Smart Energy International spoke with Philippe Vié, global energy, utilities and chemicals sector leader, CapGemini, regarding the next phase of the COVID-19 pandemic.

In many countries, the mandatory lockdowns are ending or will soon be, and the question now is: what is the new normal and what should utilities do to adapt?

This article was originally published in Smart Energy International Issue 3-2020. Read the full digimag  or subscribe to receive a print copy here.

“We have observed what our clients have been doing to react to the crisis, but also to envision what the new normal will look like,” Vié tells Smart Energy International during a video conference. “This is far more important for us than only helping them with their business continuity planning.

We have seen that, in the lockdown, demand has decreased across the board and companies have gone through their business continuity activation, not only for remote working or customer services and support functions, but also for their operation of critical activities.

“Some activities such as maintenance and new developments in the network or generation space have stopped but ultimately, utilities have been very resilient, and they have been very courageous.”

Consequence: Demand and load

There are a multitude of perspectives.

As lockdowns around the world come to an end, demand will start increasing and alongside that, commodity prices. Demand is likely to remain low though and this will reflect in the wholesale prices of both oil and power.

For some sectors, working from home will continue and travel will continue to be impacted – especially for travel which is considered non-essential. “Gone are the days when we would travel for a meeting,” Vié says. “We will continue to utilise remote meeting software.”

Demand and load curves will remain impacted, with demand in the residential sector remaining and demand in commercial and industrial sectors increasing slowly – however, it will take a while for them to reach pre-lockdown levels. “In the industrial sector we will likely see some plant closures, such as in the construction industry, but at the same time, we are likely to also see a relocation of industries in order to be less dependent on global supply chains. This isn’t just for items such as solar panels, but likely for other products as well.

… utilities have been very resilient, and they have been very courageous.

Philippe Vié

“We don’t know at this stage what this will mean for consumption,” Vié says. “The new way of living and working and the industrial transformation will change load curves and will therefore likely put more focus on flexibility. Renewables will continue to grow because the energy transition will remain a critical domain.

“In the more volatile sectors, such as wholesale markets, prices will continue to change, driven by fluctuations in load and geopolitical considerations. Stakeholders in these markets will have to be more and more adaptable.”

As a result of a decrease in revenue and consumption, cost saving will be critical and there will be an increased focus on capex investment. “We have seen a reconsideration of operational and capex scenarios. Also, the competitive landscape is likely to change. With prices being volatile, we will see alternative players taking advantage of the low pricing in gas or electricity wholesale markets.

We will see aggressive positioning by retailers or DSOs in the market, and this will resonate with customers who may be feeling the need for cheaper offers and better options. Customer churn is likely to increase as a result, especially as new players come into the market. There are also likely to be more failures and consolidation of companies.”

Consequence: digital transformation

Operators will take advantage of digital transformation in order to reduce costs, but also to enable more remote working in activities like plant maintenance and energy services.

“You can do a lot with artificial intelligence, process automation and virtual reality, and so we are likely to see an acceleration or revisiting of the digital transformation. What we have seen in the oil and gas market has been very, very insightful. Oil and gas players, even as they have cut their costs, have maintained or accelerated their digital transformation. Their investments have been in technology to make remote working easier, and to get access to lowhanging fruit in terms of service.”

Consequence: energy transition

“I would like to mention the energy transition and sustainability. All the oil and gas operators are going to accelerate their diversification. We are going to see more announcements like the one made recently by Total acquiring EDP in Spain. We are going to see them accelerate their diversification into renewables, storage, hydrogen or electric mobility. We are also going to see them increasingly diversify into the retail electricity and gas markets.”

… We don’t really know what the future is going to look like, but we do know it will not be a copy of the past.

Philippe Vié

There have been multiple announcements by oil and gas majors committing to carbon neutrality by 2050 – in recent weeks companies like Shell and Total have made similar announcements. It is likely that there will be an acceleration of transformation and energy transition for these companies.

Vié continues: “What we predict is that most of the players will have to revisit their strategy in terms of positioning in the value chain and diversification in terms of geographical footprint. Imagine a European player that has an opportunity in Africa for a hydro plant. Does it make sense in these conditions to invest in these kinds of assets even if it’s profitable, or does it make more sense to shrink their portfolio and remain in their local markets, to be really dominant and protect their market share?”

Caveat

“Of course, I now have more questions than real predictions,” Vié says, sharing that this is an ongoing process. “There is a lot of uncertainty and we don’t really know what the future is going to look like, but we do know it will not be a copy of the past.” SEI

Some of the other questions we posed:

Smart Energy International: Do you think some of the smaller retailers are going to become more vulnerable and is there a chance we will see an increase in the number of monopolies?

PV: I can say that with 100 retailers in the UK market and over 200 in the Spanish market before the crisis, there isn’t room for everyone.

Some of the small players will likely fail because their clients are not going to be in a position to pay them. They will suffer from market conditions such as lower prices and definitely from the lower margins – but we will not go back to a situation in which we have only a few suppliers. There will still be dozens of suppliers and competition will remain important in the market. There is room for new players coming in with relevant offers and with low cost operations.

Smart Energy International: What do you think the increase in digitisation is going to mean for employment within the sector?

PV: We don’t believe there will be a heavy impact on employment. Of course, some activities will be automated, definitely. The main impact will be in field services – there will be more automation. For example, when it comes to routine maintenance for boilers or such, utilities will probably have better insights into the equipment to get a view of the actual operating conditions and you will do maintenance only when it is necessary.

Contact between the field operators and the clients will be impacted by social distancing and will likely be avoided by clients and restricted by utilities protecting their staff. There will be an impact on energy services.

There could also be an impact on maintenance of the network or generation or upstream plants.

All of us today are working remotely utilising a variety of tools and should be more comfortable interacting with chatbots or with automated customer services, but that doesn’t mean that call centres will drastically decrease their volumes or staff numbers.

However, we will also see new jobs coming from this transformation and a different way of working. It’s very difficult to measure this impact today. There is a shift in employment that will come from the energy transition, electric mobility, renewable energy and new usage that will lead to an increase in employment in the sector. So, if you balanced the two, I’m sure we will actually see an increase in the number of people who work in this industry.