Global energy & resources consulting industry grows to $15.5 billion

26 November 2018 Consultancy.org

The global energy & resources consulting industry grew by 5.9% last year to reach a value of $15.53 billion. The spurt represents the fastest expansion of the market in four years, as the sector continues on a healthy trajectory thanks to increasing demand regarding digital transformation and renewable technology adoption.

The nearly 6% growth comes on the back of three slower years, with on-going low commodity prices and resulting financial pressures meaning growth in consulting spending by clients in energy & utilities space in 2016 and 2016 was 3.5% and 3.2% respectively. Lower commodity prices have also had an impact.

In particular oil has remained far below what most would consider “normal”, despite picking up from a crash in its value. Having steadily risen in price through the past 12 months, oil’s stock has once again plummeted at the end of 2018, something which hit pause on a number of large projects in the last two years, and will likely do so again now.

Despite this, across the consulting landscape, energy & resources now accounts for around 12% of entre industry, a share which is relatively equal to that in 2014. This is largely because clients are keen to source external expertise when it comes to navigating these new challenges.

Size of the global energy & resources consulting market

According to data from Source Global Research, the massive US energy & resources consultancy market is largest of world, weighing in at a value of $7.85 billion. This is followed by Australia’s energy and resources market, which grew by 4.7% to over $1 billion in 2017. Hot on heels of Australia is the DACH region, consisting of Germany, Austria and Switzerland. DACH energy consulting grew faster, at a rate of 5.9% in 2017, closing the gap on Australia to sit only $18 million behind in third place.

The growth of the DACH market has undoubtedly been buoyed by the German Government’s change of tack regarding its energy policy. In the wake of Japan’s Fukushima crisis, which saw an earthquake cause a nuclear power-plant to contaminate coastal waters, Germany announced plans to close the European nation’s own nuclear plants, boosting demand for consultants to help energy firms reposition themselves for a post-nuclear industry.

Main services

From a functional perspective, technology is the biggest service line in the global energy and resources consulting market by some distance. While the researchers have not unveiled data for 2017, the two years previous saw its share account for 33% of all consulting spend, and little is likely to have changed there.

As with every other industry, digital transformation has driven this demand for technology consulting work. Looking forward, this is set to continue and even pick up pace, as it enables clients to improve productivity and cut costs, while becoming a driver of change in its own right. This is particularly clear in the case of big data and digitisation, which are transforming the operations of clients keen to finally analyse the vast amounts of data they previously collected, but were unable to effectively use before.

Meanwhile, operational improvement is still the second largest service line valued at nearly a quarter of the energy & resources consultancy market. This includes services such as process excellence, Business Process Re-engineering (BPR); customer/supplier relations management (CRM); turnaround/cost reduction, purchasing, supply chain management and outsourcing among other areas. Financial management consulting is estimated to account for just over 15% of the global energy consulting market, with finance and risk propositions including the revisiting of financial planning and budgeting, performance management, enterprise risks, compliance, and finance transformation.

Size of the global management consulting market

Another major service area is strategy, where consultants aid clients with analysing and rede­fining their strategies, improving their business operations and optimising their corporate and business planning, business modelling, market analysis and strategy development. At the same time, consulting on human capital (also known as People & Change) remains an important component of the sector. Spanning Human Resources (HR) consulting, it includes change management, retirement schemes and talent development programmes, among other offerings, making it increasingly relevant as many of the world’s leading economies face ageing populations.

Looking ahead, the digital boom is set to remain the key driver of growth in energy and resources consulting. Transformation and restructuring in energy has become indispensible to clients looking to weather volatile pricing scenarios in the oil sector, and pressures resulting from the push for renewable technologies. Clients will continue to seek out efficiencies and restructuring opportunities across the whole value chain, for the foreseeable future.

Improving customer interaction in utilities is also an important factor which will boost growth for consultants. As is the case in many a crowded market, utilities clients are continuing to invest in customer service offerings, to help set their services apart from rivals. This will continue to generate good revenue growth for consultants in the space, alongside the need for renewable integration, and moving from current electricity systems to new ones.

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Shock to the system: utilities brace for electric vehicle influx

09 January 2019 Consultancy.org

They’re coming. There’s no stopping them. They’re driving toward us. And they feed off our electricity. They are electric vehicles (EVs), and they are on the brink of wide-scale adoption. This is a certainty.

The International Energy Agency’s latest "Global EV Outlook" shows that there were more than 3 million EVs on the road in 2017, a number that will increase exponentially, to 50 million, by 2020, then again, to 125 million – potentially 220 million, “should policy ambitions rise even further to meet climate goals and other sustainability targets” – by 2030.

The pressure’s on, then, for utility companies, which must take action in the very near future if they are to successfully handle the coming surge in electrical demand, according to a new study. The report, by management consultancy firm L.E.K. Consulting and Australia-based e-mobility experts Tritium, titled "Preparing the Grid for the Uptake of Electric Vehicles," offers both challenges and solutions for utility companies regarding the EV situation.

“There are significant opportunities for network owners, operators, and energy retailers as EVs are one of the few growth drivers for many developed energy markets, and also enable the opportunity for utilities to build closer consumer relationships,” said Tim McGrath, a partner at L.E.K. Consulting. “But utilities need to be proactive in planning for a future scenario of significant EV adoption, especially in a world where spending capex on additional infrastructure at the costs of the consumer is no longer a palatable response.”

The number of EVs will increase to 50 million by 2020

The challenges

EV-eryone wants some

More EVs on the road means more electricity will be used. It’s simple supply and demand. If EV battery energy efficiency remains roughly the same, EVs will demand 6.3% of global electricity in 2030, compared with a modest 0.3% in 2017.

Same time, same place, same demand

Owning an EV nearly doubles a household’s energy consumption. Amplifying this strain on the grid is the current trend which shows EV owners living in close proximity to one another (the same cities, neighborhoods, or streets).

“Clustering effects in vehicle adoption at the local level might lead to high PEV [plug-in electric vehicle] concentrations even if overall adoption remains low, significantly increasing peak demand and requiring upgrades to the electricity distribution infrastructure,” states a 2018 article in scientific journal Nature. Essentially, certain areas are bound to have higher concentrations of EVs than others. These areas will place strain on the electrical grid, as EV owners will charge their vehicles in roughly the same locations, often at the same general times.

An electrical guessing game

As the number of EVs increase, so will the number of charging stations. This creates unpredictability in terms of when and where vehicles will be charged. “Charging an element of randomness, and drivers will recharge their vehicles at different locations and for varying lengths of time whenever required,” states the L.E.K. report.

With the rise of EV electrical requirements, power demand becomes “nonlinear,” and requires increased distribution of power generating devices such as solar panels. “This can stress local infrastructure and heighten the need for increased network investment,” McGrath said. Without proper management, this stress will come at great financial cost to utility companies, decreasing lifetimes and requiring more frequent replacement of equipment such as transformers and cables.

"With the rise of EV electrical requirements, power demand becomes nonlinear and requires increased generation and distribution of power."

The solutions

According to the research, there are five steps utility companies should take, “both to stabilize future grid behavior and ensure the rise of electric vehicles maintains its pace.” For utility companies to not act proactively is to potentially position themselves as barriers to widespread EV adoption.

Make charging worth it

Utilities must provide incentives to customers that will allow residential charging to be more adeptly managed. Tariffs and demand response programs will encourage EV owners to do their part in reducing strain on the infrastructure.“New York utility Con Edison enables EV drivers to charge anywhere in the Con Edison service territory, be identified, and earn rewards for charging outside of peak hours,” the report states as an example.

Get smart

Using the right software is key in ensuring that home charging is managed in such a way as to not place undue stress during peak hours. Much like those used in certain air-condoning systems, smart software can stagger home charging to avoid a dogpile. Utility companies can also consider offering subsidies to those consumers willing to give up a certain amount of control as to when they charge their vehicle at home.

Create a transparent grid

Businesses, entrepreneurs, and those looking to invest in charging stations and infrastructure must be kept in the loop with clear and detailed information. This will keep the infrastructure moving, preventing backup, and ensuring that power is available whenever and wherever it is needed. “For example,” the report states, “PG&E, a Californian utility, has created an interactive mapping tool for network capacity highlighting the locations on their network where existing equipment has the capacity and is ready to be used for EV charging.”

Take charge

Utilities must look for options other than the deployment and installation of charging stations. This includes opportunities such as “stationary battery storage at charging locations.” Doing so will further reduce pressure on the grid, and allow for the exploration of areas that would otherwise be unreachable.

Come together

Automakers, utility companies, charger manufacturers – all involved must work cohesively to construct a habitable environment for the future of EVs, and the electricity demanded by them. “The U.S. Department of Energy is facilitating such collaboration, recently announcing over $8 million in funding designed [for cross-industry collaboration],” the report states. This funding hopes to see utilities rise to the “forefront of emerging vehicle charging and grid integration technologies.”