A huge shift in thinking and action around energy efficiency and cleaner fuels is taking place in the power utilities sector, according to the ninth annual PricewaterhouseCoopers report Energy and Efficiency: Utilities Global Survey 2007. The annual survey goes to the heart of boardroom thinking of 114 power companies in 44 countries and this year reveals a complete shift in the extent to which energy efficiency, renewables and nuclear power are at the top of company agendas.

Utilities companies worldwide expect wind and nuclear power to provide an increasing share of their market's energy consumption in the next five years. Last year, only 17% and 19% were looking toward these two fuel sources. By 2007, in the space of just 12 months, they were being mentioned by 48% and 45% of respondents. Climate change appears to have cemented its place in utility company strategies.

But the report warns that, without effective and consistent worldwide regulatory and market frameworks, actual progress may be limited. Manfred Wiegand, global utilities leader, PricewaterhouseCoopers said:

"It is clear that the climate of thinking and action around cleaner power, renewables and energy efficiency is shifting fast. The big question is the extent and pace of the actual shift that will take place in the energy mix. Economic signals and incentives will be critical for utility companies to be able to make a big shift. An effective signaling of carbon prices will need to exist across all regions, crucially covering high-emitting and high-growth countries such as the US, India and China."

The survey shows an industry that believes that technological advances can take the world into a new era of energy efficiency. Expectations that technology can have an impact on energy efficiency have again shot up over the last 12 months--from 22% to 81% among American respondents, from 33% to 43% in Europe and from 41% to 62% worldwide.

Utility companies believe that the greatest energy efficiency gains could come from end-users, of all kinds--industrial, commercial and, especially, residential customers. Although utility companies feel that governments and end-users must set a lead on energy efficiency, companies are ready to invest significantly in efficiency, not just in their own production and transmission but also to help their customers become more energy efficient. Indeed, 72% of respondents from companies with supply businesses are making some investment in demand-side efficiency measures.

Manfred Wiegand, global utilities leader, PricewaterhouseCoopers said:

"This is much more than a 'waking up' to climate change. This is a 'working up' of activities on a wide range of fronts--2007 looks set to be the year when utility companies world-wide gear up to seize the sustainability agenda."

For the first time, the annual survey includes the viewpoints of top leaders from big industrial consumers of electricity in the metals, chemicals and paper sectors. Companies in these sectors are increasingly seeking to be in control of their own energy production and reduce dependence on utility companies. Investment in energy efficiency is a priority for all companies. In some instances, companies are considering moving production to lower price energy territories and many companies are stepping up investment in their own generation, often from renewable sources. There is also a view that utility companies could do more to structure their tariffs around the needs of their big energy consumers.

Other report highlights:

Security of supply concerns
Concerns about security of supply are intensifying. Utility companies across the world report that they expect to have to deal with supply and demand conditions that are significantly or, indeed, 'immensely' challenging (see figure 10 in link below). Seventy-one per cent of respondents rated the outlook in these terms--a major rise from 51% in 2006. This includes 62% of North American respondents, 88% in South America, 70% in Europe, 76% in Australia and New Zealand, 66% in the BRIC countries and all respondents in the Middle East and Africa.

Value chain re-positioning
Forty-eight percent of utility company executives say they expect regulatory moves to unbundle transport and transmission distribution from vertically integrated businesses will have a strong or very strong impact on their power and gas market in the period ahead.

Indeed, a third (32%) of all respondents worldwide say they will reposition their company in the value chain in the next five years, including 40% of Americas and 34% of European respondents. A similar proportion of respondents say that they also intend to reposition by country.

Skills and knowledge shortages become a deal driver
For the first time, skills and knowledge shortages are becoming a leading factor in M&A activity. They were mentioned by just a third of respondents as a deal driver in 2006 but, by 2007, this had increased to half. Shortages of knowledge and skills are becoming a crunch issue for utility companies worldwide. Investment in infrastructure, new generation and technology is driving up the demand for expertise. However, this is against a background of an aging workforce and, in some countries, fewer graduates studying relevant engineering subjects.

To view the global survey charts mentioned in this article, click here.

This article was taken from the PricewaterhouseCoopers website.