Handbook Utility Management (eBook)

Preface 5
Overview 7
Contents 10
List of Contributors 30
Part I: Introduction to Management 36
1 Managing in an International Environment 37
1.1 Introduction 38
1.2 Building a Global Talent Network 38
1.3 What Factors Contribute to an Optimal Climate for Coordinated Research and Development? 43
1.4 How Can External Areas of the Business – such as Partner Networks – Be Engaged to Support Globalization Efforts? 44
1.5 The Business Network Life Cycle 46
1.6 How Technology Can Support Business Network Transformation and Globalization 47
1.7 The Challenge for Management in the Era of Business Network Transformation 47
References 48
2 Superior Performance Through Value-based Management 49
Abstract 49
2.1 Introduction 50
2.2 Concepts of Value-based Management 51
2.3 Applications and Techniques of Value-based Management 56
2.4 Value Creation by Large German Firms 63
2.5 Value Creation by Large and Medium-sized German Utilities 66
References 69
3 Ways to Corporate Growth 71
Abstract 71
3.1 Growth Is a Strategic Necessity 72
3.2 Ways to Growth 75
3.3 Finding the Right Blend of External and Organic Growth 79
3.4 The Right Way to Organize Growth 83
References 87
4 Diversification and the Achievement of Scope Economies 88
Abstract 88
4.1 Introduction 89
4.2 Corporate Strategy and Diversification 89
4.3 Economies of Scope as an Imperative for Diversification 95
4.4 Diversification and the Achievement of Economies of Scope in the Utility Industry 99
4.5 Conclusion 101
References 102
5 Innovation and Technology Management 106
Abstract 106
5.1 Innovation – The Key to our Future 107
5.2 Innovation – an Essential Driver for Profitable Growth 109
5.3 Elements of Innovation Management 110
5.4 Innovation – a Cultural Issue 120
References 121
6 Entrepreneurial Orientation 122
Abstract 122
6.1 Introduction 123
6.2 The Concept of Entrepreneurial Orientation 123
6.3 The Dimensionality of Entrepreneurial Orientation 124
6.4 Entrepreneurial Orientation and Firm Performance 125
6.5 Contingency Theories 125
6.6 Environmental Variables 125
6.7 Organizational Variables 128
6.8 Combined Models of Venture Performance 129
6.9 Critique 130
6.10 Conclusions 131
References 132
7 New Paradigms in Organizational Design 137
Abstract 137
7.1 Introduction: Main Drivers Influencing the Organizational Framework of European Utilities 138
7.2 Keys to Reading the Current Organizational Framework of European Utilities 141
7.3 Challenges and Emerging Paradigms in Utilities Organizational Design 149
7.4 An Overview of US Utilities Organizational Trends 164
Part II: Fundamentals in Utility Management 166
8 An Industry Overview – Strategic Groups and Critical Success Factors 167
Abstract 167
8.1 Preface 168
8.2 An Industry Overview – Segmenting European Power Utilities 168
8.3 Critical Success Factors of Top-performing Utilities 173
8.4 Conclusion 175
9 The Utility Industry in 2020 177
Abstract 177
9.1 Introduction 178
9.2 Stakeholders in Utilities 182
9.3 Basic Drivers and Business Models 186
9.4 Evolutionary Scenario in the Utility Industry in 2020 190
9.5 Revolutionary Scenario in the Utility Industry in 2020 195
9.6 Conclusion 196
References 197
10 The Changing Structure of the Electric Utility Industry in Europe: Liberalisation, New Demands and Remaining Barriers 198
10.1 Introduction 199
10.2 The European Electricity Supply Industry in Pre-liberalisation Days 199
10.3 Restructuring of the European Electricity Supply Industry 200
10.4 Price Formation in a Liberalised Competitive Electricity Market 203
10.5 Performance of the Wholesale and Retail Markets 206
10.6 Remaining Barriers to Effective Competition 213
10.7 Conclusions 219
References 220
11 The Changing Structure of the Utility Industry from the Perspective of Regulation Authorities 222
Abstract 222
11.1 Introduction 223
11.2 Structural Changes in the Utility Landscape in Germany 225
11.3 Unbundling Integrated Utilities 228
11.4 Strategic Options for Utilities 231
11.5 Outlook 234
References 234
12 The Changing Structure of the Utility Industry from Its own Perspective 236
Abstract 236
12.1 The Importance of Regional Utilities – with EWE AG as an Example 237
12.2 EWE’s Strategies for Growth and Competition 240
12.3 EWE Group’s Strategy for Tomorrow’s Energy Supply 245
References 251
13 Mergers & Acquisitions from a Strategic Perspective
Abstract 252
13.1 Introduction 253
13.2 The Need for Acquisitive Growth in the Utilities Industry 253
13.3 M& A Patterns in the Utilities Industry
13.4 E.ON’s Development in the M& A Market
13.5 Success Factors and Organizational Line-up 260
13.6 Conclusion 261
References 262
14 What Next for European Power Utilities? 263
Abstract 263
14.1 Introduction 264
14.2 European Power Sector Key Drivers 266
14.3 Value Creation Transactions 272
14.4 How the Sector Might Look in 10 Years’ Time 273
15 Unbundling – Strategic and Organisational Challenges for Power and Supply Companies 274
Abstract 274
15.1 Introduction 275
15.2 Transmission and Operation of the System in a Liberalised Environment 275
15.3 Vertical Unbundling Alternatives – Independent System Operator and Transmission System Operator Models 277
15.4 International Experience 284
15.5 Upcoming Developments in the European Union – the Third Package 288
References 289
16 Convergence of Gas and Electricity Markets: Economic and Technological Drivers 290
Abstract 290
16.1 Introduction 291
16.2 Characterizing the Gas and Electricity Sectors 292
16.3 Categorizing Market Convergence 294
16.4 Drivers for Convergence of Gas and Electricity Markets 295
16.5 Conclusions 303
References 304
Part III: Power Generation 306
17 Investing in Power Generation 307
Abstract 307
17.1 Introduction 308
17.2 Investment in Risky Assets 310
17.3 Changing Paradigms? 314
17.4 Selected Examples 327
17.5 Conclusions 329
References 330
18 Perspectives on Capacity Investment in Germany and Europe – The Future of Power-Mix Optimization 337
Abstract 337
18.1 The Underlying Conditions Have Changed Dramatically 338
18.2 The Power Plant Age Structure Needs Investment Running into Billions 338
18.3 The Risks in Power Plant Investment Have Definitely Increased 340
18.4 Lack of Investment Means Higher Power Prices 343
18.5 Investment Program for Environmentally Sound Power Plant Capacities 343
18.6 Market Intervention by Energy Policy Slows Down Necessary Investment 344
18.7 Summary 346
References 347
19 Renewable Resources for Electric Power: Prospects and Challenges 348
Abstract 348
19.1 Driving Forces Behind the Rethink in Energy Policy 349
19.2 Renewables in the National and International Settings 350
19.3 Limited Potential of Geothermal Energy, Solar Power and Biomass 351
19.4 Wind Power is the Most Promising Growth Segment 352
19.5 The Offshore Mega-trend: Prospects and Challenges 354
19.6 Integration into a National Energy Supply Concept 355
19.7 Outlook: The Right Social Framework Is Crucial 357
References 358
20 Emission Allowances – a New Production Factor in the Power Sector 359
Abstract 359
20.1 Introduction 360
20.2 Characterisation of the New Input Factor Emission Allowances 360
20.3 Emission Trading 362
20.4 Effects of Emission Trading 365
20.5 Consistent Strategies Under an Emission Trading Scheme 367
20.6 Summary 369
References 369
Part IV: Energy Trading and Wholesale 371
21 Energy Trading, Emission Certificates and Risk Management 372
Abstract 372
21.1 Different Roles of Energy Utility Companies in the Energy Markets 373
21.2 Overview of Energy Markets and the Contracts Being Traded 374
21.3 Trading From a Risk Management Perspective 380
21.4 Concluding Remarks 382
References 383
22 The Future of Liquefied Natural Gas Trade 384
Abstract 384
22.1 Introduction 385
22.2 Liquefied Natural Gas 387
22.3 Drivers of Current and Future Liquefied Natural Gas Market Development 390
22.4 The Rice World Gas Trade Model Reference Case – One Possible Future 396
22.5 Various Risks to Liquefied Natural Gas Market Development 401
22.6 Concluding Remarks 406
References 407
23 Cross-border Trading 408
Abstract 408
23.1 Introduction 409
23.2 The Nordic Power Exchange – The Nord Pool Group 409
23.3 The Common Nordic Power Market 410
23.4 Price Formation at Nord Pool Spot 412
23.5 Handling of Internal Grid Limitations 416
23.6 Cross-border Optimization Between Denmark West and Germany 418
23.7 Financial Products Related to Cross-border Trading 418
23.8 The Intraday Market – Elbas 422
References 422
24 The Future of Gas Supply in Europe 424
Abstract 424
24.1 Introduction 425
24.2 Supply Outlook to 2015 425
24.3 Security of Supply 430
24.4 Conclusions: a Constrained Future for Gas in Europe? 436
References 438
25 Strategic Use of Gas Storage Facilities 440
Abstract 440
25.1 Introduction and Fundamentals of Storage 441
25.2 Current Gas Market Development and Implications for Gas Storage 449
25.3 Strategic Use of Storage for a Gas Market Player 451
25.4 Conclusion 453
References 454
Part V: Transmission and Distribution 456
26 Regulation of Network Charges 457
Abstract 457
26.1 Introduction 458
26.2 Cost-based Regulation 459
26.3 Price-based Regulation 462
26.4 Further Developments in Network Pricing – a Menu of Sliding Scales 471
26.5 Concluding Remarks 475
References 477
27 Transmission Management and Pricing 479
Abstract 479
27.1 Introduction – the Tasks of Transmission System Operators 480
27.2 Value Drivers and External Influences 481
27.3 Management 485
27.4 Organisation of Transmission Operations 487
27.5 Transmission System Operator Revenues and Pricing 492
27.6 Management Information 495
27.7 Summary 497
References 497
28 The New Entry-exit Model in the EU and Its Consequences for Gas Supply Companies 499
Abstract 499
28.1 Introduction 500
28.2 Network Access in the Liberalized Gas Market 500
28.3 Network Access Models in the Gas Market 503
28.4 Decision for the Entry-exit Model 507
28.5 Consequences for Gas Supply Companies 509
28.6 Conclusion 512
References 513
29 Implementation of the EU Unbundling Guidelines in Germany – a Legal Perspective 514
Abstract 514
29.1 Community Law Bases 515
29.2 Current Community Law Development 517
29.3 Overview of the Systematic of the Unbundling Requirements in Germany 518
29.4 Unbundling Targets 523
References 525
30 The Energy Arteries of a Continent – Natural Gas Networks Secure Europe’s Energy Supply 527
Abstract 527
30.1 Introduction 528
30.2 Declining Domestic Production in the EU 528
30.3 The EU Expects Natural Gas Imports to Increase 529
30.4 The Nord Stream Project Is of Interest to Europe 531
30.5 Economic Benefits from New Natural Gas Networks 532
30.6 Pipeline Across the Baltic Sea – Europe’s Energy Artery 535
30.7 Investments Are Profitable 536
30.8 No Growth without Secure Energy Supplies 537
References 538
31 Dispatching in Unbundled Electricity Markets 540
Abstract 540
31.1 Operation of Restructured Power Systems 541
31.2 Coordinated Real-time Dispatch of Unbundled Electricity Markets 546
31.3 Several Major Operational Issues in Unbundled Electricity Markets 550
31.4 Conclusions 556
References 556
Part VI: Retail 562
32 The Retail Electricity Service Business in a Competitive Environment 563
Abstract 563
32.1 Enter Competition 564
32.2 Branding 564
32.3 Attitude and Image Research 567
32.4 Customer Preference and Behavior 568
32.5 Understanding Residential Customer Needs 569
32.6 Commercial and Industrial Needs-based Customer Segments 574
32.7 Conclusion 575
References 576
33 Customer Segmentation in the Utility Industry 577
Abstract 577
33.1 Introduction 578
33.2 Conceptual and Contextual Background 579
33.3 Segmentation and Strategy Formation within Essent 582
33.4 Conclusion and Outlook 591
References 591
34 Current Trends in Serving Industrial Customers 593
Abstract 593
34.1 Macro- and Micro-trends in Serving Industrial Customers 594
34.2 Cases and Trends in 'Best Practice' 601
35 The Energy Retail Market from a Customer Perspective 609
Abstract 609
35.1 Industrial Energy Consumption – with the Nonferrous Metals Industry as an Example 610
35.2 Basic Energy Management Conditions for Energyintensive Industrial Companies in Germany 611
35.3 Adaptability of Energy-intensive Industrial Enterprises – with Norddeutsche Affinerie AG as an Example 616
35.4 Petition for German Energy Policy 620
References 621
Part VII: Regional Peculiarities in the Utility Markets 623
36 Options for and Regional Peculiarities of Investment Funding in Energy Markets 624
Abstract 624
36.1 Introduction 625
36.2 Main Characteristics of the Energy Markets 625
36.3 Barriers to Investment 627
36.4 Financing Considerations 636
36.5 Conclusion 645
37 A Comparison of Market Structure and Regulation Between US and European Utility Markets 646
Abstract 646
37.1 Introduction 647
37.2 Why Regulate? A Short Survey 650
37.3 Regulatory Approaches in the US 652
37.4 Regulation of the Electricity Industry in Europe 666
37.5 Conclusions 677
References 678
38 Investment Opportunities in South America 681
Abstract 681
38.1 Investment Wave in the Region: The Privatization Process of the 1990s 682
38.2 Future Investment Requirements 684
38.3 Latin America’s Macroeconomic Situation 686
38.4 Regulatory Framework 689
38.5 Generation and Energy Mix 690
38.6 The Distribution Business 695
38.7 Sustainability – an Unavoidable Choice 696
References 698
39 Final Stages in the Reform of RAO UES of Russia – Future Developments in the Russian Energy Market 699
Abstract 699
39.1 Introduction 700
39.2 Progress 700
39.3 Finance 703
39.4 Market Creation 705
39.5 Commissioning Energy 708
Part VIII: Special Issues in Utility Management 710
40 Creating Competitive Advantages Through Co-operations Between Municipal Utility Companies 711
Abstract 711
40.1 Introduction 712
40.2 Development of New Profit Potentials by Entering the Market of Electricity Generation, and Importation, Production and Trading of Gas 712
40.3 Co-operation in the Field of Supply Network Systems as an Answer to Cost Pressure and Unbundling 716
40.4 Nationwide Distribution to Standard Customers to Compensate for Customer Losses and Development of further Market Potential 719
40.5 Successful Change Management 721
40.6 Summary 722
41 Growth Options for Regional Utilities 723
Abstract 723
41.1 What Is Growth? 724
41.2 German Municipal and Regional Utility Sector Structure 725
41.3 Market Changes and Competition Despite Saturated Markets 727
41.4 Challenges and Options for Regional Utilities 730
41.5 Strategy of MVV Energy 732
41.6 Conclusion and Outlook 736
References 737
42 Climate Protection Requirements – the Economic Impact of Climate Change 738
Abstract 738
42.1 Climate Change – Why Do We Bother? 739
42.2 Economic Impacts of Climate Change 740
42.3 Climate Protection Requirements 743
42.4 Climate Protection: What Next? 746
42.5 Final Remarks 749
References 751
43 European Energy Policy on the Basis of the New Provisions in the Treaty of Lisbon 753
Abstract 753
43.1 Introduction 754
43.2 The Elements of Art. 194(1) TFEU 756
43.3 Legislative Procedures, Art. 194(2) TFEU 766
References 768
44 The Role of Energy Efficiency in Electric Power Systems: Lessons from Experiments in the US 772
Abstract 772
44.1 Introduction 773
44.2 Background 774
44.3 Demand-side Management – a Brief History 775
44.4 Energy Efficiency vs Energy Conservation 776
44.5 The Energy Efficiency Paradox 778
44.6 The Nature and Value of Energy-efficiency Techniques 778
44.7 Elasticity of Demand 779
44.8 The Relationship of Power Systems and Use Sectors 780
44.9 Demand-side Management in Practice 782
44.10 Effectiveness 783
44.11 Going Forward 784
44.12 Conclusion 786
References 786
45 Private Water and Economic Regulation in the United States 789
Abstract 789
45.1 Introduction 790
45.2 Market Structure of the US Water Industry 791
45.3 Privatization 794
45.4 Regulatory Structure 800
45.5 Regulation and Utility Ownership 804
45.6 Conclusion 808
References 809
Index 812