2017 was a transition period for long-term changes in the global energy and environment markets.
Technology continues to be a key disruptor across industry segments. In addition, against a backdrop of global uncertainty, key focus areas for companies today are high operational efficiency, risk mitigation, optimising production and cost savings. To achieve these, digitalisation initiatives play a critical role. Companies in the energy and environment markets continue to invest heavily in the clean energy sector and use of smart technologies across the industry value chain is on a growth trajectory.
Since the beginning of 2018, there have been renewed investments in the oil & gas (O&G) sector and opportunities continue to be rife in the LNG and refinery segments. In the power generation sector, solar power will overshadow cheap coal as the fastest growing segment in the Asia Pacific (APAC) region. Business models for power utilities will undergo slow and steady transformation as growing interest in distributed energy and microgrid threatens the conventional power industry’s supply chain.
The buildings industry in the APAC region will also continue to witness changes in the areas of energy management and facilities management (FM). Building energy management will move from passive to active solutions, while the Asian FM market will witness heightened M&A activity for vertical, geographic and capability expansion.
Frost & Sullivan’s Asia Pacific Energy & Environment Industry Outlook is an annual research that scrutinises most of the significant regional and country-level energy and environment market trends including oil & gas, power, distributed energy, buildings and water to provide expert opinions on the future of the industry. Key trends in 2018 are as follows:
Despite price stagnation, modest increase expected in O&G investments
2018 will be the year for new investments in the O&G industry as crude oil prices are expected to be stable at US$59 per barrel. Frost & Sullivan projects a 5% increment in upstream CAPEX in 2018 in tune with its recovery from 2017. In addition, the expected regulatory changes in Indonesia, Thailand and the technological developments in Malaysia are expected to boost tenders in the E&P sector. Operating costs for oil production varies by country in the APAC region. Hence, those countries with higher operational efficiency and higher production volume will attract greater investments.
Coal Investments to go downhill for second consecutive year
Investments in coal power market in the APAC region will continue to dwindle for second year in a row, due to mounting challenges to get coal-fired power plants off the ground. Amongst the primary energy sources for power generation, coal will continue to be the least important in 2018 as focus will remain on renewables, mainly solar power.
Distributed Energy Projects to remain at the Forefront
Fuelled by technology and business innovation, investments in renewable energy (RE) will continue their high growth trajectory. As countries transition to a low-carbon future, RE including hybrid projects will become a mainstream source of power. Annual solar photovoltaic (PV) capacity growth is set to increase by 10% in 2018 even as key markets such as India and Japan are likely to witness a slowdown this year.
Utilities to Continue Smart Grid Investments
2018 will see widespread investments in distribution grid management systems in Southeast Asian countries like Thailand and Vietnam. Utilities in Japan and Australia will take their first steps towards Internet of Things (IoT) implementation in the power sector by adopting this technology for their generation and grid equipment. Implementation of energy management software and IoT will be the key focus areas in the grids sector. Increased retrofit into smart electricity meters will be inevitable.
Utility-scale Projects to Drive Demand for Battery-based Energy Storage Systems (ESS)
With new partnerships and new market entrants, disruption in ESS competition will be intense in 2018. Battery-based ESS projects will also register significant growth, especially in China, Japan, India, and Thailand.
Digitalisation Initiatives to drive the Building Industry
Digitalisation initiatives will sweep through all segments of the building industry, including construction, building management systems (BMS), and FM. The focus will be on transforming buildings to become intelligent and cognitive. M&As and partnerships for vertical, geographic, and capability expansion will become commonplace in the Asian FM market as companies look to combat unconventional new entrants.
Strong Opportunities Ahead for Water Industry Participants
Water utility industry CAPEX will grow by 9.6% in 2018. Asian water utilities will leverage digital platforms to improve service and revenue collection. Smart cities’ vision fruition and the redevelopment of water services will also open up opportunities for smart meter solutions and IoT providers. Partnerships and collaborations between water companies will gain prominence during this year.