The utility market is shifting. Time to get nimble, says Peter Siggins, Energy & Utilities expert at PA Consulting Group.
Every stakeholder in the energy sector understands that the landscape around them is changing with continued technology and regulatory evolutions. Even the end user as they start to engage with energy.
The growth of distributed energy resources (solar, batteries, electric vehicles, etc) on distribution networks and the subsequent realignment of consumer-prosumer expectations has put continued pressure on revenue streams.
So how should utilities respond to such a complex set of challenges? With agility and practicality, says Peter Siggins, Energy & Utilities expert at PA Consulting Group.
Siggins highlights there is a tendency within the distribution industry to look at the market from a product viewpoint but he advocates that utilities must look at the “practical reality in terms of how your business function needs to change as the gap between technology introduction and ubiquitous adoption continues to decrease”.
With the length of time between technology adoption and ubiquity estimated at five to seven years, according to Eric 'Magic' Teller, CEO of X, Alphabet's Research and Development Lab, quoted in Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations, how do utilities ensure they are ready for digital reinvention?
Siggins highlights four key capabilities that utilities must develop to embrace the distributed energy future.
Future-World: This is the ability to systematically look into the future. Siggins argues that utilities tend to focus on the “probable future they think they know” but with policy evolving and technology increasing, must reach a “shared alignment on what consumers will desire and what will be (technically) possible in the future to drive breakthrough innovation towards a preferred future”.
Customer-Forward: We are now far beyond the Henry Ford adage ‘you can have it in any colour you want, as long as it is black’. Siggins suggests that utilities designing business models around evolving expectations will be the ones that prove successful.
Choice is no longer happening only at a residential level but a commercial one. Netflix for example, already sources 100% of its energy from renewable sources and Google is looking to achieve its 100% goal this year. Looking at energy uses from the outside-in gives a very different view on what customers want and creates very different business models.
Innovation: As many as 61% of energy and utility professionals surveyed by PA Consulting have felt that innovation has, at times, proven a costly failure. Siggins argues that successful innovation requires a “broader ecosystem of collaborators and a culture that rewards it. In other words, innovation is no longer an individual pursuit sport”.
An agile approach: With new technology innovations moving faster than at any time in human history, an agile approach to delivery is crucial.
Taking an agile approach, at both a programme or organisational level, is proven to help business leaders not only deal with market challenges but also to thrive and grow.
Achieving the benefits of agile is more than just a methodology – it must be supported by the right leadership, culture, governance and organisational structure across the whole organization not just in the IT shop.
PA Consulting sees that momentum towards utilities embracing these new paradigms is picking up, says Siggins. And with the cost of deploying technology decreasing, the business case is stacking up and supported by the rapid change of skill-sets within the utilities themselves.
An excellent reference point for digital reinvention is in New York, where regulatory support and executive vision has led to the Reforming the Energy Vision.
The goal of the project is to get 50% of its electricity from renewables by 2030 and cut greenhouse gas emissions by 40%, with the state hoping these efforts will catalyse $5bn of new investment in clean, distributed energy.
It is a project that will take collaboration and commitment to complete and adhering to those guarding principles above will certainly help, says Siggins. Momentum is increasing with many participants including New York Power Authority leading the way.
To learn more about how to adapt to new energy business models, meet PA Consulting Group's energy experts at the upcoming European Utility Week conference.
PA Consulting is hosting a Power Hour Networking Reception at The Heineken Experience on Tuesday 3 October 18:00. Peter Siggins will talking more about business models and optimising operations during session 15 on Wednesday 4 October.