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20 | 29TH APRIL - 5TH MAY 2016 | UTILITY WEEK Operations & Assets T he utilities industry is on the cusp of a period of great change, as we were reminded by the signing of the Paris climate agreement last week. The low carbon transition is well underway in the energy sector, the Competition and Markets Author- ity is due to set out its final remedies for the retail market in the coming weeks, and a competitive transformation is on the horizon in the water sector. Our growing climate change challenges and targets will impact all utilities, heralding new approaches to resilience and sustaina- bility – particularly around urban areas with expectations for further significant popula- tions growth. Market evolutions, meanwhile, are bring- ing opportunities to shape and reshape the utility whole arena with new business mod- els, modes of competition and consumer interaction. The fundamentals of the sector come 2030 will remain unchanged: water, electric- ity and gas will still need to be provided to customers in the UK. However, the way the New business models Eon and RWE have split their businesses in response to the low carbon agenda and the challenging conditions for traditional, ther- mal generation energy companies. This is part of a move to ensure they are fit to operate in a future world where there is a larger focus on innovation and renewables, and experts predict more change is likely to follow across the sector. Eon's spin-off com- pany, Uniper, will take control of the German energy giant's centralised energy to allow Eon to focus on its more profitable customer- facing business. RWE announced at the end of last year plans to separate its retail, networks and renewables interests to form a new company with stronger growth potential than its centralised thermal generation and nuclear- focused interests. Holger Lösch, a board member at the Federation of German Industries, said the new business models "require companies to be more agile and flexible about trying new things". With the same challenges facing traditional thermal generation, further splits – or at least a shi in focus towards more profitable areas, such as retail services – could follow for other utilities. The competitive water markets, domestic and non-domestic, should be firmly estab- lished by 2030. With moves already underway – the United Utilities and Severn Trent joint venture being a prime example – some of the larger companies are looking at new models. Whitman Howard analyst Angelos Ana- stasiou told Utility Week further alliances are "certainly feasible", although they will probably be in the form of a water and sewer- age company (WASC) taking over a water-only company, with more WASC-WASC deals also likely. industry operates to deliver these modern life essentials will be very different. The retail space for the energy and water companies, already starting to show the signs of change, could be transformed, with industry figures predicting that new entrants could offer complete, whole-house solutions, with the likes of Amazon and Google poten- tially taking on the traditional players. The distribution network arena could also look different, with the continued growth of variable, low carbon and decentralised energy increasing the difficulties of manag- ing the system, and the ingress of storage providing a potential solution. Generation, supply and the wholesale side for the utilities will also undergo a change, with further decentralisation possible, the development of water trading and additional reforms set to shake up the sector. Utility Week assesses what the industry could look like, and examines the key trends and themes that will shape the sector in 2030. The climate change agenda The Paris climate agreement, which was signed by 175 UN member states last week, will help to shape the utility arena and how it will look in 14 years' time as nations seek to limit global warm- ing to less than 2°C. The agreement reaffirms the UK's Climate Change Act, which sets the target for 2050 that carbon emissions will be reduced to 80 per cent of 1990 levels. 2030 is also an important milestone as the midpoint of the fih carbon budget, which is currently being debated and will be set in June. The Committee on Climate Change recom- mends this is set at 1,765MtCO 2 e, and limits UK carbon emissions to 57 per cent of 1990 levels. PROJECTED SUPPLY-DEMAND BALANCE FOR CURRENT WATER RESOURCE ZONES IN THE 2030S <= -500 (deficit) > -500 to <= -100 > -100 to <= -5 > -5 to <= -1 > -1 to <= 1 > 1 to <= 5 > 5 to <= 100 > 100 to <= 1000 (surplus) Source: Defra PRIMARY ENERGY DEMAND BY FUEL Solid fuels Oil and natural gas Renewables, nuclear and other electricity Primary energy demand by source, Mtoe Source: Decc Analysis Utilities 2030 The utilities industry will look vastly different by 2030, driven by factors such as climate change, regulation, competition and population growth. Mathew Beech reports.