Electrons to insight: The shift in the utility business model

OSIsoft’s Michael Kanellos reflects on the opportunities utilities have to commercialise their network expertise.
Published: Wed 07 Jun 2017

What will utilities do next? That’s the multibillion-dollar question for the power industry.

On the one hand, renewables, demand response services and gains in energy efficiency are potentially putting a ceiling on their future.

On the other hand, grid operation is becoming more costly and complex than ever with the emergence of electric vehicles and Internet of Things. It all seems to be coming down to more work and less opportunity - a scary scenario for the utility.

More market opportunities for utilities

In some jurisdictions, the response to this dilemma has been for utilities to become common carriers. They don’t sell power or generate it. Instead, they manage the wires and infrastructure that connect consumers and power producers.

But, the market is presenting even more opportunities. Utilities are also a source of untapped expertise in running complex networks in real time. Instead of simply selling electrons, utilities are selling cloud-based services or other technologies to large power consumers, and solar companies.

For instance, Sempra Energy, a US natural gas utilities holding company based in San Diego, California, has launched a subsidiary company called Pxise for microgrid software and services. This was done alongside software company OSISoft.

Both the technology and business model are novel. In the past, if a utility developed something like Pxise, it would have stayed in-house. The customer would have been the utility itself and the benefits would have only been enjoyed by the people and businesses living in the service territory. Now, potentially, innovation can be shared worldwide.

Others are embarking on the same path. Last year, Edison International spun out Edison Energy, an energy advisor aimed at helping customers with complex energy portfolios.

US regional transmission organisation PJM, meanwhile, has developed an application called DIMA (Dispatch Interactive Map Application) which gives technicians a control-room view into operations. While PJM uses the application internally for the benefit of its dispatchers now, it is currently exploring ways to commercialise it.

Tokyo Electric Power in Japan is also looking at ways to develop new services.

The market potential in data sharing

Regulators are also on board. They have been advising utilities that certain types of data such as circuit maps are likely to be shared with solar producers and other such service providers. The upside is that data and analytics, based on real-time data, can be monetised.

“Basic data should be available to all providers, but utilities might legitimately earn a return for costs incurred in producing and cleaning up data that delivers value to providers,” said John Borchert, director of energy policy at Central Hudson Gas and Electric, in an article by Herman Trabish in Utility Dive.

“It might be done through an unregulated arm of the utility or the commission could decide it is an appropriate revenue stream for regulated utilities.

The utility business model of tomorrow

Granted, we’re still at the start of the utility transformation. Policy frameworks will have to be implemented and then tweaked over time.

Not all of these attempts to sell advanced technology will work either.

Utilities will also have to contemplate how such a shift might impact their role as an impartial service provider, as well as the massive cultural shift they may face. But, starting to think of them as technology companies that happen to sell electrons rather than as electricity providers that happen to have a tremendous wealth of technology expertise could be the first step into a new future.

Michael Kanellos is a technology analyst at OSIsoft and has covered the high-tech industry for over 20 years.

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