SAN MATEO, CA – April 19, 2017.
Mercatus Publishes Annual Energy Insights Trend Report Comparing 2016 Investment Trends with 2015.
Mercatus has published its highly-anticipated Energy Insights Trend Report and complimentary copies are now available online. The trend report analyzes aggregated anonymized data on customer renewable energy investments managed by the Mercatus Cloud-based system for energy investment lifecycle management (ILM).
According to the report, fierce competition amongst downstream renewable energy companies put downward pressure on project returns throughout 2016. Declining technology costs, combined with market pressures amounted to a supply-side shift, reducing the overall price of renewable energy power while expanding demand, especially in new geographic market segments.
“The disruption in energy industry economics is driving power producers to seek out healthy IRRs in new geographies, technologies, and market segments, such as corporate offtakers,” said Haresh Patel, Mercatus founder and CEO. “In addition, as competition drives down off-take and input prices, power producers must focus on operating efficiencies. This is the best lever to lean out their cost structures and achieve profitability.”
Key findings that underscore these conclusions:
- The input cost reductions associated with renewable energy technologies mostly benefit energy consumers and not developers.
- Lower costs and tighter margins has meant that capital invested in renewable energy technologies in 2016 was cycled more efficiently, with more MW/$ invested coming online than ever before.
- Lower power prices have made renewable energy projects increasingly competitive with traditional fuel sources, expanding energy demand.
- Demand for renewable energy is emerging from new segments – most prominently corporate investors and off-takers.
- Despite political changes in 2016, renewables remain on a growth trajectory due to declines in prices.
- Energy companies continue to diversify their development into new geographies and technologies.
- Tighter gross margins with greater market demand underscore the need for downstream energy companies to maximize operational efficiency.
“To survive the industry transformation and position themselves for future competitiveness and growth, energy companies are focusing on factors they can control like their own internal operational efficiency, said Patel. “They are recognizing that end-to-end process digitization and task automation is the key and this explains why about 80% of energy and utility companies are undertaking digital transformation projects.”
The shift in focus on operational-efficiency-driven profitability, which is in full-swing today according to the report, began over a year ago. Enel Green Power chief executive officer Francesco Venturini, whose company bid 3.5 US cents/kWh in Mexico back in March 2016, said in an interview that his projects would make decent money even with record-low prices for electricity.
“There is no value in winning without margin attached,” Venturini said. “I have two investment committees and two boards of directors I need to present my projects to and they want to see the money attached to it. So, trust me, there is margin.”
Please download the report at gomercatus.com/IRV
Mercatus Investment Lifecycle Management or ILM digitally transforms how energy producers invest and operate to accelerate the return on their project investment and asset portfolio. We do so by empowering stakeholders with collaborative Cloud analytic technology that integrates the information and processes needed to optimally manage the complete energy investment lifecycle. The benefits to our clients are unparalleled data visibility and integrity; speed via enhanced collaboration, efficiency and productivity; and insight via analytics to improve decision quality and better manage risk/compliance. And, Mercatus ILM is the only Cloud-based, end-to-end solution that is purpose-built for the energy industry.
The Mercatus ILM system represents one of the largest energy generation databases in the world. The system hosts over 6,000 project data sets, across eight technologies, representing over $1.5T of investable projects. To date, the system has been deployed by industry leading power producers and utilities to manage in aggregate over 125 gigawatts of renewable energy in development or in operation. This is enough energy to power approximately 90 million homes or the equivalent output of 60 Hoover dams.