Electricity Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

Electricity Category Overview

The electricity category is anticipated to grow at a CAGR of 8% from 2023 to 2030. In 2022, the category size was estimated to be valued at USD 1.79 trillion. Emerging and expanding economies in Asia are the driving forces for increasing growth. Policy, technology, and consumer preferences are all factors affecting how the globe consumes electricity. The category's growth is being driven by the electrification of everything from cars to buses to high-speed railways, as well as the expansion of access to reliable energy in emerging countries. Electric automobiles can increase a home's usage of electricity by more than 50%. Global power consumption continues to shift proportionally as countries' populations and economies expand faster. It has increased around four times faster than global energy consumption. Global demand for the category is also increasing, owing mostly to a rise in wind, solar, natural gas-fired generating, and nuclear.

Renewables and nuclear power are expected to dominate the expansion of the world's electricity supply over the coming years. In 2022, wind and solar accounted for a record 12% of global electricity. In over sixty countries, they account for more than 10% of electricity generation. With the conflict in Ukraine and the subsequent sanctions of exchanges with Russia, the security of energy supply and prices were dramatically impacted, prompting many governments to reconsider their plans in the face of skyrocketing fossil fuel costs and security worries about relying on fossil fuel imports. Fossil fuels continue to account for more than 80% of worldwide energy output. In November 2022, the COP27, or Conference of the Parties, set a target of 90% renewable energy by 2050. International Civil Aviation Organization (ICAO) recently signed a Memorandum of Understanding with International Solar Alliance, an Indian initiative signed by 74 countries to pursue the goals of ensuring lowering of carbon emissions. The alliance aims to reduce airport emissions, enhance air quality, and support sustainable actions. Renewable energy is generally a cheaper power option.

The category is generally moderately fragmented than other commodity markets, with multiple individual operators in charge. The most significant distinction is that electricity is produced and used in real time. As electricity cannot be stored at the wholesale level, demand and supply must be constantly balanced in real time. When compared to traditional capital markets, this balance results in a significantly different market design. The division of the category is majorly on a regional basis. With 8,833 TWH, China is the largest electricity-producing country in the world, followed by the United States and India.

The cost of producing electricity can be classified into three categories: fixed, semi-fixed, and operating or running cost. The annual cost of fuel, lubricating oil, maintenance and repair along with operating staff pay, all contribute to the total cost of the category. All of these costs are based on the plant's energy output; the operating cost is precisely proportionate to the number of units produced. Residential and business consumers typically have higher retail prices due to the distribution distance. As compared industrial clients have lesser retail prices, as they require more electricity and receive it at higher voltages, making it efficient and cost-effective for the suppliers. Fuel prices and availability, building costs, and fixed costs are the primary drivers of category pricing. The global annual average prices in 2022, by major types of customers vary as per the requirement. The residential consumers paid USD 0.15 per kWh, business customers paid USD 0.12 per kWh, industrial customers paid USD 0.08 per kWh, and transportation users paid USD 0.11 per kWh.

The major approach large electricity buyers use is to engage with the correct type and number of suppliers. Identifying potential to cut purchase administration costs, as well as savings through volume discounts and lower logistics costs. Procurement professionals establish and implement plans that promote a leaner supply chain and efficient operations by staying vigilant regarding market developments. Another element that is being examined and is increasing in demand is companies turning carbon neutral. The category is also responding to buyer needs by expanding its coverage, and services. NextEra Energy has a market capitalization of USD 152.8 billion. TotalEnergies, ranked second, with a market value of USD151.6 billion. 

Electricity Procurement Intelligence Report Scope