid sections linking
RES to remote load centers.
In parallel, the European Commission

favors the building of electricity
highways to transport energy over
long distances in Europe. These should
be able to better integrate renewable
energy generated far from consumption
centers. The e-Highway2050 project31
is applying this alternative way of
thinking about the grid in the long
term and across Europe. Launched
in 2012, it delivered its results at the
end of 2015. Its key findings were for
the construction of a close to zero
emissions grid able to handle RES, for
which investments of up to 400billion
are expected, and for priority northsouth corridors. Irrespective of the
scenario used, the study showed
that several reinforcements that
connect the North of the panEuropean electricity system (North
Sea, Scandinavia, UK, Ireland), and
southern countries (Spain and Italy), to
the central continental area (northern
Germany, Poland, Netherlands,
Belgium and France) are necessary.
In addition to grid infrastructure
development, mechanisms linked to
market integration such as market
coupling or operational cooperation
between TSOs should also help
integrate RES and ensure resilient
security of supply in Europe.
Future planned
investments in
network infrastructure
should reach
150 billion
These network
investments should
lead to reductions in
congestion hours (-40%)
and renewable energy
spillage (-30 to -90 TWh)
The 2016 TYNDP estimates that the

benefits of these investments will
include a reduction in congestion
hours of around 40% and a reduction
in renewable energy spillage of
30-90 TWh.
30
ENTSO-E, Ten-Year Network Development PLan (TYNDP) 2016
31
e-Highway2050, Europes future secure and sustainable electricity infrastructure
47
arket integration
moves closer to
real-time responses
and sets up operational
cooperation
Market integration is still
driven by network codes
To achieve a European Internal
Energy Market (IEM) as defined by the
European Commission in the Third
Energy Package, ENTSO-E manages
the publication of network codes32,
which are validated by the Agency for
the Cooperation of Energy Regulators
(ACER) and supported by market
stakeholders in terms of content.
Considerable effort has gone into
developing network codes and the
Capacity Allocation and Congestion
Management (CACM) code33 was the
first to enter into force, in August 2015.
This step should allow end consumers
to see the benefits (lower price,
increased security of supply). Two other
codes entered into force in 2016, and
two additional ones are expected in
Q3 2016.
Under the umbrella of the three marketrelated network codes Forward
Capacity Allocation (FCA)34, CACM
and Electricity Balancing (EB)35, the
European energy market is now set up
and is expanding both geographically
and towards faster responses.
32
33
34
Day-ahead market coupling

is now stabilizing and
intraday market coupling
will be launched soon
From 2010 to 2015, almost all European
day-ahead regions were coupled
via multi-regional coupling (MRC) or
4M market coupling (4M MC) areas
(figure 4.6, part 1). After this quick
and successful expansion through
a regional initiatives methodology,
2016 has been a year of operational
stabilization. In particular, Nominated
Electricity Market Operators (NEMOs)
for each European region were
officially designated (for day-ahead
and intraday) in December 2015 by the
regulatory authorities. This step is vital
for running the markets as each NEMO
has the operational responsibility to
perform day-ahead or intraday market
coupling in its region. The results of
discussions regarding how joint NEMO
responsibilities can be delivered/
governed should be approved by
National Regulatory Authorities (NRAs)
in 2017.
In parallel, power exchanges and
TSOs are working closely to develop a
common platform the Cross-Border
Intraday (XBID) project for intraday
market coupling via an implicit and
continuous mechanism for allocation
of capacity. Unlike the regional
implementation approach chosen for
day-ahead market coupling, XBID is
based on centralized development
that will be realized through Local
Implementation Projects (LIPs),
which deal with adaptation of local

arrangements (such as procedures, IT,
contracts, etc.) (figure 4.6, part 2). After
contracting with providers in 2015, the
platform was developed in 2016 and
go-live is expected in Q3 2017.
In the shorter term, TSOs
are working together on
cross-border electricity
balancing projects
The EB network code (which entered
the comitology process in June 2016)
is one of the most ambitious given
the complexity of balancing, its key
role in European security of supply,
and the current low level of European
harmonization. In order to speed
up integration, TSOs opted for early
implementation of pilot projects.
Proposed by ENTSO-E, they aim to
test the feasibility of the European
target model and intermediate steps
established in the ACER Framework
Guidelines on Electricity Balancing
(FG EB). For instance, TERRE36 (Trans
European Replacement Reserves
Exchange), involving six countries37,
aims to optimise the allocation of
replacement reserves across the
systems of the different TSOs involved,
in order to correct system imbalance
and restore the right level of operating
reserve. (figure 4.6, part 3). The design
- a common platform for sharing
a harmonized type of balancing
product (replacement reserve) on a
market-based process - was officially
submitted to NRAs for approval in 2016
and development should start in 2017.
Go-live is expected at the end of 2018.
Network codes are intended to act as a tool, complementing existing national rules to tackle cross-border issues and should be implemented across Europe to
drive market integration. They cover 3 main areas of the Power System: Market, System Operations and Infrastructure
The Capacity Allocation and Congestion Management (CACM) code sets out the regulatory framework for the allocation of capacity in day-ahead and intra-day timescales
The Forward Capacity Allocation code sets out the regulatory framework for the attribution of long-term cross-zonal capacity (linked to market products with
delivery time of more than two days)
35
The Electricity Balancing code sets out the regulatory framework for electricity balancing (linked to market products with delivery time below 30 minutes)
36
ENTSO-E, Cross Border Electricity Balancing Pilot Projects, November 2015
37
TERREcountries: France, Italy, Portugal, Spain, Switzerland and the UK
48
Figure 4.6 Market coupling mechanisms progress
Day Ahead
NO
IE
UK
IE
RO
IT
ES
NO
EE
LV
LT
DK
NL* DE*
PL
BE*
LU*
CZ
SK
FR* CH
AT*
SIHRHU
PT
Intraday
FI
SE
PT
BG
UK
ES
NL DE
PL
BE
LU
CZ
SK
FR CH
AT
SIHRHU
IT
Day Ahead Go Live

Nov 2010
Feb 2014
May 2014
Feb 2015
Nov 2014
IE
PT
ES
FI
SE
EE
LV
LT
DK
UK
NL DE
PL
BE
LU
CZ
SK
FR CH
AT HU
SIHR
IT
Intraday
Go Live
2017
RO
BG
GR
RO
BG
GR
NO
EE
LV
LT
DK
GR
Balancing
FI
SE
Balancing
Go Live
Project
CWE
NWE
SWE
IBWT
4 MMC
(Central Western Europe)

(North Western Europe)
(South Western Europe)
(Italian Borders Market Coupling)
(4 Markets Market Coupling)
MRC Area
4MMC Area
Project
XBID (Cross Border Intraday)
Project
2018
TERRE (Trans European Replacement Reserve Exchange)
TBD
EXPLORE (European X-border Project for LOng term Real-time

balancing Electricity market design)
* Flow Based Market Coupling since 2015

Source: Power Exchange, ENTSOE and various industry sources Capgemini analysis, EEMO18
Operational coordination is
increasing between TSOs
For the European energy market to
work, new systems have been put in
place to better coordinate operational
tasks. In particular, Regional Security
Cooperation Initiatives (RSCIs) were
designated by ENTSO-E38 in 2014 to
build European operational cooperation
between TSOs on technical aspects
(security analysis, various simulations,
38
etc.). The increasing collaboration

between TSOs, due to the progressive
implementation of market integration
projects, leads to a growing RSCIs
responsibility in terms of technical
tasks and covered geographies. For
instance, Coreso was confirmed in
2015 as operator of the joint CWE flowbased calculation platform (previously
operated by RTE and Elia).
Market integration is
progressing, with almost
all day-ahead markets
coupled and intraday
coupling go-live planned
for 2017
ENSTO-E, Future TSO coordination for Europe, November 2014
49
t local level, the

smartening of
DSO networks and
operations is accelerating,
although much
deeper transformation
is expected in the
coming decade.
Despite the significant
acceleration in smart
meter deployment,
according to current rollout comitments only 72%
of EU consumers will be
equiped by 2020
Despite faster smart meter

rollout in 2015-2016 in
several countries, the 80%
deployment objective set by
the EU is unlikely to be met
Spain aims to reach its target of 70%
of meters replaced by the end of 2016.
In France, the Linky program launched
its mass rollout in December 2015
with three million smart meters to be
deployed by the end of 2016. The UK
program is accelerating, with more than
two million smart meters deployed out
of the 26 million target as at Q1-2016.
Despite its inconclusive cost benefit
analysis on mass rollout of smart
meters, Germany agreed in July 2016
to implement selective rollout from 2017
to 2032.
But despite this acceleration, according
to the Joint Research Centre (JRC),
based on current rollout commitments,
at most only 72% of European energy
consumers will have an electricity smart
meter by 2020. In addition, countries
currently launching mass rollouts
are facing local opposition such as
39
50
EU Regulation 2016/89
doubts about the economics of the

projects, health concerns regarding
meters, or issues of compliance with
data protection policy along with
technical and operational issues in
deployment, all of which delays the
initial timetable.
Apart from smart meter rollout,
several major demonstration
and deployment projects
are leading progressive
implementation of smart
grids across the EU
As well as the GRID4EU project
(discussed in the Editorial), smart
grid projects such as evolvDSO,
IGREENGrid or ECOGRID, funded
by the EUs Seventh Framework
Programme, are publishing conclusive
recommendations on process, tools,
KPIs and implementation best practices
with a focus on future DSO roles and
related use cases, grid integration
of distributed renewable energy
resources, and real-time price signal
demand response management.
In addition, three major smart grid
deployment projects involving both
DSOs and TSOs are now part of the list
of projects of common interest (PCIs):
the SINCRO.GRID project (Slovenia and
Croatia) joined the PCI list in 2015, and
the North Atlantic Green Zone Project
(Ireland, the UK and Northern Ireland)
and Green-Me project (France and Italy)
have been part of it since 2013.39
Profound transformation of
the DSO role is expected
over the coming decade
A recent survey conducted among
DSO representatives by the Vlerick
Business School shows that 70%
of them are convinced that demand
response will become widespread by
2020. The survey also indicates that
72% of respondents are convinced
that the DSO role will become
more service-focused than assetoriented.40 The evolvDSO project thus
described eight key DSO roles that
are meant to be extended (Smart
Meter Operator), evolved (Data
Manager), or even created in the
coming years (Distribution Constraints
Market Officer). In particular, the
progressive shift from a historically
rather centralized system to a more
decentralized one implies more
balanced operational responsibilities
between TSOs and DSOs along with
a reinforced collaboration through
defined services, common procedures
and tools, and shared data.41
This transformation needs to
be supported by a high level
of investment and adequate
developments in regulations
In 2014, the JRC estimated that
investment of 480 billion was
needed in distribution networks by
2035 to enhance the automation
and control of the networks, develop
smart appliances for easy demand
side flexibility and smart homes,
charging infrastructure for EVs, etc..
The nature of DSO investment is
40
41
evolving and as a consequence the

regulatory incentive models need to
adapt from predominantly CAPEXbased models supporting asset
investment, to approaches more
balanced between CAPEX and OPEX,
and fostering innovation in particular.42
Putting aside the financial part of this
transformation, regulators also need
to set up common and appropriate
frameworks that will enable DSOs to
prepare for and undertake their new
responsibilities, and as far as possible
maintain a neutral facilitator role in their
local market.43 In fact, current related
regulation differs depending on the
country: for example, in the UK, small
batteries can be part of the distribution
network, whereas in Germany, storage
should be a liberalized activity.
In the long term, there will be time
to debate the major investment
decisions that will be required regarding
transport and distribution networks,
especially given the long time to market
before any innovation appears. The
future of assets may be affected by
development of microgrids (outside the
distribution network) that could reduce
transport requirements, and influence
the increasing role of the DSO as a
balancing party, the changing nature of
network services offered to customers,
and so on.
An estimated
480 billion
investment are
needed by 2035 to
reinforce and
enhance distribution
networks
DSO prerogatives
and related regulatory
frameworks need to
evolve to foster the
implementation of local
evolutions in the energy
market
Vlerick Business School, The European DSO landscape in 2020

ENTSO-E, CEDEC, GEODE, EURELECTRIC and EDSO for Smart Grids, TSO - DSO Data Management
Report
42
EURELECTRIC, Innovation incentives for DSOs - a must in the new energy market development
43
CEER, The Future Role of DSOs
51
Gas Markets
In 2015, the European gas sector has
experienced a slight recovery. After
4years of decline, demand has increased
by 4.1% compared to 2014, driven by
some economy recovery and low gas
price. Production continued to decrease
(8%), especially due to production cap on
the Groningen field in the Netherlands,
even though UK has increased its gas
production for the first time in 14 years.
Wholesale prices have been relatively
stable since February 2015 although there
is a clear downward trend in all regions
prices. In Europe, prices decreased from
21.6/MWh in H1 2015 to 13.3/MWh
in H1 2016 44. However, continued mild
weather in 2016, an oversupplied storage
and LNG markets, and weak oil prices
will most likely keep prices relatively low till
end of 2016.
In Europe, prices
decreased from
21.6/MWh in H1 2015
to 13.3/ MWh in H1
20161.
Despite a weak demand and low gas

prices, storage capacity increased by
10.7% at the end of 2015 compared to
the same period of 2014.
With increased dependency over gas
imports, all levers should be enabled
to support the European Strategy for
Energy Security.
Figure 5.1 Gas consumption in EU-28 (Bcm)
600
CAGR 20
500
477.2
Gas consumption in EU-28 [Bcm]
431.4
436.8
10-15:-3
.3%
413.6
400
368.2
+4,1%
399.4
300
200
100
0
2010
2011
2012
2013
2014
Source: BP Statistical Review 2016, national sources Capgemini analysis, EEMO18
44
2015
ndigenous gas
production continuous
decline and demand
increase in 2015
raise concerns about
security of supply
European natural gas demand

increased (+4.1%) to 399.4 bcm
in 2015 (see figure 5.1). This
was mainly driven by colder
weather at the beginning of the
year and economic recovery.
Slight economic recovery last year
in countries such as France, Czech
Republic, and Slovakia, was reflected
in an increase in industrial gas demand
in these EU Member States. In the
power sector, gas demand increase
has been experienced in several
countries for various reasons: gaining
market share due to low gas prices
in the UK, drought in Spain thus
reducing hydroelectric outputs, as well
as increase in demand for summer
air-conditioning in Italy and Greece.
However, this increase has not been
observed in other countries, like
Germany and the Netherlands, where
gas power share reduced in favor of
cheap coal.
Residential gas demand increased in
several countries due to colder weather
in the first quarter of 2015 compared
to 2014. However, in the first quarter of
2016, the EC recorded a decrease of
overall consumption by 1% compared
to the same period of 2015, driven
mainly by mild temperatures.
According to the EIA, natural gas
consumption in Europe will grow by
1.3% per year on average to reach 716
bcm by 2040. Electric power sector
will be accounting for more than half
Average of spot prices on key European gas hubs: PEG Nord, Zeebrugge, NCG, PSV, TTF, NBP and Gaspool (see figure 5.7)
52
Security of Supply and Energy Market Integration - Gas Markets
Figure 5.2 Share of domestic gas production, piped gas and LNG Imports in domestic consumption (2015)
DE
9%
91%
UK
55%
IT
9%
85%
NL
HU
369
55%
BE
45%
90%
25%
91%
37%
9%
63%
AT 26%
CZ
10%
75%
74%
51
11.7%
50
5.7%
48
34
DK 100%
30
FI 100%
29
BG 100%
28
27
LT 85%
LV 100% 14
SI
9.1%
7.8%
-0.8%
4.4%
-4.6%
4.8%
PT 67%33%
97%
IE
GR 80%
9.5%
2.8%
715
4.7%
0.3%
6.1%
81
SK
100%
178
449
775
7.4%
89
100%
315
178
122
99
10%
15%
100%
ES
RO
21%
81%
FR
PL
863
24%
Gas from domestic production

Gas from pipeline imports
Gas from LNG imports
Total available supply (TWh)
4.1% Demand evolution 2015 vs. 2014
Available supply evolution 2015
vs. 2014 + 4.1%
0.6%
7.2%
0.3%
-10.8%
6.5%
-1.5%
0.7%
23.6%
200
400
600
800
1,000
Total available supply [TWh]

Source: BP statistical review of world energy 2016, GIIGNL and national informations sources Capgemini analysis, EEMO18
of the total increase as older nuclear

and coal-fired units will be gradually
decommissioned and replaced
primarily by new natural gas-fired and
renewable capacity. In addition, policies
and political decision might accelerate
this trend. For example, the British
government approved the Hinkley Point
nuclear plant which is considered the
most expensive energy source in the
UK by Bloomberg New Energy Finance
- in September 2016. This decision
will have an impact on gas demand in
the UK.
EU-28 natural gas production
continued to decline, by
8.0% to 120.1 bcm in 2015,
although UK natural gas
production increased by 7.8%
The European share of global gas
production lost 0.4 points in 2015 (to
3.4%) as a result of continuous increase
of the World production by 2.2% and
decrease in Dutch gas production
(-22.8%) mainly driven by the falling
cap on production from the Groningen
45
field, the largest gas producing field in

Europe, following increased seismic
activity in the Northern province.
In 2015, the UK experienced gas
production increase (7.8%) its first
over the last 14 years, raising the
share of production up to 55% in their
total gas supply (see figure 5.2). It is
expected that UK should overtake
Netherlands in 2016 as the largest
gas producer in the EU; Netherlands
share in EU28 gas production should
indeed reduce as Groningens
production, the largest European
gas field, is announced to extinct by
2029. However, the UK production is
estimated to go back to a downward
trend45 despite the start of production
of other projects expected in 2016 such
as the Cygnus gas field the biggest
discovery for the last 25 years within the
Southern Gas Basin.
The European share

of global gas
production
lost 0.4 points

in 2015 (to 3.4%).
In 2015, the UK
experienced gas
production increase
(7.8%) its first over the
last 14 years, raising
the share of production
up to 55% in their total
gas supply. However,
the UK production is
estimated to go back to
a downward trend.
UKCS Oil and Gas Production Projections
53
ith an increased
dependency over
gas imports, securing and
diversifying gas supplies
remain a strategic
priority for Europe.
The indigenous production

share of EU-28 gas consumption
dropped by 4 points in 2015
(30%). CEDIGAZ predicts
that dependency of EU-28
over external gas suppliers
should increase up to
around 90% by 2035.
In the first quarter of 2016, imports
remained quite strong with a 21%
increase compared to a year earlier.
Russia maintained its position as the
EUs top supplier, with an increase of
10.3% compared to 2014. Russia is
closely followed by Norway, supplying

35.4% of total extra-EU imports, of
which 2.1% are LNG exports as shown
in figure 5.3.
Transits through Ukraine rose by 76%
year-on-year in Q4 of 2015 and 94%
year-to-year in Q1 2016. Gas flows
through the Nord Stream increased
by 23% in the last quarter of 2015 and
by 66% in the first quarter of 2016. In
contrast, Imports through Belarus has
been relatively steady.
Imports from North Africa represent
11.5% of total EU imports. Piped gas
imports from North Africa increased by
6.7% in 2015 compared to 2014.
Figure 5.3 Map of gas imports (2015)

Exporting country
NORWAY
Piped gas: 109.5 bcm
LNG: 2.36 bcm
Importing country
LNG imports (net)
FI
47
2.7
NO
4.3
TRINIDAD & TOB.
LNG: 1.46 bcm
IE
LT
-9.3
29.3
BE
DE
FR
PERU
LNG: 1.24 bcm
40.2
26.3
7.7
Existing LNG terminal
11.1
CZ
RUSSIAN FEDERATION
Piped gas: 133.2 bcm
12.9
CH
AT
ES
SK
HU
6
SI
IT
PT
4.5
PL
75
HR
5.8
RO
BG
GR
3.1
OTHERS*
LNG: 0.16 bcm
HERS**
NG:
bcm
LIBYA
ALGERIA
Piped gas: 20.7 bcm Piped gas:
6.5 bcm
LNG: 9.4 bcm
QATAR
LNG: 27 bcm
Note: * Others = Oman and Equatorial Guinea

Source: BP statistical review of world energy 2016, GIIGNL Capgemini analysis, EEMO18
54
0.2
0.5
55.9
26.7
LNG flows
Re-exports
2.8
NL
NIGERIA
LNG: 6.08 bcm
Piped gas flows
1.3
LV
DK
UK
Total net imports (in bcm)
EE
SE
-1.4
Piped gas imports (net)
3.1
Figure 5.4 LNG imports to Europe

In bcm
Algeria
Nigeria
Trinidad
&
Tobago
Norway
Egypt
Equatorial
Guinea
Peru
Qatar
Oman
Yemen
Reexports
received
Reexports
loaded
Total
imports
% of
total
Europe
% ch.
2015/14
Belgium
3.66
(1.13)
2.5
5.8%
93.8%
France
4.47
0.97
0.45
0.27
0.26
(0.49)
5.9
13.7%
-4.8%
Greece
0.38
0.08
0.15
0.6
1.4%
18.4%
Italy
0.03
5.78
0.05
5.9
13.5%
31.4%
0.44
0.4
1.0%
Netherlands
0.22
0.95
0.83
(1.14)
0.9
2.0%
53.7%
Portugal
0.22
1.14
0.08
0.08
0.08
0.23
(0.35)
1.5
3.4%
13.5%
Spain
3.73
3.89
1.14
0.72
0.97
3.06
0.08
(1.58)
12.0
27.7%
11.8%
United Kingdom
0.39
0.23
0.18
13.18
(0.27)
13.7
31.6%
20.0%
Europe
9.44
6.08
1.46
2.96
0.0
0.08
1.24
27.00
0.08
0.0
0.1
-5.0
43.4
100%
18%
% of total Europe
21.7%
14.0%
3.4%
6.8%
0.0%
0.2%
2.8%
62.2%
0.2%
0.0%
% change 2015 vs. 2014
-9.0%
38.4%
-52.2%
30.5%
0.0%
-7.1%
18.3%
-50%
To
Lithuania
Source: GIIGNL Capgemini analysis, EEMO18
LNG contributes to the EU

energy and climate objectives
and offers a secure, resilient
and competitive gas supply
LNG imports in EU28 rebounded in
2015 (+18%) to 43.4 bcm (net) imported
as a result of a weak Asian demand
and converging Asian and European
LNG prices. The increase is driven by
the UK (+20%) and Spain (+12%) who
represent 59% of the European LNG
market as well as Italy and Belgium.
LNG imports will play a vital role in
the European Markets, in particular
as the global LNG supply is expected
to increase over the next five years
by more than 40% mainly as a series
of in-flight projects are completed.
For instance the US has started LNG
exports, with the first ship from Sabine
Pass terminal arrived in Portugal in April
2016. There are also other projects
which are coming online in 2016 such
as Gorgon project in Australia. This will
increase LNG availability on the market
and potentially increase the oversupply
situation.
46
The European commission sees a

major opportunity in LNG for the EU
in terms of gas security, resilience and
competitiveness. Small Scale LNG and
Floating Storage and Regasification
Units (FRSUs) are emerging as
competitive solution that could boost
European LNG market
Small scale LNG may contribute to
this objective in supplying heat and
power sources, for example can
provide energy to remote consumers
that use other fossil fuels.
FRSUs provides a cheaper and
shorter lead time alternative to LNG
plants. This could boost European
LNG market. For example, the last
six LNG terminals in Europe have all
been FSRUs.46
In addition, LNG is increasingly being
used as an alternative to marine fuels
in shipping and to diesel in heavy duty
vehicles providing environmental gains.
LNG imports will play

a vital role in the
European Markets, in
particular as the
global LNG supply is
expected to
increase over
the next five
years by more
than 40%.
EU strategy for liquefied natural gas and gas storage, 2016
55
The European Commission

is pursuing its diplomatic
energy action plan to
diversify its gas sources
After the publication of the European
Commissions strategy for an Energy
Union in February 2015 where
diversification of gas supply is one
of the main pillars of this strategy,
the European Commission shared
in February 2016 the EUs ambition
and how they propose to exploit the
full potential of LNG and storage in
the internal market. A key pint of this
report is to complete the missing
infrastructure, in particular the link
between LNG and storage to markets.
Another key point relates to Making
the EU an attractive market for LNG
by facilitating the completion of an
integrated internal gas market. The
Commission also calls for optimizing
effectiveness and efficiency of the
use of gas storage across borders
through regional preventive action and
emergency plans.
To help create an integrated EU energy
market, the European Commission
invests in key gas or electricity
infrastructure projects in order to
secure their financing. In H2 2015
and H1 2016, the priority has been
given to securing gas supply (79% of
subsidies granted since H1 2015). For
the gas infrastructure, the subsidies
given in 2015 amounted to 287 million,
a 27% decrease compared to 2014.
Nevertheless, in H1 2016 the pace of
investments has picked up again with
263 million being invested (in project
such as the enhancement of EstoniaLatvia interconnection or to several
feasibility studies), and 600million
being announced for H2 2016.
European Union shows real political will
to support key strategic projects and to
play a key role in shaping the European
gas market.
47
Turkey is emerging as a strategic bridge

connecting the gas-rich countries to
Europe, including Southern corridor
which strengthens Europe gas security.
In 2015, the ECs priority was given
to southern gas corridor via the
investment of 179 million (67% of gas
infrastructure subsidies in 2015) to the
gas pipeline from Bulgaria to Austria
through Romania and Hungary, part
of the Southern Gas Priority Corridor
(SGC). In the beginning 2016, more
than half of the grants were given to
Baltic, mainly to the Balticconnector
(187.5 million euros) between Estonia
and Finland.
Despite the diversification strategy,
Russia, which remains EU28 top
supplier, keeps looking for pipeline
routes to Europe that bypass Ukraine.
Nord Stream 2, one of the most
controversial projects, would double
gas import capacity from Russia. On
the other hand, Turkish Stream, was
cancelled in December 2015 after
political tensions between Turkey
and Russia at year end. However,
this project might come back on the
agenda after the reconciliation between
Turkey and Russia.
In H1 2016, the pace

of investments has
picked up with 263
million being invested.
600 million are being
announced for H2 2016.
IEA (2014): World Energy Investment Outlook.
56
he gas infrastructure
business is also
impacted by unfavorable
market fundamentals.
Remaining uncertainty over geopolitical

tensions in Ukraine can form a
strategic rationale for Europe to invest
in alternative supplies and develop
alternative supply routes. In Europe,
259 infrastructure projects have been
submitted for the next 10 years. In 2011,
the EC estimated a total investment
requirement of 70 billion up to 2020. In
the World Energy Investment Outlook,
IEA estimated an investment need of
another 100 billion between 2020 and
2030.47 Overall, however, many projects
final investment decisions (FID) have
been postponed in 2014, mainly due to
weak market fundamentals.
In Germany, in order to satisfy the
requirement for new available capacity
coming from the potential expansion
of the Nord Stream pipeline, TSOs
plan to expand the transportation
network. Therefore, up to 4.4 billion
of new investments are planned
toward 2027. In Italy, Snam Rete Gas
invests mostly in the development of
reverse flow capacity and integration
of European networks, which is in line
with the provisions of the EU Third
Energy Package. That investment
plan includes 3.1 billion for transport
and regasification (with the goal of
expanding its current network by
another thousand kilometers), and 1.7
billion euros to compete the capacity
upgrade of the TAP (Trans Adriatic
Pipeline). Total investment over the
2016-2021 period is estimated and
aimed to increase the flexibility and
security of the Italian gas system
and thus reinforcing the countrys
position in the European Gas system.
Investments in Italy can also be viewed
in the ambition to become a gas
hub for Europe, exporting supplies
from Russia (Southstream pipeline),
Figure 5.5 Map of pipelines and LNG terminals projects (as of June 2015)
Pipeline projects
BALTIC &
NORTH SEA
96
Projects of new pipelines

(planned or under
construction)
FI
NO
SE
RUSSIA
Strea
51
ATLANTIC
120
Nord
DK
IE
UK
BBL
NL
BE
AT
HU
ES
ish
BG
IT
k
Tur
TAP
GALSI
Under construction
and/or included within
Mandatory Planning
RO
HR
SI
SCPX
am White Stream
Stre
TC
Under study or proposed

Nominal annual capacity
by receiving zone
(in bcm)
Existing
GR
Forecast
by 2023
Status
Start of construction
2019
Commissioning date
Cost ($ billion)
~4
Interconnector projects - SOUTH-EAST EUROPE
Gree
Interconnector projects
AFRICA-EUROPE
GALSI
Capacity (bcm)
7.6
n Str
eam
ALGERIA
WEST. MED
57
Existing
BLACK SEA
8
0
SK
CH
Interconnection projects
supported by
the EU
LNG terminals
CZ
FR
97
TAP
PL
DE
LU
Medgaz
LV
LT
77
PT
Built segments of
pipelines under
construction
EE
TCP
EAST. MED
LIBYA
44
13
Capacity (bcm)
Status
Commissioning date
Cost ($ billion)
SCP-(F)X
TANAP
16
15
32
In political Pre-feasibility Construction
on-going
studies
deadlock
2018
2019-2020 2021-2022
10-11
~1.5
5
TAP
10
Design and
permitting, FID
2020; 2022
4.4
Source: GIE GLE, European commission projects of common interest Capgemini analysis, EEMO18
North Africa (GASLI, Greenstream

pipeline) and Azerbaijan (TAP/TANAP
pipeline) to central and Northern
Europe (TransitGas-TENP pipeline) (see
figure5.5).
The French TSO GRT gas presented
its investment plan for 2016. The
assumptions used consider also
biomethane injections in the distribution
network; the objective of energy
transition law being 10% of biomethane
in 2030. The investments planned
for 2016 amount to 667 million,
0.6% less than the reviewed budget
for 2015 of 671 million. In 2015,
GRTgaz accomplished lArc de Dierrey
project. The first phase consisted in
commissioning the interconnection
of Dunkerque terminal with the
transmission network. The second
phase contributed to the North area

decongestion. Among the projects
planned after 2016, GRT gaz mentions
Val de Saone, Gascoigne-Midi and
creation of entry capacities in Oltingue,
interconnection point between France
and Switzerland. GRT gas also plans
to adapt the transmission network
specific for gas coming from Groningen
in Netherlands in the perimeter
concerned.
The Spanish gas TSO, Enagas,
invested 530 million in 2015 of which
more than 60% was allocated to
projects outside Europe, supporting
its internationalization strategy. The
MIDCAT pipeline, which is currently
on the European Commissions list of
strategically important projects, would
put Spains interconnection capacity

with France at 14 bcm/year.
The Northwest European
storage market is still in
an oversupply situation
EU gas storage facilities are considered
crucial to energy security and resilience
in times of major supply disruption.
Nonetheless, investment in gas storage
facilities is facing low cross-border
availability of stored gas between
Member States as well as unfavorable
market conditions.
Due to colder weather and low imports
from Russia over the first three months
of 2015, storage level considerably
decreased to bottom on 9 April at
a level of 23 bcm, 25% of storage
57
capacity, while it only reached a

minimum of 37bcm, 43.1% of storage
capacity, in 2014 (see figure 5.6).
Increased capacities of other flexibility
tools such as LNG or cross-border
flows and expectations of decreasing
prices delayed storage injections.
Mild weather and relatively high LNG
imports reduced storage withdrawals in
the fourth quarter of 2015. In absolute
terms, at the end of 2015 gas storage
levels increased by 10.7% compared to
those in the same period of 2014. In the
other hand, the filling percentage was
considerably lower: 84%, as opposed
to a maximum of 94% reached in
October 2014 as a result of increased
storage capacity.
Over 2015, new capacities were added
mainly in Netherlands, Poland, Portugal
and Spain. The capacity of the Norg
L gas storage facility in Netherlands
increased by 25%, up to 7 bcm and
the Bergermeer storage facility, with
a capacity of 4.5 bcm, became fully
operational in April 2015. Due to
diminishing production of Groningen
field, storage facilities have an
increasing role in supplying the Dutch
market during the winter.
Figure 5.6 Gas storage inventories in EU-28 (2010 to H1 2016)

94.4%
23/10/2014
98%
% Full and Total Storage Capacity [mcm]
88%
93 bcm
31/12/2015
78%
84 bcm
31/12/2014
68%
84.4%
13/10/2015
58%
48%
In the UK, the Oil and Gas Authoritys

approval to increase working capacity
at the Rough storage facility by about
0.4 bcm resulted in a jump in UK stock
levels on 22 July 2015.
n a gloomy economic
environment, gas
prices decreased in
all regions in 2015 and
continued in early 2016.
Wholesale gas prices were still

related to local and regional
market dynamics but the
spreads between the main
indexes reduced significantly.
After the significant volatility observed
in 2014 and early 2015, wholesale
prices have been relatively stable
since February 2015 although there is
a clear downward trend in all regions.
Beginning from May, European gas
prices have been below spot LNG
prices in Asia. The price at NBP
continued on falling till it reached its
lowest level by April 2016.
Germanys gas trading partners might
have turned to hub-based pricing in 2015.
As a matter of fact, during 2015 and
the beginning of 2016, German border
price was close by the price at NBP (on
average, it was only 0.32/MWh higher
but it reached a 3.28/MWh difference
in January 2015).
Prices at NBP and the German border
are not the only one that converges.
Actually, the ratio of international
wholesale prices stabilized after the
convergence of prices experienced in
2014 and early 2015, and it reached its
lowest level since 2016 in April 2016.
38%
43.1%
14/03/2014
28%
% Full
Source: GIE GSE Capgemini analysis, EEMO18
58
16
1/
20
/0
01
1/
20
/0
14
1/
20
/0
01
13
1/
20
/0
01
12
1/
20
/0
01
11
1/
20
/0
01
01
/0
1/
20
10
18%
15
25%
09/04/2015
01
Total Capacity (bcm)
One of the factors that are applying

downward pressure on prices is the
decrease of oil prices. However, Oilindexed contract prices are no longer
the only price setter at European hubs
given pressure from LNG imports and
Figure 5.7 Gas spot prices (2015 and H1 2016)
BE Zeebrugge
DE - NCG
FR - PEG
Nord
IT - PSV
(PB-Gas)
NL - TTF
LNG
Japan
UK - NBP
DE - Import
Europe
Henry Hub
price
Brent FOB
(US)
100
Min
11.3
11.3
11.5
13.1
11.1
18.4
12.0
13.0
23.8
4.6
Average
20.6
17.7
20.8
22.5
17.5
28.3
20.6
18.9
43.3
7.5
Max
24.1
24.2
24.6
26.5
24.0
46.1
25.7
23.0
59.1
10.1
16
1/
/0
16
1/
/0
07
16
06
1/
/0
16
1/
/0
05
16
04
1/
/0
16
1/
/0
02
03
16
1/
/0
01
1/
1/
/0
12
/0
11
1/
/0
10
15
1/
/0
09
1/
/0
08
15
1/
/0
07
1/
/0
06
1/
/0
05
1/
/0
04
1/
/0
03
1/
/0
1/
/0
15
0
15
0
15
20
15
10
15
40
15
20
15
60
15
30
15
80
15
40
02
Gas prices [/MWh]
50
01
120
2015
& H12016
Brent price [/bl]
60
Source: Gas Exchanges web sites, World Bank, BAFA Capgemini analysis, EEMO18
storage withdrawals. This decrease of

prices resulted in a decrease of EUs
gas import bill, by around 72 billion
euros in 2015.
As a result of falling gas prices, the EUs
estimated gas import bill decreased
to around 72 billion euros in 2015, in
spite of increasing volumes. In fact,
in European hubs, the trading activity
increased in Q4 of 2015 and Q1 of
2016. In Q4 of 2015, 10250 TWh
were traded in the main European gas
hubs, so 13% more than Q4 of 2014.
In 2015, we observed a 9% increase
of total trades volumes compared to
2014. 88% of this volume was traded
in the UK and Dutch hubs in Q4 of
2015 (2 points more than Q4 2014). The
volumes at NBP at TTF were almost the
same in Q4 of 2015, thanks to a 36%
increase year-on-year of volumes in TTF
(compared to 3% in NBP). However,
French hubs didnt experience this
increase of volumes, where they
decrease by 40%.
We continue to observe this increase
of traded volumes in Q1 of 2016, even
though at a slower pace: total volume

traded on the main EU hubs almost
reached 13500 TWh, so 4% than Q1
2015. However, in 2016, the UK hub
was excluded from this trend, where
volumes decreased by 9% compared
to Q1 2015. In TTF, volumes continue to
increase: 17% year-on-year.
In Q1 2015, we observed a modest
increase of the average NBP/Henry Hub
ratio, to 2.6 (compared to an average
of 2.5 in the three first quarters of 2015.
However, this trend was reversed to
a decline of this ratio to 2.2 in Q1 of
2016. Even though this ratio seems
to be important in absolute terms, the
difference between the price at NBP
and at the Henry Hub has notably
dropped to 7.1/MWh in Q1 of 2016,
compared to 12.7/MWh in the first
three quarters of 2015 (and especially
compared to 2012 and 2013 where
it reached 17.8/MWh). This drop is
mainly due to the drop of the Euro
compared to US dollar in 2014 and Q1
of 2015 (which increased the US price
in Euro terms)
The network codes are

one of key points of
European harmonization
and the development of an
integrated energy market.
In 2015, the EC, with the help of ACER
and the ENTSOG, adopted several of
network codes and regulations. Those
rules set the way gas operators deal
with cross borders gas flows, how they
should handle the quality difference
of gas and the exchange of data with
market players.
This network codes will help facilitating
the gas flow in Europe and will then
contribute to the security of supply and
to get customers competitive prices. In
2016, a public consultation is trying to
gather the gas market players opinions
on the priorities of the implementation
of network codes from 2017 onwards.
59
Customer
Perspective
Prices and Supplier

Switching
Figure 6.1 Average European gas & electricity prices in 2015

Industrials
n 2015, end-user
energy prices remained
stable for electricity
and fell for gas
In 2015, European electricity and gas

prices went in opposite directions. The
average residential price for electricity
increased by 2.4% while gas decreased
by 1.7%. However, significant variation
around these averages was seen. The
Min
(/MWh)
Max
(/MWh)
20.8
73.4
-1.7%
40.2
126
Electricity
From -0.6 to -2.3%
44.6
269.7
+2.4%
105.5
293.2
gap between the highest and lowest

residential price remained stable for
gas (40.2/MWh in Luxembourg vs.
126/MWh in Portugal) and increased
by 11.1% for electricity (105.5/MWh in
Norway vs. 293.2/MWh in Portugal).
The 2020 energy mix objective has
increased the proportion of installed
-15%
150
-20%
100
-25%
50
-30%
-35%
-2
EU
IE
SI
SE
Note: Annual gas consumption between 20 GJ (i.e. 5,557 kWh) and 200 GJ (i.e. 55,566 kWh)
Source: Eurostat Capgemini analysis, EEMO18
Customer Perspective - Prices and Supplier Switching
Price change H2 2015 vs. H2 2014 [%]
200
-10%
G
R
ES
250
K
AT
DE
-5%
EE
300
PT
LU
0%
IT
BG
PL
350
LV
H
R
5%
U
SK
N
L
FR
10%
400
BE
RO
Max
(/MWh)
From -3.7 to -7%
450
DK
Price [/MWh, Purchasing Power Parity]

Pre Tax Price
Levies
VAT and recoverables
Min
(/MWh)
Gas
Figure 6.2 Residential gas prices all tax included and with PPP (H2 2015 and %
change with H2 2014)
60
Residential
renewable energy sources (RES)

capacity. This changing mix could
result in significant levies in order to
compensate for feed-in tariff (FiT)
programs in several countries (such as
France, Netherlands, Denmark). Such
levies vary between EU members.
Market liberalization continued: the
regulated tariff for industrial customers
in France ended on January 1, 2016
(this applies to customers consuming
more than 36 kV of electricity or
more than 30 MWh of gas). However,
the liberalization trend didnt reduce
average residential prices: in 2015,
unregulated electricity markets
remained 8% more expensive than
regulated ones. Unregulated gas
markets, however, were 18% cheaper
than regulated ones.
40
-5%
30
-10%
20
-15%
10
-20%
-25%
E
SK
D
E
EU SI
EU 28
-2
7
0%
PT
50
IE
N
L
IT
U
K
SE
5%
D
K
60
AT
FR
10%
ES
15%
70
PL
80
FI
EE
B
G
R
O
LV
G
R
H
U
C
Z
H
R
LU
Price [/MWh, VAT excluded]
Very Small Industries: annual consumption < 1,000 GJ (i.e. 0.2778 GWh)
45
10%
40
5%
35
0%
30
-5%
-30%
-35%
SI
SE
FI
-25%
PT
10
E
AT
-20%
IE
LU
15
R
U
K
G
R
FR
-15%
IT
H
U
EU PL
EU 28
-2
7
D
K
SK
-10%
20
G
EE
B
E
R
O
LV
C
Z
N
L
ES
25
Small to Medium Industries: 10,000 GJ (i.e. 2.778 GWh) < annual consumption < 100,000 GJ (i.e. 27.78 GWh)
SE
AT
PT
-2
EU
EE
-30%
-25%
LV
ES
-20%
10
SK
-15%
15
IT
-10%
20
PL
-5%
25
N
L
0%
30
FR
5%
35
U
K
10%
15%
40
Medium to Large Industries: 1,000,000 GJ (i.e. 277.8 GWh) < annual consumption < 4,000,000 GJ (i.e. 1,111.3 GWh)
45
With an average residential gas price

of 70.7/MWh in H2 2015 (-1.7%
compared to 71.9/MWh in H2 2014),
the upward trend finally came to a halt
after slowing down from 14.5% in 2011
to 2% in 2014. This is partly the result
of changes in wholesale market natural
gas prices between 2014 and 2015.
Reflecting the drop in oil prices, the UK
National Balancing Point (NBP) index
decreased by 20% in 2015 (after a
decrease of 22% in 2014-2015) and the
German import price index fell by 27%
(after a decrease of 15% in 2014-2015)52
(see also Security of Supply chapter).
Figure 6.3 I&C gas prices VAT excluded (H2 2015 and % change with H2 2014)
In the gas market, average

European prices fell by
3.7-7.0% in industrial
segments48 and by 1.7% for
residential users in 2015
For industrial customers, the 2014
price drop was reinforced by average
decreases in H2 2015 of 3.7% for small
industries and 7% for large industries,
compared to H2 2014. Industrial prices
were further affected by the changing
wholesale market, as prices are indexed
to both spot and long-term levels49, and
by offer/supply50 dynamics. The more
power-intensive the industry, the more
it benefits from the decrease. Globally,
gas consumption in the EU increased
slightly by 4% in 201551 because of the
cold winter (compared with a decrease
of 7% in 2014).
48
Including industrial and commercial customers
49
Quarterly report on European gas market, European Commission, Q4 2015
50
A la veille de la drgulation, les prix restent orients la baisse, Usine Nouvelle, 26/11/2014 http://indices.usinenouvelle.com/energie/gaz/a-la-veille-de-laderegulation-les-prix-du-gaz-restent-orientes-a-la-baisse.5771
51
Quarterly report on European gas market, European Commission, Q1 2015 (page 4)
52
BP Statistical review of world energy, BP, 2016
61
400
10%
300
0%
200
-10%
100
-20%
-30%
-2
EU
DE
LU
20%
500
SI
G
R
U
K
IE
ES
30%
AT
EE
600
PT
N
O
FI
SE
40%
IT
LV
PL
RO
700
BE
SK
50%
U
H
R
BG
800
FR
N
L
DK
Price [/MWh, Purchasing Power Parity]

Pre Tax Price
Levies
VAT and recoverables
Figure 6.4 Residential electricity prices all tax included and with PPP (H2 2015 and
% change with H2 2014)
Note: Annual electricity consumption between 2,500 kWh and 5,000 kWh
European Electricity
price for residential
customers rose by
2%
in H2 2015
Nonetheless, residential gas prices

decreased less than industrial prices
in some countries. In France, levies
on residential gas prices rose from
2.4/MWh to 4.2/MWh between
H2 2014 and H2 2015. Gas prices
increased by 1.3% and 9.5% between
H2 2014 and H2 2015 respectively for
Poland and Romania due to energy
costs. Those exceptions to the general
trend have diversified and widened their
supply sources. For example, in 2015,
Poland received liquefied natural gas
(LNG) from Qatar for the first time53.
On the electricity markets,

average European prices
increased by 2.4% for
residential users and fell by 0.62.3% for industrial customers
After an increase of 2.9% in 2014,
average European electricity prices
for residential customers grew by
2.4% in 2015. As in previous years,
the predominant factor was financial
support for a growing share of RES (in
order to compensate for FiT programs
and network investments):
In France, CSPE tax54 (levied on
electricity bills to fund renewables)
increased by 18.2% to 19.5/MWh in
2015 (from 16.5/MWh in 2014 and
13.5/MWh in 2013);
In the Netherlands, levies increased
by 77% in 2015 (26.2/MWh in 2015
vs. 14.8/MWh in 2014)55.
Conversely, prices have decreased
in some countries. German prices
overall fell by 0.9%, taking all factors
into account. As expected, the already
very high EEG tax (the contribution to
renewables) fell by 1.1%56 (61.7/MWh
in 2015 vs. 62.4/MWh in 2014). In the
UK, there was a general price drop
of 2.9%, reflecting the falling price of
wholesale electricity (with the combined
effect of increased production and
falling consumption). But it was
Norwegian consumers who benefited
from the greatest reduction: prices
dropped by 9.21% between 2014 and
2015.
53
http://www.leblogfinance.com/2015/12/gaz-gnl-le-qatar-livre-pour-la-premiere-fois-la-pologne-au-grand-dam-de-la-russie.html
54
http://www.cre.fr/operateurs/service-public-de-l-electricite-cspe/montant
55
Eurostat, 2015
56
Recent facts about photovoltaics in Germany, Fraunhofer, 19/05/15, http://www.ise.fraunhofer.de/en/publications/veroeffentlichungen-pdf-dateien-en/studienund-konzeptpapiere/recent-facts-about-photovoltaics-in-germany.pdf page 18
62
Figure 6.5 I&C electricity prices VAT excluded (H2 2015 and % change with H2 2014)
5%
150
-0%
100
-5%
50
-10%
-15%
200
IE
SK
D
E
G
R
IT
ES
10%
K
B
E
U
EU K
-2
EU 8
-2
7
PT
250
Z
LV
AT
LU
15%
SI
PL
FR
300
20%
FI
H
U
EE
R
O
B
G
H
R
N
L
SE
Very Small Industries: annual consumption < 20 MWh

350
60
-6%
40
-8%
20
-10%
-12%
-4%
EU LV
EU 28
-2
7
IE
D
E
U
K
IT
80
ES
G
R
PT
-2%
AT
B
E
SK
100
EE
0%
FR
120
2%
140
SI
H
U
LU
4%
FI
B
G
C
Z
R
O
N
L
PL
6%
160
SE
N
O
Small to Medium Industries: 500 MWh < annual consumption < 2,000 MWh
180
0%
60
-10%
40
-15%
20
-20%
-25%
80
E
IT
U
K
5%
LV
SK
100
EU PT
EU 28
-2
7
IE
10%
ES
120
FR
EE
G
R
C
Z
D
K
B
E
AT
15%
FI
N
L
R
O
B
G
H
R
SI
PL
20%
140
SE
N
O
LU
Medium to Large Industries: 20,000 MWh < annual consumption < 70,000 MWh
160
For industrial customers, average

European electricity prices remained
more or less stable with decreases
of 0.6-2.3% across the different
consumption ranges57. Mediumsized industries benefited even
more than large ones, with a price
drop of 2.3%. Globally, prices in the
industrial sector are more affected
by the decrease in wholesale prices.
The increasing RES share exerted
downward pressure on wholesale
prices (shifting the merit order curve to
the right), which compensated for the
increase in taxes58. In a sense, some
of the cost burden is being transferred
from the industrial segment to the
residential one; this protects industrial
competitiveness. Germany has led the
way.
In a changing environment,
Utilities continue
adapting their tariffs
As in 2014, Utilities have continued
to expand and develop their offers
and tariffs for both electricity and gas
in order to respond to consumers
needs. Configurations vary by country
and the emergence of smart meters
has multiplied the number of tariffs
and offers. In December 2015, France
launched Linky, its smart electricity
meter. The aim is to install it in 35 million
households before 2021. Suppliers have
also started to implement specific types
of tariff (indexed on the time of day or
the weekend). The same trend can be
seen in Italy, Netherlands and the UK59.
However, the pace of transformation is
unlikely to be as fast as expected: only
72% of Europeans will have a smart
meter by 2020 compared with the
original goal of 100%.
57
Eurostat, 2015
58
Quarterly report on European electricity market, European Commission, Q4 2015
59
From Benchmark, Capgemini Consulting, 2014
63
60
A slight shift in the European

switching landscape
2015 saw some shifting among the
European markets and in the overall
switching landscape. In a number of
markets, customer switching rates
increased significantly for electricity
and gas, compared to 2014 and 2015
respectively. The greatest changes
were in the Belgian region of Flanders
(for gas 13% to 18%, and for electricity
12% to 16%) and in Slovenia (for gas
4% to 6%, and for electricity 3% to 7%).
For electricity, there was an increase in
switching rates in Portugal (6% to 10%)
and a decrease in Estonia (5% to 3%).
Due to increased activity in Flanders,
the two Belgian regions, Flanders and
Wallonia, are among the most active
markets in Europe for both electricity
and gas. In Northern Ireland, there
was a jump in switching rates for
LU
IE
SE
PL
rth
er
AT
SK
No
SI
EE
N
L
IT
C
Z
ls)
a)
de
r
(F
l
Source: VaasaETT Utility Customer Switching Research Project Capgemini analysis, EEMO18
The graph shows the aggregated average switching rates in 2015.

The definition of switching includes only switch of supplier (to a different utility, not just a different
contract of the same utility) and does not include switching just due to moving.
64
BE
0%
an
ss
ru
(B
Source: VaasaETT Utility Customer Switching Research Project Capgemini analysis, EEMO18
Todays consumers expect a more

digital and personalized experience
with their energy suppliers. Some
suppliers have anticipated this and
are offering new services. In the
Netherlands, a smart thermostat sends
daily information to Eneco via its home
management system; consumers no
longer receive unexpectedly high bills.
Other providers, such as Centrica
and British Gas, provide smart home
solutions. Globally, an increasing
number of Utilities are offering online
contracts to their customers, who
benefit from lower prices. For example,
Direct Energie in France has an
online-only offer with a 10% discount
compared with the regular residential
price. With this offer, customers receive
their bill by email and check their
consumption via an online service.
Other retailers are focusing on building
brand loyalty. In the Netherlands, Nuon
has one loyalty savings program that
awards points for every month you are
a customer, and another that offers a
price discount for customers who stick
with that provider.
Dormant
markets
2%
s)
LU
AT
PL
G
R
RO
el
s)
SI
BE
C
Z
FR
EE
SK
IT
DE
N
L
DK
PT
la
nd
(W ers
al ) B
lo
ni E
a)
B
E
IE
N
O
G
B
N
or
th FI
er
n
IE
ES
SE
0%
4%
se
Dormant
markets
2%
Cool active
markets
6%
ni
4%
8%
us
Cool active
markets
lo
6%
Active markets
10%
(B
r
8%
12%
FR
DK
DE
Active markets
(W
al
10%
14%
IE
G
B
ES
12%
16%
BE
14%
20%
18% Hot and warm active markets
BE
Hot and warm active markets
16%
Aggregated European gas switching rates [%] I&C and residentials
18%
(F
Aggregated European electricity switching rates [%] I&C and residentials
Figure 6.6 Aggregated European electricity switching rates (2015) 60 Figure 6.7 Aggregated European gas switching rates (2015)60
electricity, locating it among the most

active markets. Switching in Poland
took a slight downturn in 2015, placing
it into the dormant markets category
for electricity. For gas, there are more
markets in the hot and warm active
markets category in 2015 than in 2014;
the markets with increased activity are
Denmark, France and Germany.
Customer Experience Transformation

A customer-led market
The shift from passive consumers
waiting to receive their bills to proactive
customers looking for the best offer is
accelerating. Some consumers have
formed community buying groups
to increase their negotiating power
and benefit from the best offers.
For example, the French consumer
group Que Choisir launched two
campaigns for cheaper energy in 2014.
Its third campaign, Gaz moins cher
2015 convinced more than 60,000
consumers to switch gas supplier, with
yearly savings averaging 12761.
In the Netherlands, proactive
consumers can benefit from two
schemes: Vandebron allows consumers
to choose their own local, renewable
energy producer (such as a farmer
with wind turbines or solar PV panels);
Powerpeers is similar, enabling
consumers to buy from their friends,
family or anyone with their own means
of production.
o be more effective,
individual prosumers
are forming communities
Regulations are diverse, with

some favoring development
of distributed generation
(DG) and others trying to
limit impact on prices
Bridge the performance gap
by joining a community
Until now, solar energy generation has
largely meant Utility-scale PV projects
or behind-the-meter generation by
commercial and industrial (C&I) users
and residential rooftops. But by 2016 it
61
62
became increasingly clear that energy

transition would include a shared
economy model with prosumers
at the forefront. While micro wind
turbines, biomass cogeneration
units, and renewable heating can all
play an important role in prosumer
or community energy projects, their
current stage of development means
that solar is in the strongest position.
The entire industry is looking at the
shared economy while cautiously trying
to anticipate what the disruptive model
would look like. Most agree that an
Uber for energy would optimize asset
usage regardless of ownership. Some
models are already claiming to have
defined it, but there are various aspects
that will further influence the post
energy transition shape of the European
Utilities landscape.
Most EU Member States have policies
in place to support RES integration,
but the markets are highly diverse
and country specific. Factors to be
considered range from potential RE
sources to grid taxes and the value
of excess electricity. Therefore in the
EU we currently have very different
models coexisting. At one extreme is
the German and Danish model, where
almost half of renewable installed
capacity is owned by citizens; at the
other extreme there is the Polish model,
with only just over 4,700 installations
(35 MW). Solar PVs levelized cost of
electricity (LCOE) is significantly lower
in Germany than in Italy, which, among
other factors, is due to the simple
approval process62. As well as these
diverse conditions, what initially looked
like state assistance for residential
investment in RES has sometimes
shifted and retroactively changed
the rules of the game Spains sun
There is an accelerated
shift from passive
consumers to a shared
economy model, with
prosumers at the
forefront
The stimulating
policies in Germany
led to a
44%
of the renewables
installed capacity to
be owned by citizens,
in high contrast with
countries with more
passive policies.
https://www.quechoisir.org/action-ufc-que-choisir-bilan-de-gaz-moins-cher-ensemble-nouvellestimulation-reussie-de-la-concurrence-n13497/
http://www.pvgrid.eu.
65
As new players on
the energy market,
prosumers need a stable
framework to protect
their investments. While
the degrees of protection
for individual installations
varies country by
country, the community
size installations start
to look economically
appealing
63
tax is an example. The table below

summarizes some of the policies
affecting prosumers in EU Member
States, mainly relating to investment
schemes supporting residential PV
projects, and schemes promoting
self-consumption.
Prosumers, individually and in
communities, lack the benefit of a
legal framework that would clarify their
status, eliminate barriers, and protect
their investments. A series of policy
recommendations are emerging from
consumer organizations and have
been acknowledged by the European
Commission63. In essence, they would
include a remuneration scheme, access

to the grid, and simplified permission
procedures, with predictable and
stable support schemes to offset
market failure.
Even without a dedicated legal
framework to protect them, and in a
regulated landscape almost entirely
focused on established incumbents,
community solar projects seem to
be gaining momentum by combining
the benefits of behind-the-meter and
Utility-scale models. The European
Federation for Renewable Energy
Cooperatives (REScoop), founded in
2011, has 20 member organizations
UK
Subsidies to householders installing rooftop solar panels were cut by 65% in December 2015. The Renewables Obligation, a second subsidy plan,
has also been cut, for both large and small projects. Self-consumption for small systems (<30 kW) is being encouraged through a generation tariff higher
than the export tariff for electricity fed into the grid.
NL
A net metering scheme exists for small-scale residential consumers, with a one-year balancing period. Once a net metering limit is exceeded, no incentive for
self-consumption is paid and a FiT scheme is in place for excess electricity.
BE
A net metering scheme exists for small systems (< 10 kW), with a one-year balancing period. The residential PV system owner receives the retail price
for excess electricity fed into the grid, whereas a commercial PV owner can only sell if there is a Power Purchase Agreement (PPA) in place (with a direct client).
DE
There is a minimum requirement of 10% self-consumption for installations between 10 kW and 1 MW. Excess PV electricity is remunerated via either a defined FiT
or a feed-in premium on top of the electricity market price. The FiT surcharge for self-consumption electricity from new PV systems is currently 30% and will rise to
40% from 2017, but installations below 10 kW are exempt for 20 years.
IT
Scambio Sul Posto (net metering) applies to systems below 500 kW. The scheme combines real-time self-consumption with net billing.
Excess electricity is remunerated based on quotas relating to electricity market prices and the cost of grid services.
FR
Retail prices are low and a FiT scheme exists for excess electricity from PV systems.
PL
A FiT scheme was launched on July 1, 2016. An increase in the number of connected micro installations is expected in H2 2016, and grid operators estimate
the total will reach the 2015 level, when most existing installations were built (around 4,700 installations, 35 MW).
GR
Residential PV is one of the most dynamic market segments. A new self-consumption model (based on net metering) has been agreed and will run in parallel with
the existing support scheme, which is based on FiTs. To be eligible for incentives (FiTs), when installing a small residential PV system (<10 kW) part of the
buildings hot water needs must be covered by RES such as solar thermal systems.
SW
State aid is capped at 35% of total investment for new installations and a maximum of SEK 2 million. Capping the total available investment subsidy is causing
long delays in building new installations. From January 1, 2015 there has been a tax reduction for surplus electricity from PV.
SL
A net metering scheme with a one-year balancing period is available for households and small businesses (<11 KVA). The policy is to encourage self-consumption,
and so any surplus is not remunerated. There is an overall yearly connection limit of 10 MVA (7 MVA for households and 3 MVA for businesses). If by October 1
of the calendar year the annual limit has not been reached, the share of unused power can benefit both groups of customers. Installations participating in
net metering are not allowed to benefit from FiTs and premiums.
NO
One of the biggest renewable energy producers (together with Canada), Norway focuses on stimulating large-scale RES projects instead of small-scale, residential ones.
SP
A specific grid tax of 0.5/MWh has to be paid together with a 7% tax on electricity produced. All self-consumption systems below 10 kW pay the sun tax,
a grid backup fee per KWh consumed. There is no remuneration for excess PV electricity below 100 kW fed into the grid; above 100 kW, the excess can be
sold on the wholesale market.
European Commission: Delivering a New Deal for Energy Consumers, COM(2015)339 final, July 2015; BEUC Building a consumer-centric Energy Union, July 8, 2015
66
Customer Perspective - Customer Experience Transformation
(either discrete RES communities or

regional RES federations) in 11 Member
States, representing 1,240 separate
RES groups and their 300,000 citizens.
Community-size projects provide an
affordable operating model thats not
possible with individual PV. They enable
mid- to low-income prosumers, without
access to large enough surfaces for
conventional PV, to install a meaningful
production unit (at least 20% of internal
consumption), whether they own or
rent their houses, have access to
an individual rooftop or live in multioccupancy accommodation, or simply
own an otherwise unappealing asset
that is suitable for PV installation,
like contaminated land or an area
with building restrictions. They are
not subject to the siting constraints
of solar Utilities, such as the need
for infrastructure development, or to
the grid/market access difficulties of
behind-the-meter installations, such
as the minimum required bid size or
prohibitively high costs of connection
often enforced by some operators64.
On the other hand, community solar
prices are about 40% higher than
Utility solar, mainly because prosumer
communities generally dont have
significant finance available for project
development; they usually have little
expertise in grid connections and
are unlikely to respond as quickly as
commercial developers when grid
capacity becomes available65. Levers
to improve competition are the usual
business ones: optimizing system
design to include unappealing assets
(such as under-utilized land), volume
aggregation, and the contracting
model66. Despite generally having
limited access to finance, communities
64
65
66
can still raise significant amounts of

private capital: something that needs to
be taken into consideration by Member
States strategies for renewables.
Generally, there is growing interest in
community solar energy, stemming
from increased awareness of
opportunity combined, in certain cases,
with eagerness to support the shift
towards sustainable generation and a
general distrust of centralized energy
producers. Projects like REScoop
currently include a network of more
than 650,000 citizens and 1,240
communities. Most communities are
organized as not-for-profit entities
that specialize in facilitating the
co-production of community-owned
RES projects.
While EU projects still seem to struggle
with the distribution of grid assets
maintenance costs among market
players, the first microgrid project in
New York is allowing peer-to-peer
solar energy distribution, with the aim
of creating a community network for
local energy. The Brooklyn Microgrid
is using a TransActiveGrid approach
that combines software and hardware,
enabling members to buy and sell
energy from each other securely and
automatically, using smart contracts
and the blockchain. Being a microgrid
it has the ability to detach itself from the
mainstream electric grid during extreme
weather events or other emergencies,
paving the way for the resilient,
sustainable and efficient energy
production of the future.
It is expected that
the expanding RES
communities
network will
contribute to
disseminating
efficient operating
models to lower the
40%
price gap between

community solar and
utility solar.
The number of connection sites for a new project is often limited, and energy producers may therefore
not be able to connect at a reasonable price
Ofgem (2014). Community Energy Grid Connections Working Group report to the Secretary of State
(July 2014)
http://www.beuc.eu/publications/beuc-x-2016-001_jmu_welcome_culture_for_solar_self-generation.pdf
67
Innovation &
Transformation in the
Utilities and other
Energy companies
For Utilities, innovation is not optional:

changing market conditions (low prices,
decreasing demand, intensifying
competition, and so on) are making
it imperative that they rethink their
business and operating models.
Utilities have
embraced the need
for transformation. But
are they moving fast
enough?
Despite the challenges they are

facing to implement energy transition
and digitalization, Utilities have now
embraced the need for transformation.
They are accelerating their use of
growth and performance levers (such
as innovation, geographical expansion,
agility, digital operations, and new
business models) to unlock new value
areas or improve on existing ones.
To access these levers, Utilities have
been adapting their capabilities; their
roles such as empowerment of Chief
Digital Officers; their organizational
structures for instance, creation of
Figure 7.1 The seven largest Utilities asset impairments in 2015 and 2014
Utilities
2015
2014
ENGIE
EDF
5,731b
3,466b
0,924b
0,906b
E.ON
Vattenfall 1
3,328b
3,980b
5,457b
2,531b
Centrica 2
RWE
3,248b
3,110b
2,531b
0,843b
ENEL
Total impairment
2,965b
7,539b
25,828b
20,731b
Note: Impairments in the table calculated on Property, plant and equipment and other intangible assets
1. Amounts in SEK converted in with the ECB monthly exchange rates (December 2015 and December 2014 correspondingly)
2. Amounts in converted in with the ECB monthly exchange rates (December 2015 and December 2014 correspondingly)
Source: Annuals reports 2015 of each company
68
Customer Perspective - Customer Experience Transformation
energy transition units; and the way

they collaborate externally, in particular
with startups.
But are Utilities moving fast enough?
Several barriers seem to be preventing
them from innovating and transforming
as rapidly as they might.
ajor trends are

affecting the energy
sector, prompting it to
innovate and transform
Market conditions are driving
innovation along the entire
value chain from production
and generation to retail and
energy services, including
transport and distribution
Difficult economic times, low
electricity prices, the increasing
share of renewable energy sources
(RES), new customers expectations,
structural demand reduction, and fierce
competition downstream all these
factors have dramatically changed the
landscape. Many structural and assetrelated competitive advantages have
disappeared, while additional skills are
required to compete in growth areas
such as RES and new downstream
activities. Major European Utilities have
made substantial write-offs on assets.
Figure 7.1 shows the increase in the
seven biggest European Utilities asset
Figure 7.2 Megatrends in the energy sector

4 megatrends reshaping our economy and all energy usages
SUSTAINABILITY (decarbonation + energy efficiency)
FROM
Fossil-fuel based
economies
Fast growing energy

consumption
FROM
TO
Clean energy hegemony
Optimization of resources
Energy efficient services &
materials
LOCAL EMPOWERMENT
FROM
Centralized governance on
energy-related topics
Limited energy democracy
TO
Consumers
(passive)
Prosumers
(active)
Individual
Collective /
Communities
Clean energy hegemony
Limited customer
interactions
Customer-centric business
models
INTEGRATED SERVICES
TO
Increased decentralization of
energy-related decision making
Development of a participative
democracy
Optimization of resources
Top-down system
management
Energy-Efficient services &

materials
TO
Over-the-year energy
management
Estimated grid behaviors
END-USERS
FROM
Centralized energy system

(large-scale power plants)
DIGITAL
FROM
Dominant energy Utilities
Streamlined value chains
Standardized products
(commodities)
Siloed offerings
Mono-fluid approach
TO
Enlarged energy ecosystems
including start-ups, tech
companies, cities, equipment
providers...
Disrupted value chains
Customized services (smart
home, energy efficency...)
Integrated multi-service
offerings
Integrated multi-fluid strategy
Source: i24c Capgemini Consulting - Scaling up innovation in the energy union to meet new climate, competitiveness and societal goals, 2016
Box 7.1 The Energy Union needs an integrated

approach to research, innovation and
competitiveness
In partnership with Capgemini Consulting, the Industrial Innovation for
Competitiveness initiative (i24c) conducted a strategic assessment of past
and present innovations in energy-related industries linked to technological,
business model, financial, policy and social innovation. The report assesses
how well Europe has performed to date in spurring and scaling up energy
innovation to its advantage, from an industrial and economic as well as energy
and climate perspective. A deep dive into a selection of 11 energy-related
innovations and expert interviews highlights that, in several energy-related
areas, Europe has a deployment deficit, and is struggling to bring promising
innovations to market. The European Union (EU) risks losing its comparative
advantage to Asian and American competitors. This applies to both Europes
supply of innovation, and in the deployment taking place in Europe. In
reviewing progress to date, and drawing lessons for policy-makers, this report
confirms the need for an integrated approach to the research, innovation and
competitiveness agenda of the Energy Union.
Source : i24c Capgemini Consulting - Scaling up innovation in the energy union to meet new climate,
competitiveness and societal goals, 2016
67
impairments over the last two years.

This is mainly due to the reduction
in value of their assets, especially of
large conventional power stations.
In addition, in the past seven years,
European Utilities have been forced to
close or mothball 50 GW of gas-fired
capacity.67 All this has driven Utilities to
evolve their asset portfolios, with a shift
towards asset-light models focused
on services.
Europes entire energy system and its
related value chains are undergoing
profound change driven by four rapidly
emerging, interrelated megatrends:
sustainability, digital disruption, local
empowerment, and integrated services
(figure 7.2). These trends are all
reflected in the changing expectations
of end-users. Regulation and
technology development are key factors
Financial Times, European utilities slash asset valuations, May 2016
69
fostering these trends. Regarding the

latter, developments such as energy
storage in combination with solar
photovoltaic (PV) panels, demand-side
management, and electric vehicles
are disrupting the boundaries of the
traditional, vertically integrated energy
value chain.
Innovation in the energy system is
not only about new technologies. Its
also about new disruptive business
models and services (such as
electric car sharing, vehicle-to-grid
applications, smart home technologies,
and energy-as-a-service platforms),
societal innovation, and new policies
and financial mechanisms. Energy
innovation results from contributions
by a wide range of stakeholders from
various horizons. Innovation can be
driven and stimulated by cities and/
or end-users, can be initiated by new
players disrupting traditional value
chains (marketplaces, communities,
independent energy suppliers, etc.), can
emerge from traditional energy players
(e.g. equipment providers, power
Utilities, grid operators, and public
research institutions), or can involve
financial and academic communities.
Companies have to
transform themselves
radically in all dimensions
Numerous new entrants

are taking a share of the
cake, highlighting the need
for established players to
accelerate their transformation
As incumbents gradually start to act on
and accelerate the market transformation
taking shape around them, newcomers
are claiming their place in the changing
value chain. Electric transportation,
peer-to-peer supply, flexibility, and smart
homes and buildings are examples of
new markets, with revenue potential
now tangible and substantial enough to
attract more and larger players. Pioneers
and trendsetters have now grown into
substantial players (for example, First
Utility, founded in 2008, has become the
largest energy supplier in the UK outside
the big six), and deep-pocketed new
entrants such as Tesla are expanding
their footprint in the value chain, as
demonstrated by Teslas move in June
2016 to acquire SolarCity. Established
companies from various sectors (such as
insurance, telecoms, electric equipment,
internet service provision) are playing an
increasing role in the energy business. For
example, Apple and Google have already
established positions in the downstream
market; it will only be a matter of time
before they add the commodity supply
of (sustainable) energy to their service
and technology offerings. A new type
of integrated energy provider is taking
shape. Strategic choices, investments and
takeovers by incumbents such as ENGIE
and Total show that established players
have abandoned their wait-and-see
stance and are facing up to the next level
of competition.
Research conducted by Verdantix for
Capgemini shows that the highest levels
of innovation and disruption are taking
place across the US and European
markets (particularly in the UK and
Germany). These regions have seen
a steady increase in the RES share of
68
electricity over the past decade68, which

is a key factor promoting innovation and
new business models in the Utilities
ecosystem. The UK energy supply
market is one of the most dynamic areas,
with numerous new entrants establishing
offerings, thus putting pressure on
incumbent Utilities. Data from energy
regulators in different regions shows that
independent Utilities are taking market
share from incumbent suppliers. In the
UK, independent suppliers share grew
from 1% to 15% of the market between
2010 and 201569; in France, the market
share of alternative electricity suppliers
for residential consumers increased from
7.1% at Q1 2013 to 12% at Q1 2016, and
the trend is even faster for non-residential
customers70. However, new players
face challenges in scaling up customer
services infrastructure.
Technology startups are a driving force
in changing the energy landscape. For
example, demand response startups
such as Endeco, KiWi Power, Open
Energi, and Flexitricity are developing new
propositions; the smart home market is a
key target area for these new companies.
Startups and players from other sectors
(such as technology giants) continue to
launch solutions that take advantage
of Internet of Things (IoT) technology,
bringing a multitude of new internetenabled home automation products to
the market. For example, ecobee and
Rachio enable efficient consumption
of, respectively, electricity and water by
using sensors, monitoring technology,
and data. They have received funding
from corporations and corporate venture
capital firms, such as Carrier Corporation,
which backed ecobee, and Amazons
Alexa Fund, which backed Rachio71.
These major trends across the energy
and Utility sector mean that companies
have to transform themselves radically
in all dimensions.
From 10% in 2005 to 30% in 2015 in Germany (source: EIA); from 8.5% to 22.5% between 2011 and 2015 in the UK (source: Department for Business, Energy &
Industrial Strategy, DUKES 2016)
69
DECC, Verdantix and Capgemini Consulting analysis, 2016
70
CRE (Commission de Rgulation de lEnergie)
71
CBInsights https://www.cbinsights.com/blog/smart-home-market-map-company-list/
70
Box 7.2 Utilities innovating towards a sustainable energy world

Centrica
UK-based Centrica has invested
in innovative customer offerings,
including smart home products. In
2015, it acquired AlertMe, provider of
technical platforms for smart homes
including the Hive smart thermostat,
developed in-house by AlertMe.
Other related products that have
been launched are Hive window and
door sensors, Hive motion sensors,
and Hive Active PlugTM. In addition,
Centrica has signed a 65 million, fiveyear partnership deal with Fujitsu to
deliver a digital transformation program
transforming end-user IT services to
create a more secure, scalable and
flexible service, with mobility at its
heart.
Enel
Enel has embarked on digital
transformation. With 80% of its
infrastructure digitized, Enel has a
world-leading automated distribution
sensor and control network. Recently,
C3 Predictive Maintenance has been
implemented. This leverages more
than 750 analytics to update an assets
health score in real time as data is
received. It then uses a machine
learning model to predict the probability
of feeder faults and pinpoint their
locations with increasing precision over
time. Another digital pillar is the rollout
of smart meter technology, digitizing
the grid and enabling accurate pricing,
reliable supply, and detailed data
collection. In addition, its renewable
energy business, Enel Green Power,
has been fully integrated into the group
to accelerate innovation and increase
the growth potential of the RES
portfolio.
To accelerate innovation, in 2016,
ENEL launched its Innovation Toolbox,
a platform to engage with partners
and startups to identify and develop
innovative technologies in the green
economy and sustainability markets.
Eneco
Eneco is one of the few incumbents
who made the transformation switch
early on, by adopting a sustainable
strategy in 2007, and acting on it.
Building on its transformation journey
so far and the insights generated,
Eneco realized it needed to accelerate
its transformation and change from
a Utility provider into smart services
company. In July 2015, Eneco Group
launched Eneco Innovation & Ventures,
a new business unit with an initial
budget of 100 million, entirely focused
on innovation, ventures, partnerships
and collaboration with energy startups.
A key example of Enecos changing
scope and mindset is its ambition to
export its Toon smart home platform
and make it one of the worlds
top smart home solutions. Eneco
understands that speed and scale will
be essential to reach that goal, and is
working with partners to achieve them.
E.ON
In 2016, E.ON launched Aura for
German residential electricity
customers. This all-in-one system
encompasses solar power, energy
storage, an energy management app,
and a tailored electricity tariff. E.ON
believes that there is a high demand for
combined solar and battery solutions in
the German market. Aura makes E.ON
one of the first German Utilities to offer
home energy management with energy
storage.
E.ON is not only launching innovative
propositions, but has also innovated
around the way innovation itself
is organized. In this company,
innovation is not limited to a team
within the corporate structure, but is
the responsibility of an independent
legal entity with innovation as core
competency: the Agile Accelerator.
The Accelerator has its own (less
corporate) business and IT rules, so
that E.ON employees are motivated
and supported to nurture their ideas
and initiatives.
Total
Total Energy Ventures (TEV) is Totals
venture capital fund for investing in
startups to drive innovation. It supports
development of innovative businesses
in areas such as renewable and
alternative energies, Oil & Gas, energy
efficiency, energy storage, waste
recycling, greenhouse gas reduction,
digital energy, and sustainable
transportation. In May 2016, Total
bought French battery manufacturer
Saft Groupe for 950 million ($1.1
billion), expanding its renewable
energies business and complementing
the acquisition in 2011 of a majority
stake in US solar power systems
manufacturer SunPower. Total also
entered the Belgian gas and electricity
retail and energy services markets
with the acquisition of Lampiris
(100% for 180 million). In 2015, the
position of Chief Digital Officer was
added to the management team.
Duke Energy
In 2013, California-based vertically
integrated Utility Duke Energy formed
the Coalition of the Willing, a group
of companies looking to modernize
the electricity grid. In particular,
the coalition works to increase
interoperability in energy systems by
allowing hardware and software from
different companies to communicate
through a common protocol. Duke
believes this will provide particular value
for development of microgrids.
This proposition is innovative because
it starts to tackle some of the silos
that separate hardware, software and
communications systems. Removing
the barriers allows real-time interaction
and more effective integration of
modern grid components such as
storage and renewables.
71
tilities have taken

drastic steps in
the past 12-18 months
in their transformation,
using several growth
and performance levers
Innovate or die
Incumbent Utilities have redefined
their corporate strategies to address
the challenges of the new market
environment. Measures have been
taken to improve the operational
performance of remaining assets and
processes. In addition, capital has been
increasingly allocated to large-scale
development of RES and potential new
downstream growth areas such as
distributed energy management and
smart services.72
Large Utilities in Europe have taken
steps to accelerate innovation to meet
the requirements of a new market and
digital environment, as noted in box 7.2.
Investment and new partnerships have
been directed towards unlocking new
earnings models.
Expand geographically,
especially looking at Africa
With economic difficulties in their home
countries forcing them to look for new
growth drivers, energy companies are
extending their focus to include emerging
markets. In 2016, these new markets
represent half of the most attractive
countries in terms of RES investment,
with four African markets in the top 3073.
In February 2016, Total Energy Ventures
acquired interests in Off Grid Electric and
Powerhive. Both companies offer solar
solutions for rural areas that are off-grid
or have limited grid access in emerging
markets, especially Africa.
ENGIE decided to create a dedicated
business unit for Africa. It currently
72
72
has about 3 GW of power plants in

operation or under construction, mostly
in South Africa and Morocco74 (including
large-scale wind and solar) and is
also active in energy services through
Cofely and Tractebel Engineering.
The company recently opened offices
in Ivory Coast and Kenya, seeking
to expand to West and East Africa.
ENGIEs goal is to provide electricity
to 20 million people, currently without
access to energy, by 2020.
Increase agility to
improve performance
Some companies are seeking better
performance and business simplification
by choosing geography- or customerdriven set-ups rather than the historical
vertical ones. For instance, in July
2016, Enel sold 60% of Enel Green
Power Espaa capital to its Spanish
subsidiary Endesa (which now owns
100% of it), in line with its global strategy
of rationalization and simplification.
In January 2016, ENGIE reviewed its
worldwide organization and created 24
business units according to territory, with
the aim of bringing the business closer
to the customer, just as Veolia, GE and
Alstom did a few years ago.
Break down internal silos to
increase operational efficiency
As well as pooling traditional support
functions (as Veolia and ENGIE did in
2013), Utilities are merging some key
activities. In 2016, GRDF launched
a transformation program to merge
field activities across its customer
and network departments. Other
companies, such as ENGIE and Total,
have grouped tools and competencies
into centers of excellence for the whole
group to draw on: ENGIE Digital Factory
and ENGIE Tech are centers created in
June and July 2016 to assist business
units in their digital transformation,
launch innovation initiatives, and
address specific digital issues.
According to International Energy Agency (IEA) data (2016), over 90% of electricity generated by new
installations globally in 2015 came from renewables, the highest level seen since 1974, with half the
growth coming from wind farms alone. (i24c, 2016)
73
EY Renewable Energy Country Attractiveness Index 2016
74
Bloomberg, June 2016
Figure 7.3 MIT-Capgemini Framework for Digital Transformation
Customer Experience
Operational Process
Business Model
Customer understanding
Process digitization
Digitally-modified businesses
Top-line
Worker enablement
New digital businesses
Customer touchpoints
Performance management
Digital globalization
Implementation examples
Implementation examples
Digital asset life cycle management
Smart building services platform
Single point of access for all asset

information
3D scan opportunity for existing assets
Closed/open platform
Big data analytics for O&M operations
Smart home services platform

beyond energy
Generation assets
Cross services offers

Multi standards
Open platform
District heating
Cross-services offers
Networks
Business platform for smart city &

smart district
IoT & predictive
Open platform
Proprietary...or not
Grid
Multiple services
Up to
From
30%
20%
10%
costs
gains
costs
gains
revenue
gains
Home
Serv
Up to
source: Capgemini Consulting / MIT
Put digital at the heart of the

transformation strategy
Utilities are relying strongly on digital
to accelerate their transformation.
Figure 7.3 shows the MIT-Capgemini
Framework for Digital Transformation,
which analyzes the value that digital
transformation can bring in three
organizational dimensions.
The digitization of customer experience

already started a few years ago: Utilities
are now focusing on digital operations
and new digital business models.
Utilities are relying

strongly on digital to
accelerate
their transformation
73
igital operations
improve the
performance, integrity
and security of assets,
buildings and people
Operations and
maintenance represent
an important part of the
energy production costs,
estimated to 18 to 25%
New technologies offer

innovative opportunities
for industrial installations,
disseminated energy equipment,
and infrastructures
The energy and Utilities sector is and
will remain particularly asset intensive:
Operations and maintenance
represent a significant part of energy
production costs, estimated to be
around 18-25%75;
Investment is expected to exceed
2,000 billion in the coming years,
with more than 10% earmarked for
energy efficiency76.
In addition, energy and utilities assets
are recognized as being unusual in
their complexity, length of lifetime,
and diversity. There are a variety of
equipment types, each with its own
digital requirements:
Industrial centralized assets (Oil &
Gas platforms, nuclear installations,
combined cycle gas turbines
(CCGT)): performance, availability,
maintenance and renewal policies;
Networks and decentralized assets
(transport, distribution): leakage
management, field operations,
maintenance and renewal policies;
Decentralized energy equipment
(RES, energy services): field
operations management, energy
efficiency, service quality.
Energy and Utility companies

understand the potential of
digital in their operations,
triggering considerable
opportunities for infrastructure
owners and service providers
Applying digital to operations enables
new responses to energy companies
challenges. A variety of technology
levers are available:
Smart interfaces(mobility, augmented
and virtual reality, robotics and
drones) can improve operator
interaction with the ecosystem,
increase tool availability and
intervention quality, optimize workload
management, and perform dangerous
tasks more safely and quickly;
Collaboration(remote, extended
enterprise) can offer different ways of
working internally and with external
partners, and facilitate collaboration
in multi-site environments and those
with flying squads;
Process automation/optimization
(IoT, big data & analytics, radiofrequency identification (RFID),
machine to machine (M2M)) can help
to monitor, optimize and simulate
real-time processes and production
performance;
Asset optimization (IoT, big data &
analytics, simulation/modeling, cloud,
artificial intelligence) helps anticipate
failure, predict behavior, and optimize
maintenance and investment plans.
In addition, operational digitalization
promises to create new practices and
transform existing ones in three ways:
Promoting collaborative work,
information sharing, and crossfunctional management;
Reinforcing operational performance
and security;
Leveraging the increasing volume of
data in real time.
The anticipated benefits will contribute
towards:
Ensuring safety levels meet the
highest industry standards;
74
75
IEA estimation World Energy Outlook, 2011
76
IEA estimation World Energy Outlook, 2014
Optimizing CAPEX and reducing OPEX;

Maximizing profitability and asset
value by sustaining high availability,
increasing asset operational lifespan,
and optimizing production;
Enhancing service quality.
After observing digital activity for a
while, the main energy companies have
understood over the past 18-24 months
the value that new technologies can
bring to their operations. They are now
moving fast. Most companies have
launched multiple initiatives, while others
have decided on a deep transformation
of their DNA through digital operations.
French transmission system operator
(TSO) RTE77 has decided to make
digital into a strategic axis for the future,
and to dedicate part of its CAPEX
to digital. It aims to divert 10-20%
of its annual network investment
into digital with the goal of building
the first European smart electricity
network, which would optimize network
operations and maintenance, as well as
service quality for market players.
Oil & Gas majors are also adopting this
approach. In 2015, Total CEO Patrick
Pouyann commented that Digital
technologies can radically change the
way we work on our sites, decreasing
costs and improving our organization
and security.
In 2015, Scottish Water created a
transformation program to drive a step
change in asset performance, moving
towards a more intelligent and proactive
asset maintenance system.
Many examples of digital investment
have emerged and they can be
grouped into four areas:
Remote monitoring, control and
collaboration: Air Liquide launched
its Connect initiative in 2015 with a
remote operations center in Grenoble
to pilot and optimize production,
energy efficiency and reliability, and
77
78
to promote preventive maintenance.

In 2016, Enel invested 1.9 million in
Bucharests electric infrastructure
to introduce network monitoring
and a remote control system. Dalkia
opened its latest Energy Savings
Center an integrated platform for
managing the energy efficiency of
buildings in Toulouse in February
2016, after opening the first one in
2013 and another six in 2014.
Maintenance and renewal policy:
RTE estimates that by using big data
& analytics, cost reductions of nearly
15% can be achieved on that aspect.
E.ON applies analytics to generation,
transmission and weather data to
get a better overview of asset status
and diagnose problems, which
leads to better maintenance and
service strategies.
Scheduling and management
of field operations: GRTGaz
has launched augmented and
virtual reality initiatives to enhance
preparation and execution of complex
interventions and to professionalize
operators. National Grid has
modernized its mobile solutions
for field service engineers and
operators to reduce support costs
and projects, improving management
of time allocation processes by
50%. Chevron has implemented
mobile solutions to standardize work
processes and best practices and
to improve decision support, asset
availability, and event response. Dalkia
deployed Google Apps in 2013 and
Android for work in 2015 to equip
4,500 technicians with smartphones
and hybrid cloud.
Energy efficiency: an Oil & Gas
company used analytics to reduce
OPEX in a refinery by optimizing
steam production, and thus energy
consumption and energy mix, and
is expecting an efficiency gain of
15-25% as a result. RWE uses
analytics to help its B2B customers
better control energy consumption.
Data and connectivity are

two major prerequisites for
industrializing digital operations
To be able to scale up their proofs of
concept and get value from digital
operations, companies need to
integrate digital technologies and
ensure two fundamentals are present:
Improving governance and use
of data to enhance collaboration,
enable standardization and
replication, and merge all data
sources. Digital operations
transformation has turned out to be
all about data. Asset management
relies on all the decisions taken
by the various players within the
company and its partners and
these in turn depend on access to
reliable and comprehensive data.
Initial steps have been taken in terms
of structure and in defining standards
for data models78;
Connecting assets and people:
one major constraint is enabling
connectivity, which can be a
challenge depending on the asset
environment. Connectivity is
necessary to collect data, to ensure
real-time exchange between teams,
and also to use geolocation services.
The move to digital operations
radically changes the daily life
of energy asset operators and
energy services providers
Digitalization of operations offers major
opportunities to transform industrial
strategy, operational practice, and
asset management culture. It is a
move from a hierarchical setting with
a long lead time between gathering
data and returning it for use in the field,
to a collaborative environment based
on sharing information and data more
reliably and in real time, including with
industrial partners.
For some operators, it will enable
the move to new business models
integrating innovative services.
Enerpresse n11612, 2016

This is the case for Oil & Gas with ISO 15926, for electricity networks with standard IEC 61970 / 61968 CIM (Common Information Model), and for building
management with BIM (Building Information Modeling)
75
ew digital business
models create
value focused on
data, decentralized
opportunities,
and flexibility
Figure 7.4 shows that new business

models are found along the whole value
chain and are initiated and implemented
by different types of players (from
incumbent Utilities to niche players).
Although digital enables a wide
spectrum of new business models,
three areas appear to be seeing high
levels of activity. First, companies are
tending to put data at the heart of their
models; second, digital is accelerating
the move to decentralized energy
business models; third, the flexibility of
digital is enabling new perspectives on
grid balancing.
Data collection and analysis are
key aspects of value creation
One of the major challenges for Utilities
is to get closer to their consumers: as
data is becoming the new oil, getting
more consumer insights is a strategic
part of the new data-centric value
chain. Utilities can leverage their retail
activities to collect more data from their
users.
Smart homes can be seen as a data
acquisition layer for getting data
about consumers. Companies from
many industries other than energy
such as telecoms, healthcare and
security are entering this market,
thus increasing competition. There is
not yet a mature smart home business
model, although various offers have
been launched, such as the Homelive
connected home service from Orange,
introduced in October 2014. This
offer follows the standard commercial
model of a monthly premium on the

internet access bill, which buys an
app that manages connected objects
around the home. However, the
European market is still at an early
stage compared to the American
market and the user base is still limited:
Orange said Homelive had only 15,000
users in 201579. An explanation could
lie in the fragmentation of the smart
home market. The idea of getting and
reselling consumer data about energy
consumption is often not a key part of
smart home business models.
Enecos smart thermostat for
consumers, Toon, is an example of a
different approach to smart homes.
Eneco has recognized smart homes
as a way of obtaining consumer
data, and appreciated the analytics
potential. With 225,000 households
equipped at the end of 201580 (one
Toon installed every two minutes),
Eneco now collects exponentially
increasing volumes of data and
analyzes it to better understand its
end-consumers, with the option of
adapting the energy supply accordingly.
Eneco has pivoted its business model,
becoming a data-centric smart services
company, and its decision to develop
an open application programming
interface (API)81 around this product
is a major signal to the market. For
instance, with permission, a startup
could leverage Eneco data to develop
new services in a very agile way. This
initiative shows that Eneco wants to
use state-of-the-art IT architecture,
positioning itself as an orchestrator of
a platform around the Toon product,
and enabling co-creation initiatives to
develop Toons full business potential.
This high-value expertise has already
triggered business opportunities: Eneco
is developing a Platform as a Service
offer and started working with ENGIE
Electrabel in April 2016. When you
decide to collaborate with one of your
competitors, your business model has

really pivoted.
This data-centric model has also been
implemented at industry level by GE
with its Predix solution. This consists
of a cloud-based platform that collects
data from industrial machines and
enables large-scale analytics for asset
performance management. Similarly,
Watson is a technology platform
developed by IBM that uses natural
language processing and machine
learning to reveal insights from large
amounts of unstructured data.
These examples illustrate both the
uberization of energy services and
the way traditional companies are
pivoting towards data-centric offers and
business models.
Digital transformation and
technological enablers
accelerate decentralization
of energy business models
Fast-evolving technologies play a
decisive role in reduction of network
losses, improvement of security of
supply, and mitigation of intermittency.
All of this helps to lower the cost of
distributed generation82, accelerating
the move towards a decentralized
approach to energy.
Two main groups are currently
succeeding with this decentralized
approach: new entrants to the energy
supply market and peer-to-peer
marketplaces. The first category
includes new independent energy
suppliers (e.g. Powershop in Australia
and New Zealand), local authorityowned Utilities (e.g. Robin Hood
Energy in the UK) and communityowned Utilities (e.g. TexelEnergie in the
Netherlands). Powershop is a Utility
retailer offering consumers digital
79
http://www.capital.fr/bourse/actualites/orange-a-vendu-15.000-box-homelive-1043488
80
Eneco 2015 annual report
81
The API could be considered as secured doors for developers to access their data at any time in an automated way, without the need of a human extraction to provide them
82
According to the report Ahead of the pack - solar as the new gateway to the decentralised energy world? by SolarPower Europe, May 2016
76
Network
Upstream
Figure 7.4 New business models framework
Uses
NON-EXHAUSTIVE EXAMPLES
Upstream uses
(exploration,
generation)
Distributed
generation
Flexibility
Downstream
Stationary B2B
Stationary B2C
Mobility
Utilities
Energy Service
Providers
Constructors,
Manufacturers
Oil & Gas

Players
Telco & New

IT
Niche Players
Players
Source: Capgemini Consulting Les Echos, 2016
engagement channels and options to

purchase electricity generated from
renewable sources. Robin Hood Energy
is a non-profit energy supply company
owned by Nottingham City Council,
which provides low-cost energy to
tackle fuel poverty. TexelEnergie aims to
make Texel Island (13,600 inhabitants)
a self-sufficient energy community with
locally generated renewable energy
and microgrids.
The second category consists of
platforms that bypass traditional
retail Utilities by connecting energy
producers and consumers. Notable
examples from different countries
are sonnenCommunity (figure 7.6),
Vandebron and TransActive Grid.
Vandebron, a Dutch startup, offers
83
84
a peer-to-peer platform that enables

consumers to buy electricity directly
from independent producers (see
box 7.3). TransActive Grid is a New
York peer-to-peer platform without
any central coordination enabled by
the blockchain83.
However, the main barrier facing
decentralized energy business models
is scaling up. With more than 500,000
new customers in two years, UK energy
supplier extraenergy is struggling to
cope with demands from a rapidly
growing customer base. Between
January and March 2016, extraenergy
received 1,682 complaints per 100,000
customers (compared with an average
of 277 complaints per 100,000
customers in a quarterly survey of 20
UK energy suppliers)84.
Some traditional
energy companies
are pivoting towards
data-centric
offers and
business
models
Tomorrow, Enedis will

also be a data operator.
Philippe Monloubou (CEO of French
DSO Enedis) stated in 2014
The blockchain is a public ledger for bitcoin (a digital asset and payment system) transactions. It is a
distributed database that grows continuously as new sets of data records are added
The highest proportion of customer complaints recorded over the last five years in the UK, representing
an increase of more than 7% compared to the same period last year (www.citizensadvice.org.uk)
77
Figure 7.5 Perceived value potential for and in Europe of selected innovation areas
45
Over the last decade
40
In the near future

35
% of respondents
30
25
20
15
10
ur
e
ca
en
bo
ar
C
ar
N
M
pt
er
gy
ar
uc
le
ls
in
ea
Bi
tp
of
ue
ps
um
or
e
sh
on
d
in
W
Bu
ild
in
g
ef en
fic e
ie rgy
nc
y
Sm
ar
t
N gri
et d
w s/
or
k
Sm
ar
tm
ob
ilit
y
So
la
rp
ho
to
vo
lta
ic
En
er
gy
st
H ora
yd g
ro e &
ge
n
Sm
ar
t
Di citi
st es
ric /
ts
W
in
d
of
fs
ho
re
De
m
an
d
re
sp
on
se
Flexibility offers new

perspectives for grid balancing
According to a survey on energy
innovation by Capgemini Consulting
in 201685 (Figure 7.5), the innovations
with the highest value potential over
the past decade have been related
to renewables, whereas in the near
future, the highest value solutions are
more systemic ones (such as energy
efficiency, smart homes, energy
storage), requiring or enabling system
flexibility.
In the solutions that will bring flexibility
to the system, two segments are of
particular interest: demand response
and energy storage. The European
85
demand response market is attracting

tech startups, which often see it as a
market with high growth potential due
to growing peak electricity demand
and narrowing capacity margins. In
2015, Tempus Energy (UK) launched
an energy supply offering based on
encouraging customers to move their
energy usage away from peak demand
periods to times when cheap renewable
generation is available86.
New energy storage developments
introduce unprecedented opportunities
for producers, customers, potential
third-party operators, and even DSOs.
However, a major difficulty is finding an
appropriate and viable combination of
services that can be provided through
storage (self-consumption, peak
shaving, black start, etc.). Another

major challenge relates to determining
the most appropriate location and
scale for storage: at Utility-scale,
near production facilities, or behind
the meter? At Utility-scale, PJM87 in
the USA has developed an approach
focusing on the use of energy storage
for ancillary services and frequency
regulation. On the other hand, a post88
by Elon Musk in July 2016 shows
that Teslas strategy focuses on the
behind-the-meter approach individual
solar panels with integrated battery
storage. Since April 2016, E.ON has
followed the same path by offering a
PV-plus-storage solution to residential
customers in Germany (based on
the SOLARWATT MyReserve battery
storage system).
i24c Capgemini Consulting - Scaling up innovation in the energy union to meet new climate, competitiveness and societal goals, 2016
86
Verdantix Innovation and Disruption in the Global Utility Ecosystem, 2016
87
PJM is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia
88
Elon Musk, Master Plan, Part Two, 20th July 2016
78
Utilities Transformation - Business Models Evolution and Transformation
Box 7.3 Focus on energy marketplaces
A new entrant Vandebron

Renewable energy directly from the source,
dispensing with Utilities, is what Vandebron
in the Netherlands is promising potential
customers. The startup, founded in 2013,
neither produces nor transports energy, its
main asset being a marketplace platform. The
basis of the Vandebron proposition is a digital
marketplace where producers and consumers
of renewable energy can buy and sell energy
directly between themselves. Its customer base
is growing steadily and has exceeded 87,000a,
and the company receives a lot of media
attention.
This business model of acting as intermediary
between local producers and consumers
accelerates energy transactions in the Dutch
market. Vandebron has around 80 independent
prosumers, such as farms and companies with
rural space, producing energy from wind, solar
panels, and bio-energy. In the future, it will also
focus on smaller initiatives, such as parents
being able to give energy they produce to their
children. They are solely focused on being a
green energy intermediary.
Vandebrons proposition points out that
traditional (mostly incumbent) Utilities acquiring
energy from abroad use foreign certificates for
green energy, whereas Vandebron connects
the specific local sustainable energy producer
with the green energy consumer. This means
consumers can now choose between increasing
profits for traditional Utilities or investing in local
clean energy producers, the company says.
Vandebron adds no margin to the electricity
bill but charges a flat rate subscription fee. The
average bill for the consumer is said to be lower
because no big Utility companies are involved;
and local producers in the scheme receive
higher prices for their electricity than when
selling to traditional Utilities.
In the Dutch market, customers commonly
switch suppliers annually to benefit from
generous introductory discounts offered by
big Utilities. This means Vandebron might not
always seem the most economical choice, but
overall its electricity price is claimed to be lower,
and it emphasizes consumers contribution to
the social aspects of local, clean energy (the
new green).
a)
An incumbent Vattenfall and its new energy-sharing startup

Powerpeers
With the launch of Vandebron in 2013, the Dutch retail energy market entered
a new phase in energy transition. The success of Vandebron has not gone
unnoticed by the established energy market and in June 2016, Vattenfall
launched a new company with a similar proposition: Powerpeers. As the name
implies, this Vattenfall initiative is an online marketplace for self-generated and
renewable energy, where customers choose who they sell to and who they buy
from.
It is a new name in the Dutch market, next to the existing NUON brand as part of
the Vattenfall group. Powerpeers aims to accelerate energy transition by creating
innovative customer value propositions. It was created as a hybrid startup,
combining the flexibility and independence of a startup with the resources and
expertise of a large firm. Engaging customers and motivating them to make
sustainable choices is an important step in Vattenfalls strategy to become a
climate-neutral company by 2050.
On a physical and operational level, Powerpeers appears no different to
the traditional consumption and supply of energy. However, it claims to be
the first digital, interactive marketplace where supply and demand for selfgenerated energy come together. Powerpeers is responding to a strong global
development: consumers want to be more involved. They want more control over
how their energy is produced, and new ways of interacting. Electricity can be
traded with friends, family or neighbors, or with one or more of the large Dutch
suppliers of wind, solar and hydro energy. In this way, consumers can create
their own community. They can check on the online platform how much energy
can be supplied by different sources. Each traded kWh hour is labeled and can
always be traced.
Martijn Hagens, Senior Vice President Customers & Solutions at Vattenfall

explains this step:
We are adapting our approach to changed

conditions: the new Vattenfall stands for
sustainable production and energy solutions,
with the customer as central point of focus. In
2050 we will have a climate-neutral organization.
For now, Powerpeers helps both our customers
and our company to become more sustainable.
Lars Falch, initiator of Powerpeers, underlines this point:
We have developed a new type of energy

that is in line with the trend to live sustainably
and fits todays connected society. Because
Powerpeers is a startup, the company is very
flexible. Together with our customers, we can
keep developing.
As of September 2016, https://vandebron.nl/
79
o implement these
levers, Utilities
are reorganizing
themselves and the
way they collaborate
Companies need new

capabilities (such as
data analytics, data
management and
cybersecurity) and
new roles within their
organizations.
The current business context,

centered on data and energy
transition, is creating a need
for new competencies in
energy and Utility companies,
which responding by
implementing new roles
Businesses are becoming
data-centric
A major issue is the ability to exploit
all the data that companies produce
to help decision-making, optimize
maintenance, reduce costs and
losses, improve customer knowledge,
personalize offers and interactions.
There may even be opportunities to
monetize the data itself. With the help
of analytics, Endesa reduced churn by
50% in two years89. Adapting to this
new data-centric paradigm involves
three major challenges:
Data management: manage data
quality and security. This challenge
is becoming more important with
constant growth in the volume of
data being handled: in the Utilities
sector alone, around 700 million
smart meters are expected to have
been deployed worldwide by 201790,
generating more than 280 billion MB
of data a year;
Data accessibility: enable access
at all times to accurate data, and
efficiently connect the devices and
sensors using and generating data.
For Utilities regulated activities, the
company must also often guarantee
a degree of open data and share
some data and analysis with citizens
(e.g. French TSO RTE publicly shares
a wide range of data relating to
electricity, via its online site CO2mix);
To meet these challenges, companies

need new capabilities (such as data
analytics, data management and
cybersecurity) and new roles within
their organizations. In 2015, Chief
Digital Officer positions were widely
created, at Enedis, Enel Green Power,
Enel, GE, Total (which also created
a new role of Chief Data Officer),
ENGIE and elsewhere. In general,
Gartner estimates that 90% of large
organizations will have a Chief Data
Officer by 201991. All these posts
are supported by data scientists,
who ensure data security and create
mathematical models translating
operational issues into actionable
solutions.
The energy-transition-centric
context and economic situation is
forcing companies to diversify their
activities
For example, E.ON has come up
with Aura, an all-in-one system
for the solar market. In 2012, Suez
Environment launched Ocea Smart
Building, dedicating an entire business
unit to energy efficiency. In 2016, Total
showed its eagerness to grow in the
power and energy efficiency markets
by creating a role along the lines of
chief officer for energy transition to
head up its gas, renewables and power
segments.
89
https://www.fr.capgemini-consulting.com/blog/quel-role-pour-le-chief-data-officer
90
https://www.capgemini-consulting.com/resource-file-access/resource/pdf/bigdata_blackout.pdf
91 http://www.gartner.com/newsroom/id/3190117
80
Data interoperability and

exploitability: ensure data is able
to be analyzed, reused, exchanged,
combined and aggregated. The aim
is to indirectly create value for the
company (throug h better informed
decisions, etc.) or even to directly
monetize the data.
Integrating these new

competencies and
activities is prompting
organizational change
Adapt the company structure to the
market by creating new branches
dedicated to energy transition
In 2016, Shell created its New Energies
division to invest in renewables and
low-carbon power. Also in 2016, Total
reorganized itself to create a whole new
branch for gas, renewables and power.
In Germany, radical steps have
been taken by E.ON and RWE.
Sluggish market conditions and the
Energiewende led to the decision
to fundamentally restructure their
organizations. Both energy giants
have separated their fossil fuel assets
from their renewable assets, energy
networks, and downstream activities.
E.ONs strategy is concentrated around
customer-centricity, sustainability,
distributed energy, and clean
technologies. Capital92 will be allocated
to significantly grow wind and solar,
smart infrastructure, and new customer
solutions. In June 2016, RWE launched
its new subsidiary innogy to take
over its renewable power generation,
distribution and retail businesses.
Adapt the organization to take into
account the power of data
The appearance of new roles such
as Chief Data Officer (CDO) requires
companies to decide the roles
position in the companys organization.
This decision can have multiple
consequences for the CDOs level
of responsibility and ability to meet
the companys objectives. Three
main models are seen across all
sectors. First, CDOs focusing on data
management are often positioned
in a horizontal function, for example
reporting to a risk officer. A second
group of CDOs are positioned in
92
93
a business unit and focus on the

value created for that particular unit
using big data. Third, in the most
data-centric organizations, such as
ENGIE, the CDO is part of corporate
management and reports directly to the
CEO. This last model gives the CDO
opportunities for robust company-wide
data management, for creating value
from big data, and for defining and
implementing a horizontal data strategy.
Energy and Utility companies
are also adapting their
partnership and acquisition
strategies to become more
competitive, increase speed and
agility, and drive innovation
Adapt to the new market by
creating new ecosystems
Non-traditional players have been
entering the energy market for some
time now, transforming the competitive
arena. These new entrants include
telcos, technology and equipment
suppliers, as well as construction
firms, pure energy services companies
(ESCOs), and internet startups. They
have taken up positions all along
the value chain: in generation (e.g.
Energiequelle, Valorem), in networks
and storage (e.g. C3 Energy, Saft,
McPhy Energy), in sales, marketing and
services (e.g. Bouygues, GreenYellow,
Vandebron), in equipment installation
(Eiffage, Ocea Smart Building), in
energy management (e.g. Nest,
Opower, Qivicon, Tado, Netatmo), as
aggregators or virtual power plants
(Flexitricity, Energy Pool, Hydronext),
and so on. Traditional players have
realized that they urgently need to
create new partnerships in order to
remain competitive.
Gartner
estimates that
90%
of large organizations
will have
a Chief Data Officer
by 2019
In the future, well be

competing in a whole
different arena, in which
technology firms will play
a greater role. Thats the
playground we have to
prepare for.
Thomas Birr, Head of Strategy at
RWE93
Some partnerships have been

established with major players outside
the energy sector, such as Orange
(partnered in Africa with ENGIE,
and with Veolia for M2oCity), IBM
E.ON set out a 2016 investment plan worth EUR 4.5 billion, of which EUR 1.5 billion (34%) will be
dedicated to renewables, with the main focus on offshore wind in Europe and onshore wind in the US
(Rise of 36% as in 2015 EUR 1.1 billion was dedicated to renewables) (Source: E.On Annual report 2015)
Source: According to Reuters http://www.reuters.com/article/utilities-tech-idUSL8N0Z92IE20150625
81
Figure 7.6 Cross-sector collaboration by Sonnen GmbH 94

German
Federal
Ministry for
Economic
Affairs &
Energy
Venture
capitalist
firms
Least
important
Sonnen GmbH
(initiator)
Software
developers
Most
important
Players
Users
Interactions
LichtBlick
(Utility)
or Samsung (partnered with E.ON

to launch a storage solution in the
industrial and network sector).
To stimulate innovation
and develop new
products or solutions,
many companies have
sought new initiatives
with startups
Other partnerships are leading to

the creation of complex ecosystems:
with software developers, venture
capitalists, governments, customers
and so on. For example, in July 2016,
Gas Natural Fenosa signed up to be a
global partner in the Barcelona Tech
City technology cluster, pooling various
capabilities in a single hub. Another
approach is shown in figure 7.6:
Sonnen95 GmbH has built a partnership
around its sonnenCommunity, a virtual
power plant that connects a community
of distributed generators and energy
storage users. Collaboration with
software developers, domestic users,
and an energy company was provided
new skills and technologies that
enabled Sonnen to build the platform,
enroll the community, and learn how to
effectively manage an electricity grid.
Partner with startups to become

more innovative
To stimulate innovation and develop
new products or solutions, many
companies have sought new initiatives
with startups.
Some have implemented startup
incubators or programs to stimulate
innovation. In July 2016, Enel, together
with SOSA and The Junction, two
Israeli initiatives, set up an innovation
hub in Tel Aviv to promote 20 local
startups a year. Enels Spanish
subsidiary Endesa launched an
open innovation platform, Endesa
Energy Challenges, in October
2015. Its initiatives so far include
a Datathon (which challenged the
global community of big data experts
to transform the future of energy in
Spain), a Hackathon (which challenged
young talent from various fields to
design innovative mobile solutions
to help customers optimize energy
i24c Capgemini Consulting - Scaling up innovation in the energy union to meet new climate,
94
i24c Capgemini Consulting - Scaling up innovation in the energy union to meet new climate,
95
82
consumption) and currently a Power

for Entrepreneurs challenge (which is
looking for innovative projects related
to Endesa needs which allow them
to offer new products and services,
improve customer relationship or
business development). Similarly,
the Iberdrola Energy Challenge was
launched in 2016 with the help of KIC
InnoEnergy to create new responses to
Europes energy situation.
In December 2015, Total launched
Plant 4.0, a digital incubator for
industrial activities. Total and EDF
also launched startup factories: these
focus on empowering external facilities
and services to invent a future for
the company, bypassing the classic
barriers to internal innovation.
ENGIE integrated its five first startups
in March 2015 into its OpenInnov, a
platform for collaborative innovation,
and launched a new model of its ENGIE
Innovation Week (150 events in 27
countries).
Some Utilities (like Eneco) are trying
new Innovation as a Service offers
proposed by service providers. For
players who know where innovation
is needed, such offers provide a
holistic view of the solutions, providers,
ecosystems, new models, and
disruptions that are able to meet a
Utilitys expectations. This service
has many valuable features: it can
be global, tangible (ready to test
within a few weeks), and easy to
scale up, and offers a wide range of
collaboration possibilities with startups
and ecosystems.
new markets or reinforce their position

and increase their expertise.
Many have invested in startups directly
or through separate venture capital
or funding arms. For instance, EnBW
founded EnBW New Ventures GmbH
in 2015 to invest in external startups
such as DZ-4 (15%, 2015) Lumenaza
(2016). Viesgo, in Spain, signed a
deal in June 2016 with Ezzing Solar
(international software developer) to
develop a new technology for solar
energy and auto consumption. In May
2015, Enel entered the Startup Europe
Partnership, a pan-European platform
created to support the continents
top startups. In March 2016, ENGIE
New Ventures, the corporate venture
fund of ENGIE, invested $2 million in
StreetLight Data. ENGIE grew in the
solar sector in 2015 with the acquisition
of 95% of Solairedirect; ENGIE also
increased its presence in the storage
sector by acquiring Green Charge
Networks (80%) in 2016. In December
2015, E.ON invested in Greensmith
(provider of energy storage software
and integration services). Total
entered the storage market with the
acquisition of Saft (90% for $1 billion)
and the Belgian gas and electricity retail
markets with the acquisition of Lampiris
(100% for 180 million). Total Energy
Ventures also became an equity partner
of United Wind in July 2016.
Many have
invested
in startups directly
or through separate
venture capital or
funding arms
Develop new acquisition strategies

to diversify activities and gain new
competencies towards energy
transition
As well as adapting their own
organizations to the changing
market, energy pure players are
buying companies, products and
competencies in new sectors to enter
83
ENGIE expects
a growth rate of at least
10% in Africa
Bruno Bensasson, chief executive
officer of ENGIEs Africa business unit,
June 2016
re Utilities innovating
and transforming fast
enough? Market barriers
are holding them back.
Generally, transformation is relatively
slow, and Utilities (included in Large
Companies in figure 7.7) are not
perceived as particularly innovative.
Utilities are confronted with a number
of barriers to making real progress
in adopting new earnings models
and capturing value from innovation.
Figure 7.7 Perceived contribution of stakeholders in large-scale energy innovation
How would you assess the contribution of each stakeholder in having helped drive
and achieve large-scale energy innovation up until today ?
71%*
68%
63%
57%
56%
54%
47%
42%
Startups
& SMEs
Research
National
Governments
Public &
Private
Financers
Large
Companies
European
Union
Authorities
Mid caps
38%
Regulators Universities
28%
Local
Public
Authorities
Possible answers: Major contribution, Significant contribution, Average contribution, Low contribution, No contribution, No opinion
(Ranking is only based on major and significant contribution)
* 71% of respondents estimated that the startups & SMEs contributions have helped to drive and achieve large-scale energy innovation up until today
84
Figure 7.8 Main barriers to energy innovation in Europe
Innovation cycle
Research
Development
Demonstration
Barriers to upstream innovation
High capital costs

and financial risks
No clear
long-term vision
Deployment
Maturity
Barriers to downstream innovation
26
Regulatory barriers
for market access
31
30
25
Insufficient public funding
21
22
Inefficient collaboration with

other types of stakeholders
16
19
Inconsistencies between regulations
17
Regulatory barriers to access markets
16
Risk-averse culture
14
High capital costs

and financial risks
Market uncertainties
Difficulties in understanding and addressing clients'needs
14
Lack of market pull instruments
14
Inconsistencies between regulations
14
Insufficient public funding
Note: In terms of number of answers, based on 73 participants. Multiple choices were possible.
In Capgemini Consultings 2016

survey (figure 7.8), respondents
within the energy sector indicated
that, throughout the innovation
cycle, regulation and financial
considerations are major barriers to
success. In addition, clear corporate
guidance is missing, as well as a good
understanding of clients needs. And
even though the Utilities sector has
become interested in collaboration
with partners and startups to unlock
new value streams, inefficiency in new
types of engagements is also seen as
a barrier.
To succeed, Utilities will need to rethink
their governance structure around
innovation to stimulate entrepreneurship
and enhance market responsiveness.
85
Utilities Financials
Finance and Valuation

Falling wholesale prices pushed
companies towards markets
with greater stability or the
potential for increased margins
In 2015, European electricity and gas
consumptions increased slightly but
wholesale prices tended to decline
compared with 2014.
The situation worsened

in H1 2016 compared to
H1 2015: electricity and
gas wholesale prices
dropped by 21.9% and
38% respectively
Investments are at a low and

divestments in the sector in 2015
and Q1 2016 have provided some
much needed positive cash flow. But
the EBITDA margins remain on their
downward trend and for the group of
Figure 8.1 EBITDA margins (2010; 2014; 2015)

50%
45%
CAGR
Compound Annual
Growth Rate 2010-2015
EBITDA margins in %
40%
35%
Fortum: -2.1%
30%
CEZ: -7.1%
DONG Energy: +2.7%
25%
EDP: -0.2%
Iberdrola: -1.4%
EDF: +1.6%
Enel: -3.1%
Gas Natural Fenosa:
-2.9%
ENGIE: -2.0%
RWE: -5.6%
20%
15%
10%
EnBW: -13.7%
E.ON: -14.7%
5%
0
2010
2014
2015
companies we studied for this report,

the consolidated net losses amounted
to 1,977M96.
The total reported net debt of the same
companies shows a slight relief in 2015,
but the context is still putting pressure
on debt levels.
Companies reacted by increasing their
focus on business areas or models that
are expected to provide either stability
or potential for increased margins.
These include the regulated market
assets, renewable generation capacity,
and digital energy efficiency solutions
(see Innovation & Transformation).
The EBITDA margin
continued to fall
In our sample group, the weighted
EBITDA margin maintained the
downward trend that started in 2009,
falling from 17.1% in 2014 to 16.7% in
2015, but with noticeable differences
in the margin values (from 6-35%)
between the players.
The clustering of margin levels
observed last year has gradually
reduced; performance is now more
evenly distributed.
Source: Companies annual reports Capgemini analysis EEMO18
96
86
Sum of net profits or losses attributable to CEZ,DONG Energy, EDF,EDP, EnBW, Enel, E.ON,ENGIE,
Fortum, Gas Natural Fenosa, Iberdrola, RWE, Vattenfall
Utilities Transformation - Finance and Valuation
At the opposite of the spectrum, E.ON

and EnBW, already at a low level last year,
continued to fall behind. At the beginning
of 2016, E.ON reacted by spinning off its
conventional power assets and energy
trading into a separate company, Uniper.
E.ON now focuses on renewables,
energy networks, and customer
solutions. Likewise, RWE divided its
conventional and renewable activities into
two separate entities on April 1, 2016.
Considering the continuous fall in the
average EBITDA margin for European
Utilities since 2009, and the recent
history of wholesale electricity prices,
it is difficult to tell whether companies
have reached their lowest point or
whether the trend will continue.
Revenues did stabilize in 2015 (+0.3%
for 2015 vs. 2014, compared with
-7% for 2014 vs. 2013 in our sample,
excluding DONG Energy and EnBW),
but more asset divestment is in
progress, as well as some ongoing
retargeting of business models, and the
outcomes of these strategies are hard
97
Figure 8.2 Generation margins (2010-2015)

60%
CAGR
Compound Annual
Growth Rate 2010-2015,
except
EnBW for 2011-2015
50%
Generation margins in %
A few years ago, CEZ and Fortum held

dominant positions in their respective
markets, due to their share of local
markets as incumbent players. However,
their margins have been affected by
wholesale electricity prices, and they
now tend to sit with the best performing
companies in the rest of the group.
DONG Energy and EDP have filled the
gap thanks to their marked upward
trend. DONG Energy has benefited from
divestments of oil and gas licenses,
offshore wind farms, and other oneoffs. EDP is in a unique position as it
managed to increase its EBITDA margin
while seeing its revenue and net income
decrease. This is largely due to the
addition of 600 MW of new renewables
capacity and good results in Brazil. The
result was also influenced by positive
one-off events, such as the purchase of
Pecm I in Brazil at a discounted price,
the sale of non-strategic gas assets in
Spain, and the incorporation of ENEOP
into EDPR in Portugal.
40%
Fortum -2.8%
30%
CEZ -8.6%
DONG Energy -1.6%
EDF 1.5%
RWE -12.5%
20%
E.ON -5.9%
EnBW -16.2%
-6.5%
Gas Natural Fenosa
Iberdrola -3.6%
EDP -9.6%
10%
Enel -24.1%
0
2010
2011
2012
2013
2014
2015
Sample includes electricity generation business units, in some cases only for the historical geographic area of a given group.
One-offs are excluded using adjusted EBITDA.
to predict. It is interesting to note that

difficulties encountered by European
players are not shared with their peers
in North America or Asia, which have
been performing better globally, tending
to improve their performance in recent
years (e.g. investor-owned electric
Utilities in the USA97, or CLP and
Tenaga Nasional in Asia).
Overcapacity and development
of markets and interconnections
have dented the level of
generation margins
The evolution of E.ON and EDF illustrates
this point. Some of the operational
efficiency efforts made by these two
companies in recent years, which had
started to pay off, have been offset,
halting the increase in their EBITDA
margin. E.ON was only just able to
stabilize its generation margin, despite
the favorable circumstances with falling
natural gas prices and a recovering
clean spark spread in Germany (38% of
E.ONs generation capacity comes from
natural gas).
German companies
face an ambitious
and rigorous energy
transition plan (the
Energiewende) with
the goal of
renewables
representing
80%
of Germanys energy
mix by 2050
Other German companies, such as

RWE and EnBW, have been affected
even more: their generation capacity
from lignite and hard coal, of 58% and
42% respectively, leaves them very
Edison Electric Institute 2015 Financial review
87
Figure 8.3 Reported net debt and leverage ratio

Reported
leverage
2015 (x)
Reported
leverage
2014 (x)
-1.7x
0.5x
2.0x
2.1x
2.5x
2.5x
3.0x
3.8x
4.4x
Reported
leverage
2015 (x)
2.3x
0.2x
2.0x
2.0x
2.3x
2.4x
3.5x
3.7x
4.7x
Reported
leverage
2014 (x)
in M except when
noted; at 31/12/2015
Reported
net debt
Fortum
DONG Energy (in MDKK (Ma))
CEZ (in MCZK (Ma))
EDF
ENGIE
Enel
Gas Natural / Fenosa
Iberdrola
EDP
-2,195
9,193 (1,232)
131,225 (4,857)
37,395
27,727
37,545
15,648
28,067
17,380
Reported
economic
net debt
1,265
18,484 (2,478)
65,104 (2,409)
17,601
11,262
15,297
5,264
7,306
3,924
25,126
27,714
137,585 (15,375)
7,017
7,557
32,754 (3,660)
3.6x
3.7x
4.2x
3.8x
4.0x
3.9x
8,601
1,918
4.5x
4.6x
in M except when
noted; at 31/12/2015
RWE
E.ON
Vattenfall (in MSEK (Ma))
EnBW
EBITDA
EBITDA
a) All exchange rates at December 31, 2015

Note: Data is split into two tables because E.ON, RWE, Vattenfall and EnBW report economic net debt, that is to say including
provisions tied to future nuclear and payroll costs. As other companies do not use the same definition, a direct comparison across
groups would be difficult.
sensitive to rising carbon allowance

prices (from 6.5-8.0 in 2015)98 and a
falling clean dark spread in Germany.
Major utilities continue

to divest parts of their
conventional generation
businesses and to sell
their grids in order to
improve their debt ratios
and capacity to invest
Enel, already at a low level, dropped

again in 2015. The group was hit
by falling wholesale prices and by
unfavorable water conditions for its
hydropower plants, which represent
23% of its energy generation, as well
as impacted by some necessary
provisions and disposals.
Net debt for our sample fell
from 260 billion to 244
billion despite the long-term
trend towards increased
debt (tight margins, limited
impact of divestments, higher
future nuclear costs)
Globally, companies succeeded in
reducing their net debt as well as their
leverage ratio (net debt/EBITDA) in 2015
compared to 2014.
EDFs EBITDA margin remained stable
while its net debt increased (by 3 billion,
i.e. 9% in one year): liabilitites soared (an
increase of 8.5 billion) without being
offset by the 5.1 billion in available-forsale financial/liquid assets.
98
88
Fortumsnet debt to EBITDA ratio was

-1.7x as the company was net cash
positive by more than 2.2 billion.
Net debt decreased by approximately
6.4 billion during 2015, mainly as a
result of divestment from its distribution
businesses in Sweden, Finland and
Norway.
Gas Natural Fenosa owes its better
leverage (3x in 2015 from 3.5x in 2014)
to a sharp decrease in investments,
from 2.6 billion in 2014 to 0.3 billion
in 2015. Borrowings decreased by
8% (1.3 billion) in 2015 while EBITDA
increased by 0.4 billion.
E.ONs net debt fell by 17% (5.7 billion)
in 2015 with a smaller EBITDA drop of
10%. Decrease in net debt is mainly
due to divestments: exploration and
production (E&P) in the Norwegian North
Sea and the UK, operations in Spain,
generation in Italy, and the remaining
stake in E.ON Energy from Waste (EEW).
But this debt relief needs to be seen
alongside a more structural, longer-term
trend towards debt due to low margins,
limited impact of asset divestments,
sometimes settled at a low price point,
and higher future nuclear costs.
Decommissioning and back-end
nuclear cycle provisions are already
affecting the balance sheet. For
example, EDFs provisions amounted
to about 47 billion at the end of 2015,
and E.ON has provisioned 8.1 billion
for retirement and decommissioning of
nuclear activities.
In addition, companies repeatedly rely
on financial instruments that defer the
effective maturity of their debt (e.g. to
record a debt at grid connection date
for a new generation asset). This partly
explains the different treatments used
to report net debt. Because of this,
the focus here has been on companyspecific observations rather than
direct comparisons.
European Energy Exchange AG, https://www.eex.com/en/market-data/environmental-markets/spot-market/
ivestments and
impairments
took a 74.2% share in the natural gas

wholesaler VNG in 2016. At the same
time, EnBW sold part of its share in
EWE (from 26% to 6%), an energy and
telecommunications company focusing
more on renewables and smart
systems. EnBW was apparently seeking
a more fruitful collaboration in the field
of energy transition, which is also part
of its strategy. It had already tried
unsuccessfully to acquire the wind
company PROKON in 2015.
Divestments
Major Utilities continue to divest
parts of their conventional
generation businesses
Generally, companies are no longer
investing in fossil fuel and nuclear
assets, turning instead to renewables.
E.ON abandoned its share in E.ON
Exploration & Production Norge AS
in December 2015; the sale of RWE
Dea (oil and gas) was completed in
March 2015; Vattenfall sold its lignite
mining and power generation assets in
Germany in 2016; and DONG Energys
oil-pipeline activities are expected to be
sold before the end of 2016. In addition,
RWE and E.ON are both still trying
to sell their stake in Urenco (a British
uranium enrichment company).
German companies
whose energy
production relies mainly
on nuclear (E.ON)
or fossil fuels (RWE,
EnBW), have raised
their provisions in order
to cover costs relating
to the back-end of the
nuclear cycle as well as
impaired some of their
fossil fuel generation
assets
Impairments
Impairments were numerous and
related to all types of generation
assets: conventional, nuclear and
renewables
Most companies in the sample group
suffered impairments during the last
year, often of several billion euros.
This was the case for ENGIE, whose
impairments reached 8.7 billion,
mainly in relation to Global Gas &
As for EnBW, it chose to mainly

refocus its investments towards the
gas business: after the acquisition
of terranets bw and GVS in 2014, it
Figure 8.4 Dividend per share in (2006-2015)
4.0
3.5
2011
2012
2013
2014
2015
3.0
Dividend per share in
2010
2010-2015 Evolution
2.5
-100%
2.0
-24%
1.5
-33%
-67%
-4%
+10%
-64%
+25%
1.0
0.5
+12%
-15%
-43%
En
BW
RW
E
Ib
er
dr
ol
a
G
as
N
Fe atu
no ra
sa l
Fo
rtu
m
EN
G
IE
En
el
ED
P
ED
F
E.
O
N
C
EZ
0.0
89
Figure 8.5 Dividends per share base 100 (2008-2015)
Dividend per share, base 100 in 2008, non-adjusted
160
140
EDP
SSE
120
Fortum
100
Centrica
Iberdrola
CEZ
EDF
Gas Natural Fenosa
80
60
ENGIE
Enel
E.ON
EnBW
40
20
RWE
DONG Energy
0
2008
2009
2010
2011
2012
2013
2014
LNG, Energy International, and Energy

Europe business lines.
It is interesting to note that although
impairments are mainly linked to
conventional sources of energy
generation, such as gas combinedcycle plants (E.ON, RWE, ENGIE) and
coal-fired power plants (EDF, RWE,
Fortum), it can also be the case, though
to a much lesser extent, for nuclear
assets (Fortum) and renewables such
as wind installations (RWE, EDF) or
hydro generation assets. This can be
due to the drop in wholesale electricity
prices in specific markets or in
particular political contexts (RWE wind
projects in the UK).
Dividends per share reflect the
difficulties of the major Utilities
Apart from a few exceptions (CEZ,
SSE, EDP), the general trend has
been downwards since 2008. This is
especially true since the 2009 crisis,
when the companies with substantial
assets in fossil fuel and nuclear power
generation have started to lower their
90
By contrast, players more involved in

renewables or natural gas, like SSE,
seem to have performed better. Their
dividend per share has risen and
remains above 2008 levels.
2015
Impairments volume
remains high for all kind
of generation assets:
conventional, nuclear but
also renewables
dividends. RWE, EnBW, E.ON, Enel

and ENGIE have cut half or more of
their dividend per share compared to
2008; EnBW had to cut them again in
2015, and RWE suspended its dividend
altogether. EDF also had to lower its
dividend per share in 2015, to 1.10
compared with 1.25 in 2015 and 1.41
in 2008.
The trend is likely to continue as long

as uncertainty remains in the Utilities
industry. EDF shareholders welcomed
the option of payment in new shares
(decided at the annual general meeting
on May 12, 2016). RWEs renewables
subsidiary, innogy, is planning its initial
public offering (IPO) by the end of 2016.
It is not yet clear how dividends will be
affected. In a very different position,
following its IPO in June, DONG Energy
will pay a total of DKK 2.5 billion
(335.8million) in dividends for the
year 2016.
Stock prices for almost all

Utilities fell in 2016 (-14.3%
on average versus 2015) but
there were marked disparities
both among them and
compared to EURO STOXX 50
Looking at the 2016/2015 share prices,
it is clear that no company is in positive
territory, except SSE. All the others
are having to deal with decreases
of between 0.7-43.8%, EDF being
the most affected by this trend. It is
particularly concerning to note that
some relatively secure stocks (Enel)
and high performers (EDP, Iberdrola,
Gas Natural Fenosa) during the 20102015 period were badly hit in 2015-2016.
As for SSE, its 2016/2015 share price
evolution, though positive, remains very
low, especially compared to the 20102015 trend.
A study of the 25 main European
energy companies99 found that market
capitalization of these companies
reached 264 billion in May 2016,
79billion less than in June 2015 (-23%).
Considering long-term changes (20102016), it is the big companies EDF,
RWE, E.ON and EnBW that have been
hit hardest.
However, compared with the EURO
STOXX 50 variation (which itself lost
18%), the changes in relative share
are more marked. Three groups can
be distinguished: EDF and RWE show
the worst relative performance (about
-10 percentage points or more in 2016
compared to 2015), whereas Fortum,
Enel, Iberdrola and SSE appear to
perform better than the EURO STOXX
50 (by 10 percentage points or more),
and the other companies closely follow
the EURO STOXX trend.
In the case of EDF, the decrease in
stock over the last year reflects the
markets response to uncertainty. EDF
has had to deal with major investments
99
Figure 8.6 Stock performances

Company
Share price
year-to-year
ratio
(2016/2015)
Share price
2016/2010 ratio
Share price/
EURO STOXX 50
ratio
(2016/2015)
Share price/
EURO STOXX 50
ratio
(2016/2010)
EDF
-43.8%
-63.7%
-31.8%
-68.2%
RWE
-25.5%
-72.9%
-9.7%
-76.3%
EDP
-18.7%
14.4%
-1.4%
0.0%
EnBW
-18.2%
-45.4%
-0.8%
-52.3%
EURO STOXX 50
-17.5%
14.5%
0.0%
0.0%
E.ON
-16.9%
-58.5%
0.8%
-63.8%
ENGIE (ex GDF-Suez)
-13.8%
-36.8%
4.5%
-44.7%
Centrica
-13.2%
-21.8%
5.3%
-31.7%
Gas Natural Fenosa
-10.3%
54.1%
8.8%
34.6%
Fortum
-9.0%
-18.7%
10.4%
-29.0%
Enel
-4.1%
15.7%
16.3%
1.1%
Iberdrola
-0.7%
34.6%
20.5%
17.6%
2.1%
39.2%
23.8%
21.6%
SSE
Note: Share prices on July 1st, 2010 ; July 1st, 2015 ; July 1st, 2016
Sources: Boursorama - Reuters
in France and abroad (including nuclear

plants maintenance and lifetime
extensions, increased building costs
on the Flamanville EPR project, and
issues regarding Hinkley Point C in the
UK) and to increase its provisions to
meet upward reevaluations of project
costs (such as decommissioning of
reactors and increased costs at the
Cigeo nuclear waste storage project).
This led to the removal of EDF from the
French stock market index CAC 40 in
December 2015.
Market capitalization
of the 25 main
European energy
companies lost
23%
between June 2015

and May 2016
By contrast, Enels relatively good

performance in the market can be
attributed to its strategic move towards
development of renewable energy
sources over the past year. Of the
2,063 MW of generation capacity
commissioned by the group in 2015,
94% is powered by renewables.
Enel has also started the process of
reintegrating Enel Green Power after
having sold part of it in 2010.
Baromtre financier des nergticiens europens, Watts Next Conseil, June 2016
91
Figure 8.7 Standard&Poors credit ratings

Company
EDF
31/12/2010
31/12/2011
31/12/2012
31/12/2013
31/12/2014
31/12/2015
18/07/2016
A+
AA-
A+
A+
A+
A+
ENGIE (ex GDF-Suez)
A-
CEZ
A-
A-
A-
A-
A-
A-
A-
EnBW
A-
A-
A-
A-
A-
A-
A-
Fortum
A-
A-
A-
BBB+
BBB+
E.ON
A-
A-
A-
BBB+
BBB+
Vattenfall
A-
A-
A-
A-
BBB+
BBB+
DONG Energy
A-
A-
BBB+
BBB+
BBB+
BBB+
BBB+
Enel
A-
A-
BBB+
BBB
BBB
BBB
BBB+
Iberdrola
A-
A-
BBB
BBB
BBB
BBB
BBB+
BBB
BBB
BBB
BBB
BBB
BBB
BBB
RWE
Gas Natural Fenosa
A-
BBB+
BBB+
BBB+
BBB
BBB-
EDP
A-
BBB
BB+
BB+
BB+
BB+
BB+
Trend
2016/2015
Source: Companies annual reports S&P Global Ratings - Capgemini analysis EEMO18
The overall trend in S&P

ratings over the last six years
is downwards to varying
degrees (figure 8.7)
After relative stability during 2012-2014,
some ratings fell again in 2015 and
2016. A notable change in 2016 has
been Iberdrola and Enel having their
ratings upgraded.
Iberdrola, having lost two points in
2012, has been catching up and
reached BBB+ grade with a stable
outlook. This reflects the improved
business risk profile of the company,
thanks to increased contributions from
regulated or long-term contracted
activities in the UK and the USA, and
tighter financial discipline in terms of
ongoing debt reduction, improved
credit metrics, and cash flow stability
thanks to renewables (especially hydro).
The Italian company Enel secured
agency confidence by showing good
resilience to adverse economic and
regulatory challenges in its two main
mature markets, Italy and Spain. In
addition, concentrating its investment
plan on regulated and quasi-regulated
92
businesses is providing clarity on

future earnings growth. An effective
deleveraging strategy and strategic
refocusing also contributed to Enel
being viewed in a positive light.
On the other hand, three of the biggest
companies were further downgraded
in 2016: Frances EDF and ENGIE and
Germanys RWE. In the case of EDF,
exposure to volatile energy prices
and an increasing revenue share from
unregulated activities (January 1, 2016
saw the end of regulated retail prices
for electricity contracts >36 kVA and
for gas contracts >30,000 MWh),
combined with strong investment
requirements for maintenance and
nuclear new build, were the main
triggers for this negative reevaluation.
Despite this, the announcement of
capital increases, asset disposals, and
cost-cutting measures has created
an encouraging outlook regarding the
reduction of EDFs debt over the next
years. This contributes to the fact that
EDF remains the best rated of the
companies reviewed.
ENGIE also lost a notch, despite

positive aspects such as regulated
network activities in France, an
increasing share of regulated or longterm contracted operations, a highly
diverse generation mix, and relatively
new assets. However, exposure to
oversupplied European energy markets
meant ENGIE was negatively affected
by falling European energy prices. This
is likely to slow its earnings growth in
2016, with the trend becoming more
pronounced in 2017 and 2018. Cash
flow generation and credit metrics
could remain depressed over the
next two to three years despite the
companys portfolio rotation plan.
Changes in the business model may be
needed to overcome this situation.
As for RWE, dropping one more notch
this year is the consequence of two
main factors: first, the recommendation
by the German nuclear commission
that German Utilities contribute to the
funding of nuclear waste provisions
(about 6.5 billion for RWE); second,
the targeted IPO of RWEs downstream
business, which is likely to deprive the
group from some of its stable, future
cash flows.
Appendix Figures
Figure A.1 Peak load, generation capacity and electricity mix (2015)
200,000
-0.5%
180,000
Total installed capacity in Europe

+0.3%
160,000
1,001,179
MW
997,275
MW
Total generation capacity and peak load [MW]
140,000
0.3%
2014
-0.6%
2015
120,000
MW
2015
-0.7%
Total
11.0%
100,000
-2.3%
6.3%
80,000
15.6%
1,001,179
998,656
0.3%
424,631
451,018
-5.9%
Low carbon capacity
572,716
522,154
9.7%
Peak load
547,058
527,846
3.6%
Fossil fueled capacity

Low carbon capacity
60,000
4.3%
%
Change
Fossil fuel capacity
5.7%
Peak load 2015

2015/2014 change (notified if below or above +/-3%: +3.4%)
1.0%
4.7%
-5.9%
40,000
MW
2014
2.4%
-2.7%
-5.0%
-1.9%
20,000
0.4% 5.9%
-3.4% 1.1%
-3.8%
-0.3%
3.6% -0.1%
-0.7%
-0.6% -7.4% -6.0%
0.1% -0.8% -0.4%
31.5% 3.9% -5.4%
2.8% 0.2% -5.7%
7.9% -2.6% -0.1%
-0.5%
2.0% 0.6% 1.7% 0.6%2.5% 6.5% 10.1% -29.3% 9.9% 0.7%
-0.8% -6.6% -6.4% -4.7% -8.0% 9.5%
0
DE
FR
IT
ES
UK
SE
PL
NO
NL
AT
BE
CZ
RO
CH
PT
FI
GR
DK
BG
IE
SK
HU
HR
LU
SI
EE
LT
LV
CY
Figure A.2 Generating capacities projects (as of June 2016)

120,000
Other Renewables
Generating capacities projects [MW]
100,000
Wind
Solar
Nuclear
80,000
Hydro
Other thermal
Gas
60,000
Coal
40,000
20,000
0
Planned
Applied
Approved
Under
construction
Note: Data available for projects > 100 MW

Status definitions: Planned=Announcement of intent; Applied=Main permits applied for; Approved: Contracts and financial
go-ahead pending; Under construction=Ground has been broken
Source: Platts Capgemini analysis, EEMO18
93
Figure A.3 Yearly (2015 and 2016) and winter (2014/2015 and 2015/2016) average electricity spot prices
80
Year 2014
Year 2015
H1 2016
Average price [/MWh]
70
60
56.6
50
40
44.2
40.8
36.8
32.9
30
33.0
26.7
32.8
34.6
30.1
40.1
31.7
32.3
37.1
43.1
41.0
36.3
50.7
30.3
29.6
43.6
40.4
35.8
30.6
24.4
52.3
51.5
41.9
51.5
41.9
37.6
28.0
40.6
38.5
31.7
50.1
30.8
27.4
25.0
38.0
40.5
50.3
44.7
20
10
31.0
27.8
25.2
52.1
39.4
55.4
30.0
37.6
41.4
37.4
20.8
0
AT EXAA
BE BELPEX
CH EPEX
CZ OTE
DE EPEX
ES OMEL
FR EPEX
HU HUPX
IE SEMO
IT IPEX
LT Baltpool
NL - APX NORDIC Power Nord Pool
PL - Pol
PX
PT OMEL
RO SI UK - APX
OPCOM Southpool Power
80
Winter 2014/2015
Winter 2015/2016
70
Average price [/MWh]
60
56.2
50
47.9
46.5
43.5
40
30
33.4
33.5
55.5
53.9
48.8
43.3
44.1
43.4
43.3
40.3
33.5
27.4
20
10
42.9
29.3
36.7
42.2
41.0
30.4
29.3
34.7
45.3
44.2
37.3
42.0
35.8
31.5
42.3
47.9
38.5
16.9
0
AT EXAA
BE BELPEX
CH EPEX
CZ OTE
DE EPEX
ES OMEL
FR EPEX
HU HUPX
IE SEMO
Source: Power Exchange websites Capgemini analysis, EEMO18
Figure A.4 Average European electricity spot price

(2009 to H1 2016)
Average European electricity spot price
[/MWh]
60
53.21
49.02
47.22
50
45.66
41.11
40.98
41.01
40
31.10
30
20
10
0
2009
2010
2011
2012
2013
2014
94
2015
H1 2016
IT IPEX
LT Baltpool
NL - APX NORDIC Power Nord Pool
PL - Pol
PX
PT OMEL
RO SI UK - APX
OPCOM Southpool Power
Figure A.5 Electricity spot prices on the main European markets (2015 and H1 2016)
100
DE - EPEX
FR - EPEX
IT - IPEX
NL - APX
Power
NORDIC Nord Pool
UK - APX
Power
Min
-12.89
5.46
7.32
24.99
20.30
3.88
Average
29.43
43.60
34.78
47.24
35.64
21.97
51.46
Max
52.18
66.41
64.73
127.46
53.48
80.99
82.48
80
7-day rolling average prices [/MWh]
ES - OMEL
60
40
20
16
1/
/0
16
1/
/0
07
16
06
1/
/0
05
16
16
1/
/0
04
16
1/
/0
03
1/
/0
02
01
/0
1/
16
15
15
1/
/0
12
15
1/
/0
11
1/
/0
10
15
1/
/0
15
1/
/0
09
15
/0
07
08
1/
15
1/
/0
06
15
1/
/0
15
1/
/0
05
15
04
15
1/
/0
03
1/
/0
02
01
/0
1/
15
95
Figure A.6 Status of electricity price

regimes (as of June 2016)
Figure A.7 Electricity retail market size

(2016)
Existence of regulated prices

(year of price control removal)
Country
Households
Number of electricity
customers (in thousands)
Country
Non-households
AT
6,008
AT
No (2001)
No
BE
5,127
BE
Yes
No
BG
4,839
BG
Yes
Yes
CZ
5,899
CZ
No (2006)
No
DE
50,077
DK
Yes
Yes
DK
2,750
EE
No (2013)
Yes
EE
561
FI
No
No
ES
28,825
FR
Yes
No
FI
3,600
DE
No (2007)
No
FR
36,476
GR
No (2013)
No
GR
7,425
HR
Yes
Yes
HR
2,372
HU
Yes
Yes
HU
5,347
IE
No (2011)
No
IE
2,236
IT
Yes
No
IT
37,131
LV
Yes
No
LT
1,656
LT
Yes
Yes
LU
286
LU
No (2007)
No
LV
1,125
7,743
NL
Yes
No
NL
PL
Yes
No
NO
2,900
PT
Yes
Yes
PL
16,936
RO
Yes
Yes
PT
6,076
SK
Yes
Yes
RO
9,157
SI
No (2007)
No
SE
5,346
ES
No (2014)
No
SI
937
SE
No
No
SK
2,454
UK
No
No
UK
30,115
Source: CEER-ACER, National regulators Capgemini

analysis, EEMO18
Source: CEER, National regulators, European Commission

Capgemini analysis, EEMO18
Figure A.8 Residential electricity price breakdown (as of June 2016)

100%20%
90%
19%
19%
17%
20%
17%
17%
1%
10%
80%
17%
17%
4%
20%
5%
11%
19%
17%
17%
7%
10%
17%
19%
9%
20%
14%
12%
21%
13%
7%
16%
24%
17%
11%
6%
0%
7%
16%
15%
19%
12%
0%
11%
3%
20%
18%
24%
28%
16%
19%
33%
33%
65%
60%
54%
53%
45%
45%
20%
43%44%
41%
39%40%
37%
34%
31%
37%37%
33%
35%
36%
29%
31%
31%
33% 33%
10%
36%
30%
11%
30%
21%
96
Appendix Tables
IT
G
R
IE
G
B
BG
FI
BE
H
U
LT
H
R
PL
LU
L
FR
SI
DE
EE
LV
RS
SK
Z
AT
ES
PT
RO
SE
DK
0%
Source: HEPI by Energie Control Austria, MEKH and VaasaETT EEMO18
VAT
Energy Taxes
Distribution /
Transmission
Energy
26%
17%
44%
50%
39%
37%29%
25%
35%
35%
29%
46%
34%
18%
30%
28%
41%
42%
30%
41%
52%
40%
3%
30%
60% 48%
50%
16%
0%
11%
70%
18%
17%
Figure A.9 Status of gas price regimes

(as of June 2016)
Table A.10 Gas retail market size (2015)
Existence of regulated prices

(year of price control removal)
Country
Households
Non-households
AT
No (2002)
No
BE
Yes
No
BG
Yes
Yes
CZ
No (2007)
No
DK
Yes
Yes
EE
No
No
FI
No
No
FR
Yes
No
DE
No (2007)
No
GR
Yes
Yes
HR
Yes
Yes
HU
Yes
Yes
IE
Yes
No
IT
Yes
No
LV
Yes
Yes
LT
Yes
No
LU
No (2007)
No
NL
Yes
No
PL
Yes
Yes
PT
Yes
Yes
RO
Yes
Yes
SK
Yes
No
SI
No (2007)
No
ES
No (2014)
No
SE
No (2007)
No
UK
No
No
Country
Number of gas customers

(in thousands)
AT
1,349
BE
2,530
BG
74
CH
423
CZ
2,849
DE
20,979
DK
407
EE
52
ES
7,556
FI
31
FR
11,268
GR
325
HR
647
HU
3,443
IE
661
IT
23,203
LT
562
LU
86
LV
443
NL
7,152
NO
Not developed market
PL
6,852
PT
1,382
RO
3,372
SE
37
SI
136
SK
1,506
UK
21,769
Source: CEER-ACER, National regulators Capgemini

analysis, EEMO18
Source: Eurogas, CEER Capgemini analysis, EEMO18
Figure A.11 Residential gas price breakdown (as of June 2016)

100%
5%
7%
9%
11%
12%
3%
14%
16%17%17%17%18%
16%
17%
17%
17%
2%
17%
17%17%
17%
18%
0%
90% 20%20%
19%
20%
21%19%
80%
10%
21%
16%
70%
60%
9%
40%
22%
30%
20%
6%
4%
0%
4% 3%
0% 9%
10% 0%
14%
0% 0% 0%
6%21%
24%
19%15%
28%
21%23%
24%
31%31%
25%
27%
17%
33%31%29%
28%
38%
26%
37%
25%
34%
0%
8%
26%
32%
50%
10%
3%
12%
5%
VAT
Energy Taxes
Distribution /
Storage
Energy
11%
77%
71%
67%70%
64%65%
58%58%
55%55%55%57%
51%52%52%
48%49%49%
45%45%46%
42%
36%39%
30%
26%
B
RS
EE
U
PL
C
Z
H
R
LU
LV
BG
G
R
DE
IE
SK
BE
LT
FR
L
SI
RO
IT
ES
AT
PT
SE
DK
0%
Source: HEPI by Energie Control Austria, MEKH and VaasaETT EEMO18
97
Glossary
ACER
Agency for the Cooperation of Energy

Regulators, created under the EU Third
Legislative Package, adopted in April 2009
Backwardation/Contango
Contango means that long-term prices

are more expensive than short-term prices,
depicting a relaxed short-term market,
whereas backwardation reveals more
tension in the short-term reflected in higher
short-term prices than in the long-term
Base load
The minimum amount of electricity

delivered or required over a given period, at
a constant rate
Bilateral contracts/OTC
A contractual system between a buyer and

a seller agreed directly without using a third
party (exchanges, etc.). Also named as
OTC for Over The Counter
Black Certificates
Exchangeable or tradable CO2 allowances

or quotas within the European Trading
Scheme and Kyoto protocol (see EUA)
CAPEX
Capital Expenditure, funds used by a

company to acquire or upgrade physical
assets
CCS
Carbon Capture and Storage. Technologies

used for isolating carbon dioxide from
flue gas (at combustion plants) and
storing it. This means that a significantly
lower amount of CO2 is emitted into the
atmosphere
CDM
Clean Development Mechanisms, a

mechanism under the Kyoto Protocol
through which developed countries may
finance greenhouse-gas emission reduction
or removal projects in developing countries,
and receive credits for doing so which they
may apply towards meeting mandatory
limits on their own emissions
CEER/ERGEG
Council of the European Energy Regulators

and European Regulators Group for
Electricity and Gas. ERGEG was dissolved
with the creation of ACER, all ERGEG
works are found in CEER website
CER
Certified Emission Reduction. Quotas

issued for emission reductions from Clean
98
Glossary
Development Mechanism (CDM) project

activities
Churn/Switch
Free (by choice) movement of a customer

from one supplier to another
CHP/Cogeneration
Combined Heat and Power.

System of simultaneous generation of
electricity and heat. The output from
cogeneration plants is substantially better
than it would be if they produced only
electricity
DG TREN
European Unions Directorate General

for Transport & Energy that develops EU
policies in the energy and transport sectors
Distributed generation
Any technology that provides electricity

closer to an end-users site. It may involve
a small on-site generating plant or fuel cell
technology
EBIT
New technologies and processes allowing

electricity generation from coal while
lowering CO2 emissions
Earnings Before Interest and Taxes. EBIT

may also be called operating income; i.e.
the product of the companys industrial and
commercial activities before its financing
operations are taken into account. EBIT
is a key ratio for gauging the financial
performance of companies
Clean Dark Spread/Clean Spark Spread
EBITDA
The Clean Dark Spread is the difference

between electricitys spot market price and
the cost of electricity produced with coal
plus the price of related carbon dioxide
allowances while the Clean Spark Spread
is the same indicator but with electricity
produced with natural gas
Earnings Before Interest, Taxes,

Depreciation and Amortization. EBITDA
is a key ratio for gauging the cash flow of
companies
Clean Coal
CCGT/Combined cycle power plant
Combined Cycle Gas Turbine. Thermal

power plant, usually running on gas-fired
turbines, where electricity is generated
at two consecutive levels: firstly by gas
combustion in the turbines, and secondly
by using energy from the product of the
gas combustion process in boilers, which
supply heat to steam turbo-generators.
This process provides high levels of
thermal output (55 to 60%, compared with
only 33 to 35% for conventional thermal
power plants)
Decentralised generation
Production of electricity near the point of

use, irrespective of size and technology,
capacity and energy sources
Demand response
Any program which communicates with

the end-users regarding price changes in
the energy market and encourages them to
reduce or shift their consumption
DG Competition
European Unions Directorate General

for Competition which role is to enforce
the competition rules of the Community
Treaties
Eligible customer
Electricity or gas consumer authorised

to turn to one or more electricity or gas
suppliers of his choice
ENTSO-E
European Network of Transmission System

Operators for Electricity. ENTSO-E, the
unique association of all European TSOs,
was created at the end of 2008 and is
operational since July 1, 2009. All former
TSOs associations such as UCTE or ETSO
are now part of ENTSO-E
ENTSO-G
European Network of Transmission System

Operators for Gas. ENTSO-G was created
at the end of 2009 and comprises 32 gas
TSOs from 22 European countries
EPR
European Pressurized Reactor. Third

generation of nuclear plant technology
using advanced Pressurized Water Reactor
(PWR)
ERU
European Reduction Unit. A unit referring

to the reduction of greenhouse gases,
particularly under the Joint Implementation
where it represents one ton of CO2 reduced
ETS
Emissions Trading Scheme. An

administrative approach used to control
pollution by providing economic incentives
for achieving reductions in the emissions of
pollutants. The European Union Emissions

Trading Scheme has been in operation
since January 1, 2005
operators (GSE) and LNG terminal

operators (GLE) in Europe
EUA
A Guarantee of Origin certificate associated

with renewable targets fixed by national
governments. Green Certificates are often
tradable
European Union Allowances. Quotas

allocated by the National Allocation Plans
in compliance with the European Trading
Scheme
Eurelectric
Professional association which represents

the common interests of the Electricity
industry at pan-European level
European Commission (EC)
A governing body of the European Union

that oversees the organizations treaties,
recommends actions under the treaties,
and issues independent decisions on EU
matters
European Council
A body formed when the heads of state or

government of European Union member
states meet. Held at least twice a year,
these meetings determine the major
guidelines for the EUs future development
European Parliament (EP)
The assembly of the representatives of the

Union citizens
EWEA
European Wind Energy Association

FID
Final Investment Decision

Forwards
A standard contract agreement for delivery

of a given quantity at a given price, for a
given maturity (OTC markets)
Futures
A standard contract agreement for delivery

of a given quantity at a given price, for a
given maturity (organized exchanges).
The maturities may differ across power
exchanges (weekly, half-yearly, quarterly,
monthly, annually).
Maturity Y+1 corresponds to the calendar
year after the current year
GECF
Gas Exporting Countries Forum. GECF

is a gathering of the worlds leading gas
producers
GIE
Gas Infrastructure Europe. GIE is the

association representing gas transmission
companies (GTE), storage system
Green Certificates
Greenhouse effect
The warming of the atmosphere caused

by the build up of greenhouse gases,
which allow sunlight to heat the earth while
absorbing the infrared radiation returning to
space, preventing the heat from escaping.
Excessive human emissions including
carbon dioxide, methane and other gases
contribute to climate change
Guarantee of Origin
A certificate stating a volume of electricity

that was generated from renewable
sources. In this way the quality of the
electricity is decoupled from the actual
physical volume. It can be used within feed
in tariffs or Green Certificate systems
HHI
Herfindahl-Hirschman Index, a commonly

accepted measure of market concentration.
It is calculated by squaring the market
share of each firm competing in a market,
and then summing the resulting numbers.
The HHI number can range from close to
zero to 10,000
Hub (gas)
Physical or virtual entry/exit points for

natural Gas
Hub (retail)
Inter Company Data Exchange platform

primarily enabling Suppliers and
Distribution companies to exchange
client related data and making suppliers
switching more reliable
IED
Industrial Emissions Directive, a European

Union Directive that sets strict limits on the
pollutants that industrial installations are
allowed to spew into the air, water and soil.
Installations have until 2016 to comply with
the limits
Installed capacity
The installed capacity represents the

maximum potential net generating capacity
of electric utility companies and autoproducers in the countries concerned
99
IPCC
LNG
Intergovernmental Panel on Climate

Change, the leading body for the
assessment of climate change, established
by the United Nations Environment
Programme (UNEP) and the World
Meteorological Organization (WMO) to
provide a clear scientific view on the
current state of climate change and
its potential environmental and socioeconomic consequences
Liquefied Natural Gas. Natural gas that has

been subjected to high pressure and very
low temperatures and stored in a liquid
state. It is returned to a gaseous state by
the reverse process and is mainly used as
a peaking fuel
JI
Joint Implementation, a mechanism under

the Kyoto Protocol allowing industrialised
countries with a greenhouse gas reduction
commitment to invest in emission reducing
projects in another industrialised country
as an alternative to emission reductions in
their own countries
Kyoto Protocol
The United Nations regulatory frame for

greenhouse gases management, adopted
in December 1997. It entered into force
in February 2005 and ends in 2012. It
encompasses 6 greenhouse gases: CO2,
CH4, N2O, HFC, PFC, SF6
LCOE (levelized cost of energy)
LCOE is the cost of electricity produced

by a generator calculated by accounting
for all of a systems expected lifetime
costs (including construction, financing,
fuel, maintenance, taxes, insurance and
incentives), which are then divided by the
systems lifetime expected power output
(kWh).
LCPD
Large Combustion Plant Directive, a

European Union Directive that aims to
reduce acidification, ground level ozone
and particulates by controlling the
emissions of sulphur dioxide, oxides of
nitrogen and dust from large combustion
plant. All combustion plant built after 1987
must comply with the emission limits in
LCPD.
Those power stations in operation before
1987 are defined as existing plant.
Existing plant can either comply with
the LCPD through installing emission
abatement (Flue Gas Desulphurisation)
equipment or opt-out of the directive. An
existing plant that chooses to opt-out is
restricted in its operation after 2007 and
must close by the end of 2015
Load balancing
Maintaining system integrity through

measures which equalize pipeline (shipper)
receipt volumes with delivery volumes
during periods of high system usage.
Withdrawal and injection operations into
underground storage facilities are often
used to balance load on a short-term basis
Load factor
Ratio of average daily deliveries to peakday deliveries over a given time period
Market coupling
Market coupling links together separate

markets in a region, whereas market
splitting divides a regional market into
prices zones. Market coupling minimises
prices differences and makes them
converging wherever transmission capacity
is sufficient. Cross-border market coupling
also drives better use of interconnection
capacity
Merit order
The merit order is a way of ranking

available sources of energy, especially
electrical generation, in ascending order
of their short-run marginal costs of
production, so that those with the lowest
marginal costs are the first ones to be
brought online to meet demand, and the
plants with the highest marginal costs are
the last to be brought on line
Metering
Measurement of the various characteristics

of electricity or gas in order to determine
the amount of energy produced or
consumed
NAP
National Allocation Plan. List of selected

industrial and power installations with their
specific emissions allowance (under the
ETS system)
NEEAPs
National Energy Efficient Action Plans,

plans providing detailed roadmaps of how
each Member State expects to reach its
energy efficiency target by 2020
NREAPs
National Renewable Energy Action Plans,

plans providing detailed roadmaps of how
100
Glossary
each Member State expects to reach its

legally binding 2020 target for the share
of renewable energy in their final energy
consumption
Nomination
A request for a physical quantity of gas

under a specific purchase or transportation
agreement
NTC
Net Transfer Capacity. NTC is the expected

maximal electrical generation power that
can be transported through the tie lines
of two systems without any bottlenecks
appearing in any system
Off-peak
Off-peak energy is the electric energy

supplied during periods of relatively low
system demands as specified by the
supplier
On-peak
On-peak energy is electric energy supplied

during periods of relatively high system
demand as specified by the supplier
RES
Renewable Energy Sources. Energy

(electricity or heat) produced using
wind, sun, wood, biomass, hydro and
geothermal. Their exploitation generates
little or no waste or pollutant emissions
Shippers
The party who contracts with a pipeline

operator for transportation service. A
shipper has the obligation to confirm
that the volume of gas delivered to the
transporter is consistent with nominations.
The shipper is obligated to confirm that
differences between the volume delivered
in the pipeline and the volume delivered by
the pipeline back to the shipper is brought
into balance as quickly as possible
Solar Power Europe
European Photovoltaic Industry

Association. The association that
represents the photovoltaic (PV) industry
towards political institutions at European
and international level.
Spot contract
OPEC
Short-term contract, generally a day ahead
Organization of the Petroleum Exporting

Countries
Take-or-pay contract
Open season
A period (often 1 month) when a pipeline

operator accepts offering bids from
shippers and others for potential new
transportation capacity. Bidders may or
may not have to provide earnest money,
depending upon the type of open season. If
enough interest is shown in the announced
new capacity, the pipeline operator
will refine the proposal and prepare an
application for construction before the
appropriate regulatory body for approval
OPEX
Operational Expenditure, expenditures that

a business incurs as a result of performing
its normal business operations
P/E
Price / Earning ratio. The ratio of the share

price to the Earning per share (EPS). P/E
ratio is one of the tools most commonly
used for valuing a company share
Peak load
The highest electrical level of demand

within a particular period of time
Peak shaving
Reduction of peak demand for natural gas

or electricity
Contract whereby the agreed consumption

has to be paid for, irrespective of whether
the consumption has actually taken place
Third Energy Package
Third Energy Package. A legislative

package proposed on September 19,
2007 by the EC in order to pursue the
liberalisation of the electricity and gas
markets
TPA
Third Party Access. Recognised right of

each user (eligible customer, distributor,
and producer) to access in a nondiscriminatory and efficient manner
transmission or distribution systems in
exchange for payment of access rights
Unbundling
Separation of roles according to the value

chain segment (generation, transmission,
distribution, retail) required by European
Directives for enabling fair competition rules
UNEP
United Nations Environment Program

White Certificate
A certificate stating a volume of engaged

energy savings (electricity, gas, fuel, ) at
end-users site, like a home or a business.
They are tradable or not
101

Countries
Abbreviation
Regulators
Ministries or authorities for energy-related topics
Austria
AT
E-Control
Ministry of Agriculture, Forestry, Environment and Water Management www.bmlfuw.gv.at/

Environment Agency: www.umweltbundesamt.at/
Competition Authority: http://www.bwb.gv.at/
Belgium
BE
CREG (national)
BRUGEL (Brussels)
CWAPE (Walloon)
VREG (Flanders)
Ministry of Economic Affairs: http://economie.fgov.be/
Bulgaria
BG
DKER
Ministry of Economy and Energy: www.mi.government.bg/
Croatia
HR
HERA
Ministry of Economy, Labour and Entrepreneurship: www.mingo.hr/
Czech Republic
CZ
ERU
Ministry of Industry and Trade: www.mpo.cz/

Competition Office: www.compet.cz/
Denmark
DK
DERA
Energy Agency: www.ens.dk/

Ministry of Economic and Business Affairs: www.evm.dk/
Ministry of Environment: www.mim.dk/
Estonia
EE
ETI
Ministry of Economic Affairs: www.mkm.ee/

Competition Authority: www.konkurentsiamet.ee/
Finland
FI
EMV
NordREG
Ministry of Employment and the Economy: www.tem.fi/

Ministry of Environment: www.ymparisto.fi/
Competition Authority: www.kilpailuvirasto.fi/
NordREG
France
FR
CRE
Ministry of Ecology, Sustainable Development and Energy: www.developpement-durable.gouv.fr/
Germany
DE
BNetzA
Federal Environment Ministry: www.bmu.de/

Energy Agency: www.dena.de/
Competition Authority: www.bundeskartellamt.de/
Greece
GR
RAE
Ministry of Development: www.mindev.gov.gr/el/

Ministry of Environment, Energy and Climate Change: www.ypeka.gr/
Competition Commission: www.epant.gr/
Hungary
HU
MEH
Energy Office: www.mekh.hu/
Ireland
IE
CER (Republic of Ireland)

NIAUR (Northern Ireland)
Department of Communications, Energy & Natural Resources: www.dcenr.gov.ie/Energy/
Italy
IT
AEEG
Ministry of Environment: www.minambiente.it/

Ministry of Economic Development: www.sviluppoeconomico.gov.it/
Competition Authority: www.agcm.it/
Latvia
LV
SRPK
Ministry of Economy: www.em.gov.lv/

Competition Council: www.kp.gov.lv/
Lithuania
LT
REGULA
Ministry of Economy: www.ukmin.lt/
Luxemburg
LU
ILR
Ministry of Economic Affairs: www.eco.public.lu/
Netherlands
NL
DTe
Ministry of Economic Affairs: www.rijksoverheid.nl/

Energy Council: www.algemene-energieraad.nl/
Competition Authority: www.nmanet.nl/
Norway
NO
NVE
Oil and Energy Ministry: www.regjeringen.no/

Competition Authority: www.konkurransetilsynet.no/
NordREG
Poland
PL
URE
Ministry of Economy: www.me.gov.pl
Portugal
PT
ERSE
Ministry of Economy: www.min-economia.pt/

Directorate General for Energy and Geology: www.dgeg.pt/
Romania
RO
ANRE
Ministry of Energy and Resources: www.minind.ro/
Slovakia
SK
URSO
Ministry of Economy: www.economy.gov.sk/

Ministry of Environment: www.enviro.sk/
Slovenia
SI
AGEN
Ministry of Infrastructure : www.mzip.gov.si/
Spain
ES
CNMC
Ministry of Industry, Energy and Tourism: www.minetur.gob.es/

Ministry of Environment: www.magrama.gob.es/
Sweden
SE
EI
NordREG
Ministry of Energy: www.regeringen.se/

Competition Authority: www.kkv.se/
Switzerland
CH
BFE
Federal Department of Environment, Transport, Energy and Communications: www.uvek.admin.ch/

Competition Authority: www.weko.admin.ch/
United Kingdom
UK
OFGEM
Department of Energy and Climate Change: www.decc.gov.uk/

Competition Authority: www.gov.uk/government/organisations/competition-and-markets-authority
102
Team and Authors

Report Sponsor
Philippe Vi
+33 1 49 67 42 47
philippe.vie@capgemini.com
Project Director
Alexandra Bonanni
+33 1 49 67 42 60
alexandra.bonanni@capgemini.com
Our partners
Climate Change Challenges insights
Institute for Climate Economics (I4CE)
Emilie Alberola
+33 1 58 50 41 76
emilie.alberola@ i4ce.org
Charlotte Vailles
+33 1 58 50 19 75
charlotte.vailles@i4ce.org
Security of Supply and Energy Market

Integration
Florent Andrillon
florent.andrillon@capgemini.com
Electricity
Yann de Saint Germain
yann.de-saint-germain@capgemini.com
Aurlien Peyrac
aurelien.peyrac@capgemini.com
Antoine Bagur
antoine.bagur@capgemini.com
Houda Matta
houda.matta@capgemini.com
Gas
Bakr Nacir
bakr.naciri@capgemini.com
Akram Al Ganad
akram.al-ganad@capgemini.com
Switching and retail price insights

VaasaETT
Lamya Lasfar
lamya.lasfar@capgemini.com
Christophe Dromacque
+358 (0)4 4906 68 22
christophe.dromacque@vaasaett.com
Michaela Buriankova
michaela.buriankova@capgemini.com
Hanna Launonen
hanna.launonen@vaasaett.com
Energy Transition
Alain Chardon
alain.chardon@capgemini.com
Energy Transition Policies
Alexandre Autheman
alexandre.autheman@capgemini.com
Salma Zouari
salma.zouari@capgemini.com
Renewable Energies
Perle Camey
perle.camey@capgemini.com
Arthur Arrighi de Casanova
arthur.arrighi-de-casanova@capgemini.com
Francois Comby
Francois.comby@capgemini.com
Kevin Bhurtun
kevin.bhurtun@capgemini.com
Sidney Delourme
sidney.delourme@capgemini.com
Benjamin Henniaux-Vergnhes
benjamin.henniaux-vergnhes@capgemini.com
Battery and storage
Michal Salomon
michael.salomon@cleanhorizon.com
Customer Perspective
Anthony Cosnefroy
anthony.cosnefroy@capgemini.com
Organization & partnerships

Louise de Brmond dArs
louise.de-bremond-d-ars@capgemini.com
Financials
Matthieu Peterschmitt
matthieu.peterschmitt@capgemini.com
Bndicte Martin
benedicte.martin@capgemini.com
Lucas Merdinian
lucas.merdinian@capgemini.com
Ali Habi
ali.habi@capgemini.com
Country Boxes
Germany
Petar Denev
petar.denev@capgemini.com
Spain
Fernando-Maria Ginestal-Vela
fernando-maria.ginestal-vela@capgemini.com
Acknowledgements to Mayank Shah,

Camilla Carlsson and Stphane Tchirieff.
Mihaela Onofrei
mihaela.onofrei@capgemini.com
Innovation & Transformation in Energy

companies
Paul Faraggi
paul.faraggi@capgemini.com
Nicolas Clinckx
nicolas.clinckx@capgemini.com
Mark Schtz
mark.schutz@capgemini.com
Petar Denev
petar.denev@capgemini.com
Trends and moves
Jochem Van Hove
jochem.van.hove@capgemini.com
Digital Operations
Grgoire Lejett
gregoire.lejette@capgemini.com
New Business Models
Nathan Igual
nathan.igual@capgemini.com
Emmanuel Anthony
emmanuel.anthony@capgemini.com
Jeroen van Daal
jeroen.van.daal@capgemini.com
103
About I4CE
I4CE Institute for Climate
Economics is an initiative of Caisse
des Dpts and Agence Franaise
de Dveloppement. The think tank
provides independent expertise and
analysis on economic issues linked to
climate & energy policies in France and
throughout the world.
I4CE aims at helping public and private
decision-makers to improve the way in
which they understand, anticipate,
and encourage the use of economic and financial resources to
promote the transition to a low-carbon
resilient economy.
I4CE works with a large and established network of partners.
I4CE focuses on three research
areas, addressing the issues faced by
actors involved in the energy and climate transition:
Industry, Energy and Climate: understanding policies for the low-carbon
transition in the industry and energy
sectors
Territories and Climate: identifying
and analyzing courses of action in the
fight against climate change in the agriculture and forestry sectors as well as
urban areas.
Finance, Investment and Climate:
analyzing the mainstreaming of climate
change into financial decision-making
by public and private entities.
How we work
Providing research and expertise
- Research projects and expert
reports
- Publications
Building capacity
- Disseminate knowledge and
research results
- Conduct applied research projects
-Design and organization of training
sessions
Contributing to public debates
-Organize events (conferences,
workshops, breakfast meetings)
-Respond to public consultations
-Participate in expert working groups
More information at www.i4ce.org
104
Team and Authors
About VaasaETT
VaasaETT is a research and advisory
consultancy dedicated to customer
related issues in the energy industry.
VaasaETT advises its clients based
on empirical evidence brought about
from extensive research in the area
of customer behavior, competitive
market behavior and consumer-centric
dynamics (including smart energy
offerings, demand response, energy
efficiency, smart home, smart grid).
VaasaETTs unique collaborative
approach enables it to draw on an
extensive network of several thousand
energy practitioners around the world
who can contribute to its research
activities or take part in industry events
it organizes allowing VaasaETT to
integrate global knowledge and global
best practice into its areas of expertise.
VaasaETTs truly global focus is
reflected by research and strategic
support having been provided to
a diverse array of organizations on
5 continents including for instance
large industry players, the European
Commission, Government and public
research bodies in Europe, Japan, the
UAE, the Middle East and Australia.
More information at www.vaasaett.com
105
About the European Energy Markets Observatory

Initiated in 2002, Capgeminis European Energy Markets Observatory (EEMO) is an annual report that tracks progress in
establishing an open and competitive electricity and gas market in EU-28 (plus Norway and Switzerland) and the progress in
reaching the EUs 3x20 climate change objectives. The report looks at all segments of the value chain and analyzes leading-edge
energy themes to identify key trends in the electricity and gas industries.
The analysis is made by a team of consultants and regional experts of Capgemini Consulting, the global strategy and
transformation consulting organization of the Capgemini Group. Their in-depth knowledge combined with sector news crunching
provide an insightful analysis which is enriched by the expertise from our selected partners: I4CE, Natixis, CMS Bureau Francis
Lefebvre and VaasaETT.
About Capgemini Consulting

Capgemini Consulting is the global strategy and transformation consulting organization of the Capgemini Group, specializing in
advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus
on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,000 talented
individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the
digital economy and our leadership in business transformation and organizational change.
Our Expertise and Unique Approach in the Utilities and Energy Sector
Capgemini Consulting helps clients formulate operational strategies, implement wide business transformations and optimize
organizations and processes through dedicated operational management initiatives.
Our areas of expertise in the Utilities and energy sector include:
Digital Utilities Transformation
Smart Energy (including implementation of smart infrastructures)
Power generation
Power & gas infrastructures and regulated activities
Energy retail including energy services
Clean technologies
Water distribution, collection and treatment
Upstream and downstream Oil & Gas
Digital Asset Lifecycle Management
Our 800+ professionals operating in 12 major geographies include consulting professionals and experts in specific value chain
segments and industry issues. We deliver consulting services to 60% of the leading Utilities companies, and to 50% of the leading
Oil and Gas companies worldwide.
We are recognized for our professional commitment and leadership, our intellectual curiosity, and our ability to innovate.
Find out more at:
www.capgemini-consulting.com
106
European Energy Markets Observatory
107
About Capgemini
With more than 180,000 people in over 40 countries, Capgemini is a global
leader in consulting, technology and outsourcing services. The Group
reported 2015 global revenues of EUR 11.9 billion. Together with its clients,
Capgemini creates and delivers business, technology and digital solutions
that fit their needs, enabling them to achieve innovation and competitiveness.
A deeply multicultural organization, Capgemini has developed its own
way of working, the Collaborative Business Experience, and draws on
Rightshore, its worldwide delivery model.
Capgemini Consulting is the global strategy and transformation consulting
organization of the Capgemini Group, specializing in advising and supporting
enterprises in significant transformation, from innovative strategy to execution
and with an unstinting focus on results. With the new digital economy
creating significant disruptions and opportunities, the global team of over
3,000 talented individuals work with leading companies and governments
to master Digital Transformation, drawing on their understanding of
the digital economy and leadership in business transformation and
organizational change.
Learn more about us at
www.capgemini.com/utilities
iStockphoto.com/ art Jazz (page 30), Solar seven (page 68), mediaphotos (page86).
Rightshore is a trademark belonging to Capgemini. The information contained in this document

is proprietary. Copyright 2016 Capgemini. All rights reserved.
ST-10/16
Shutterstock.com/ Anna Jurkovska (Cover & page4), Production Perig/Denis Burdin (page20), Fuyu Liu (page42), totojang 1977 (page60).

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Utilities the way we see it

2015 and Winter 2015/2016 Data Set

Climate Change Challenges

Security of Supply and Energy Market Integration

Innovation & Transformation in the Utilities and

Team and Authors

European Energy Markets Observatory

Utilities the way we see it

Figure 6.6 Aggregated European electricity

Major energy events (2015 and H1 2016).......... 18

Figure 6.7 Aggregated European gas

GERMANY: Led by the expansion of

Figure 1.1 Carbon pricing world map (2016)...... 23

Figure 7.1 The seven largest Utilities asset

Figure 2.4 CO2 emissions in phase II and III

Figure 7.5 Perceived value potential for and

Figure 2.5 EUA and CER prices in the EU ETS

Figure 7.6 Cross-sector collaboration by

Figure 3.1 New investments in clean energy

Figure 7.7 Perceived contribution of

Figure 3.2 European Green Market evolution

Figure 7.8 Main barriers to energy innovation

Figure 3.3 European Green Market evolution

Figure 8.1 EBITDA margins (2010; 2014; 2015). 86

Figure 3.4 Levelized costs of electricity (2015)

Figure 8.3 Reported net debt and

Figure 3.5 Market share (new registrations) of

Figure 8.4 Dividend per share in

Figure 3.6 Sales of battery electric vehicles

Figure 8.5 Dividends per share base 100

Figure 4.1 Installed and decomissioned

Figure 8.7 Standard&Poors credit ratings........ 92

Spain: The uncertain future of the Spanish

Figure 8.2 Generation margins (2010-2015)...... 87

Figure 8.6 Stock performances......................... 91

Figure 4.2 Electricity consumption in EU-28

Figure 4.4 Current (2015) and future electricity

Figure A.1 Peak load, generation capacity

Figure 4.5 Map of interconnections levels

Figure A.2 Generating capacities projects

Figure 5.6 Gas storage inventories in EU-28

Figure A.8 Residential electricity price

Figure 5.7 Gas spot prices

Figure A.9 Status of gas price regimes

Figure 6.1 Average European gas &

Table A.10 Gas retail market size (2015)............ 97

Figure 6.2 Residential gas prices all tax

Figure A.11 Residential gas price breakdown

Figure 6.3 I&C gas prices VAT excluded

The energy industry

Energy transition laws are being

With the commitment of 195 countries

Greenhouse gases include carbon dioxide (CO2) and methane (CH4)

A Strategic Overview of the European Energy Markets

Utilities the way we see it

goal. The first review will take place in

The Agreement recognizes the role

discourage coal-fired power plants near

generation percentage. AGL, Australias

US Department of Energy forecast

cost partly because it reduces the

A striking example relates to the 2011

EUA: the right to emit GHGs and in particular CO2