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Who will energize the future? HEC Paris analyses new strategies, new business models and new players at its 5th annual Energy Day

2 May 2016

On March 11th, HEC Paris hosted its 5th annual edition of Energy Day. 150 HEC Paris students, alumni and keynote speakers from leading companies such as ENGIE, EDF, Deloitte, Google and SNCF were there to discuss who will energize the future, while analyzing current strategies, new business models and new players. This year’s edition was again a true success.

Who will energize the future? HEC Paris analyses new strategies, new business models and new players at its 5th annual Energy Day - HEC Paris 2016

The day started with an opening speech by the Dean of the HEC Paris MBA Program Andrea Masini and Jean Michel Gautier, Deloitte’s Chief Economist Officer for Energy and Resources, Executive Director of the Energy & Finance Chair and Affiliate Professor at the business school. Andrea Masini launched the discussion arguing that in the current market, out of the world’s 10 largest companies, 6 had to deal with energy. Knowledge of the energy sector is therefore crucial for HEC Paris graduates.

From oil and gas companies energizing the world to the uberization of energy

As a recognized expert on energy economics, markets and regulations, Jean Michel Gauthier started by presenting the view of the energy industry 10 years ago and what it might be in 10 years’ time. While a decade ago, it seemed clear that private oil and gas companies along with NOCs and governments were the ones energizing the world, this view has drastically changed today. Gauthier explained that reality is quite different from what was expected then: between 2005 and 2015, carbon markets followed a different path, with gas and energy prices dropping and the coal industry going bankrupt.

 

Deloitte’s Chief Economist Officer argued that today, as the capital requirement to  finance the energy supply infrastructure has gone up threefold, conditions are there for a major economic rebound.

Gauthier insisted on the “back to nature trend”, with the theoretical potential of renewable energy: France’s potential could be equivalent to 100% of the French nuclear production yearly. He added that the world is currently facing a new phenomenon that could be called the “Uberization” of the energy sector: the electricity market design is moving gradually from a centralized to a decentralized system where power is produced locally by renewable-based electric generation facilities or by the consumers themselves with their rooftop PV installations. As consumers become lenders, producers and operators, the traditional utility model is to disappear… or to bounce back. In a fully-uberized economy, historical utilities may not be needed anymore. However, according to the HEC Affiliate Professor, the new players of the energy game will be the old ones… but only after going through dramatic change and restructuring.

He concluded his speech with the question: will new entrants break the barrier?

Entrants such as Google, Tesco, Auchan and Carrefour are now moving into the distribution market but not into the generation one. The big barrier in front of them will remain the capital requirement necessary to oversize a renewable system massively. So what would Uber do in this situation?

 

After Jean-Michel’s Gauthier speech the audience split up in 3 parallel workshops:

-  Financing and funding, which addressed the question of how new entrants and traditional players will work together to fund change, with speakers from Société Française d’Energie Nucléaire, Greenchannel and WWF

-  Strategies and business models, which discussed the role of conventional, large scale power generation in light of increased investments in renewable energy and energy storage systems, with speakers from Schneider Electric, la Commission de Régulation de l’Energie, the European Power Exchange and Greenflex

-  Technical Innovations, which aimed at responding to what innovation really is in today’s energy sector, as well as the main technological barriers today, with speakers from EEL Energy, Electro Power Systems, Enerbuild and Nenuphar Wind

Global trends and challenges facing the transformation of the energy sector

The last part of this year’s “Energy Day” was a keynote panel on the topic of global trends and challenges facing the transformation of the energy sector. Mark Akehurst, Director of Engie’s Innovation Program, Thierry Le Boucher, R&D Deputy Director for renewables, grids, energy management, commerce and energy services at EDF, Jean Michel Gauthier, Chief Economist Officer, Energy & Resources at Deloitte, François Sterin, Director of Global Infrastructure at Google and Olivier Menuet, Vice President Energy at SNCF served as keynote speakers during the event.

All the companies presented the challenges they are facing when it comes to energy. EDF’s panel speaker Thierry Le Boucher explained that while gas and nuclear power generation are long-lasting industries that will play an important role in the energy sector for quite some time, two major aspects had to be considered: the emergence of cost-competitive wind and solar energy and the fact that due to Europe’s change of laws, competition is now everywhere. He also insisted on the fact that EDF does not consider private households or companies investing in solar panels as competitors, since EDF commercializing and installing solar panels is a part of their offer. Instead they are client “prosumers”.

 

For SNCF, on the other hand, the first goal is to reduce the company’s energy consumption and expenses. Being France’s biggest consumer of energy, SNCF is making plans for the long term. As Olivier Menuet explained: “The trains that we buy will still be running for the COP41”. France's national state-owned railway company is considering investing in breakthrough innovation with hybrid trains, storage and smart grids. To the question “what if energy prices go up in the future?” Menuet answered: “We need to reduce consumption. So the best buy is… don’t buy.”

Google, one of the companies that could play a big role in the decentralized energy sector, explained the 3 axes that were essential for its ambitions of becoming a 100% renewable company: the data center energy supply, investment in renewable energy projects all over the world but also development of proprietary technology and software that can contribute to grid optimization and reduced household consumptions. François Sterin also underlined the fact that the traditional Google way of innovating - “try out many things but fail fast” - was difficult to apply in the capital intensive energy sector.

 

Finally, as the largest independent electricity producer in the world, ENGIE’s Director of Innovation Program added that the company was adapting to decentralized energy through a strategic shift towards low-cost CO2 activities, integrated solutions for customers and concentrated, regulated revenues.

Will the ambitions set out by key energy players be achieved? Next year’s edition of Energy Day will tell us.

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