PRESS RELEASE

Electricity sector 'on cusp of once-in-a-century change'

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Tuesday, August 22, 2017

PRESS RELEASE

GTM Research

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EDINBURGH/HOUSTON/SINGAPORE, August 22, 2017: The power sector is undergoing a rapid transformation. The forces at work have the potential to alter fundamentally the way electricity is generated, consumed and accessed.

GTM Research, a Wood Mackenzie company, today releases a report, The Transformation(s) of Power, identifying the major drivers for this change. The report's author, Shayle Kann, head of GTM Research, says: "This could be the most dramatic transformation of electricity for a century."

He adds: "We think the power sector - more than almost any other - is in various stages of a once-in-a-century transformation. These are the trends that driving the change: the major trends we have to address."

The four key issues identified by GTM Research are:

· Decarbonisation;

· Decentralisation;

· Vehicle electrification;

· Energy access;

"These transformation are at various levels of maturity and will take different periods of time to come to fruition," Mr Kann says. "But they all are, in one way or another, happening simultaneously."

He sees decarbonisation and energy access as the two crucial drivers of change.

"Decarbonisation is an umbrella trend. It's all about mitigating climate change. Energy access is also incredibly important and often overlooked."

Turning to decentralisation, he says: "The architecture of electricity was designed 100 years ago, and, until recently, hadn't changed significantly. Consumers were largely passive.

"But the increase in customer options - rooftop solar, battery storage and so on - is fragmenting power markets. Customers are taking control of their consumption via new technologies. In some instances, local resources are driving power consumption and generation. This has the potential to create a more resilient, cheaper and cleaner grid."

GTM Research sees vehicle electrification as another key driver of change. It will be the most disruptive to oil markets, but also presents increasing source of demand for power. Mr Kann says: "If handled well, vehicle electrification could help usher in decarbonisation. But that depends on how demands on the electricity grid, for example, are handled. It could, if poorly managed, increase electricity prices and hinder moves towards decarbonisation."

The report adds that battery storage covers all four of these trends, and will be critical to the speed - and success - of transformation.

But Mr Kann stressed that the question isn't one of how much batteries can store, it is, rather, at what cost power can be stored and what revenue streams are available to those batteries being connected into the grid. "The economics are key," he says.

Mr Kann adds: "It's a jigsaw puzzle, though. All of these trends work together and catalyse each other. Nothing is a foregone conclusion. There are a myriad of questions to be posed regarding the pace of change, the economics and the sectoral impacts. The devil in every one of these cases is in the details, and that is where we need to look."