SCH2017_DRF_EN_Livre.indb

4 Business review

Trends in Schneider Electric’s core markets

Utilities and Infrastructures

1.3

Electrical Utilities Global energy policies are accelerating the shift towards a New World of Energy, which will likely result in a gradual transformation of the regulation, mission and business models of electric utilities. World-wide electricity consumption is back to growth, but only in non-OECD countries. In mature economies, energy efficiency gains on the demand side have resulted in a flat or decreasing consumption trend. The integration of decentralized renewables, mainly in the form of rooftop PV and onshore wind farms is challenging T&D utilities for their core planning and operation duties. Electricity self-consumption from prosumers will require changes to be made to traditional utility revenue model to allow them to invest in necessary network reinforcement and build next-generation control systems in order to maintain reliability and system security, while preparing for an ever increasing penetration of distributed energy resources, including a significant amount of electric vehicles. Power generation investment priorities have shifted to renewable energy, involving traditional utility investors as well as private investors (IPP), with a greater participation of individual prosumers or energy communities Global investment in the utility sector remains healthy in all geographies, both in the mature economies where system transformation and renewable integration are the key drivers, as well as in new economies where generation and network capacity build-up are essential. Digital technologies are expanding at a faster pace throughout the utility industry to meet those new challenges. Compute demand continued to shift from on-premise to off-premise computing. That is, enterprises moving their compute load to either leased space in colocation, where they house their own IT equipment, or to Internet Giants, where they are renting platforms, infrastructure and other products as a service. To add to this shift, the continued growth of social media and ecommerce have triggered even more growth in the off-premise market. Enterprises continue to maintain hybrid environments between existing on-premise facilities and the off- premise market through colocation service providers. With its strong portfolio and global footprint, Schneider Electric is well positioned for all markets of the hybrid data center environment and brings the strengths of our Low Voltage/Medium Voltage, Building management and IT business to serve those clients under the EcoStruxure for datacenter architecture. As internet usage continues to grow in bandwidth intensive applications including video, social media, augmented reality and the increasing adoption of the Internet of Things there will be an 1.4 Data centers and Networks

Oil & Gas The Brent oil price ended the year 2017 at a high point, close to USD70, with an average price around USD54 for the year, in strong growth versus 2016. The major industry players have been engaged in a dramatic reduction in their operating cost structures which have given a profitable position at a USD50 oil price for new projects. Many are claiming their breakeven costs are below USD40. The improved cost position was achieved both by structural cost reduction but also by more creative and sustainable ways to optimize, fit-for-purpose design and digital transformation of operations. At the current oil price and with the industry cost reductions and improved operation, we expect renewed investments and increased profitability. The industry majors continue to be selective in their investments, while optimizing their portfolios. The portfolio shift to gas assets is becoming clearer as is the establishment of exploratory positions in renewables.

increased need for compute and storage at the edge of the network. Schneider is a leader in distributed IT environments and with its modular systems coupled with EcoStruxure IT software is in a strong position to capture this next wave of computing. The market for secure power in commercial and industrial applications rebounded in 2017 showing strong growth in emerging markets. Applications within the Oil & Gas, Transportation and Healthcare segments in particular led in the recovery of the market. With strong presence in key segments coupled with its global footprint, Schneider continues to be well position in the commercial and industrial market. Software and services remained strong in 2017 and led growth for the IT Division. Digital platforms such as EcoStruxure IT continued to gain market momentum, enabling protection of customers’ most critical equipment through smart alarming, remote troubleshooting and data-driven insights. Delivered by experts monitoring connected data center assets 24/7 our software provides visibility and live data directly to customers’ smartphones.

2017 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

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