Utilities Market Drivers: Market Fundamentals

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
  • METHODOLOGY
• ANALYSIS
  • Central and Eastern Europe is increasingly taking the lead in terms of changing European market fundamentals
    • Energy demand growth in Central and Eastern Europe has outpaced that in more mature markets such as the US and Western Europe, though remains largely below the global average
    • Recent power demand growth rates in Central and Eastern European have been up to four times those seen in the UK and the US
    • Recent gas demand growth rates in Central and Eastern Europe have been in stark contrast to demand declines in more mature markets
    • Short term energy demand growth potential is largely influenced by four key interdependent factors
    • CEE per capita energy demand is significantly behind that in the US and Western Europe indicating strong demand growth potential
    • GDP growth rates in CEE are generally above those forecasted for elsewhere and will more than outweigh population decreases in terms of energy demand growth
    • Foreign players are increasingly turning their attention to the CEE region as an investment opportunity
  • Changing market fundamentals point to increasingly interrelated energy markets
    • As European gas and power markets liberalise, the required factors for wholesale hub development will begin to emerge further
    • The development of wholesale markets tends to follow a preset pattern of distinct stages
    • As Europe's most liberalised gas market, the UK's NBP hub leads European wholesale gas liquidity
    • Significant future potential exists in the Dutch TTF market which has grown at a faster rate than the UK NBP
    • Some fledgling gas hubs are beginning to emerge outside of the UK's NBP market, currently Europe's most liquid gas market
    • A number of wholesale power markets are currently at various stages of development across Europe
    • In the decade after full market opening, five regional power hubs are likely to emerge across Europe from the existing wholesale markets
    • Post full market opening, gas market hub development will be driven by individual wholesale market dynamics and arbitrage synergies
  • New infrastructure development and changing supply patterns mean that LNG will increasingly drive market fundamentals in Europe and the US
    • LNG provides an alternative way to pipelines for moving gas over long distances
    • A large number of European markets are either building or planning new LNG reception terminals
    • European LNG market dynamics have the potential to alter significantly as new sources of production emerge closer to home
    • Significant expansion in LNG regasification capacity is also under way in the USA
    • The growth in global LNG means that European gas and power market fundamentals will increasingly be driven by the US market
    • The LNG value chain is of growing relevance to the US power sector as well as gas supply utilities
• APPENDIX
  • Current, Planned and Proposed US LNG Import Terminals
    • CONSTRUCTED
    • APPROVED BY FERC
    • APPROVED BY MARAD/COAST GUARD
    • CANADIAN APPROVED TERMINALS
    • MEXICAN APPROVED TERMINALS
    • PROPOSED TO FERC
    • PROPOSED TO MARAD/COAST GUARD
  • Definitions
  • Further reading
  • Ask the analyst
  • List of Figures
    • Figure 1: Energy demand growth in Central and Eastern Europe has outpaced that in more mature markets such as the US and Western Europe, though remains largely below the global average
    • Figure 2: Recent power demand growth rates in Central and Eastern European have been up to four times those seen in the UK and the US
    • Figure 3: Recent gas demand growth rates in Central and Eastern Europe have been in stark contrast to demand declines in more mature markets
    • Figure 4: Short term energy demand growth potential is largely influenced by four key interdependent factors
    • Figure 5: CEE per capita energy demand is significantly behind that in the US and Western Europe indicating strong demand growth potential
    • Figure 6: GDP growth rates in CEE are generally above those forecasted for elsewhere and will more than outweigh population decreases in terms of energy demand growth
    • Figure 7: As European gas and power markets liberalise, the required factors for wholesale hub development will begin to emerge further
    • Figure 8: The development of wholesale markets tends to follow a preset pattern of distinct stages
    • Figure 9: As Europe's most liberalised gas market, the UK's NBP hub leads European wholesale gas liquidity
    • Figure 10: TTF growth versus NBP growth
    • Figure 11: Some fledgling gas hubs are beginning to emerge outside of the UK's NBP market, currently Europe's most liquid gas market
    • Figure 12: A number of wholesale power markets are currently at various stages of development across Europe
    • Figure 13: Likely Power Hubs by 2018
    • Figure 14: Likely Gas Hubs by 2018
    • Figure 15: LNG provides an alternative way to pipelines for moving gas over long distances
    • Figure 16: A large number of European markets are either building or planning new LNG reception terminals
    • Figure 17: European LNG market dynamics have the potential to alter significantly as new sources of production emerge closer to home
    • Figure 18: Current, Planned and Proposed US LNG Import Terminals
    • Figure 19: The growth in global LNG means that European gas and power market fundamentals will increasingly be driven by the US market
    • Figure 20: The LNG value chain is of growing relevance to the US power sector as well as gas supply utilities