The energy sector is entering a new era as a result of major disruptors like renewable energy, consumer will and energy storage. The disruption is forcing the once stable and highly regulated energy industry to change its traditional business-as-usual approach to a business model that is more flexible to market needs. But, it’s not all about finding the perfect business model, according to Sebastian Asioli Macchi, manager energy and utilities, Capgemini, it is more important for utilities to keep innovating and responding to changing needs.
While there is a lot of uncertainty around the new role created by disruption, causing many to wait around for a dominant trend, the worst thing that utilities can do is to adopt a ‘wait and see’ approach. “This is the biggest risk,” says Asioli.
Prosumers-the biggest risk and opportunity
The biggest disruption that Europe’s utilities face is the emergence of prosumers because the innovation involved is at the edge of the grid,at the consumer level and involves a lot of new technology around home energy management and energy storage, says Asioli. But, there are opportunities there too-for both the consumer and utility.
To avoid losing customers altogether, many forward-thinking utilities are partnering with the prosumer and are offering very necessary energy services, often alongside highly innovative startups. Asioli points to E.ON as one such utility.
We wrote recently about how utilities are reorganising themselves in order to embrace the opportunities that microgrids, for instance, can offer. [Microgrids are changing the energy landscape.] The global energy landscape will continue to evolve and proactive energy consumers will only grow in their numbers so it is rather unwise for utilities to ignore the development and not take advantage of the business opportunities available to them. François Borghèse, Prosumer Marketing Director, Schneider Electric, told Engerati recently that utilities should not hide from microgrid development or see it as a threat but instead grab the opportunities available. He adds: “Utilities have to reinvent themselves by expanding their service offers beyond just energy supplying.”
Future energy in 3D
Asioli quotes the three main drivers of disruption with the formula coined by Engie “the future is 3D”: decentralisation, decarbonisation and digitalisation. “These are changing the way utilities must approach the business going forward into the future.”
The move from a central grid to a decentralised one is gaining momentum especially now that utilities recognise its many benefits. The decentralised grid better suits a high renewables penetration, reduces transmission losses and lowers carbon emissions. Security of supply is increased nationally as customers don’t have to share a supply or rely on relatively few, large and remote power stations. There can be economic benefits too. Long term decentralised energy can offer more competitive prices than traditional energy. While initial installation costs may be higher, a special decentralised energy tariff creates more stable pricing.
For house builders and developers, decentralised energy is a cost-effective route to achieving carbon targets. This approach to low carbon energy provision provides the opportunity to promote a locally provided, sustainable, competitive and smarter energy choice-for both the consumer and the utility. [Bringing energy system thinking out of the dark ages.]
If the utility wants to be a part of this move to a decentralised grid, the utility will need to arm itself with new technology and transformed business models. IT and automation technologies play a major role when it comes to managing these new complexities on the grid.
Digitalization is all about harnessing the value out of the increasing volume of data from the modern grid. Automation is certainly part of the digitalization process and an increased need for automation comes from more and more devices in the grid that increase complexity and create more data. Digitalization is the next lever to create value out of data and without this, utilities will not be able to harness new revenue opportunities and will possibly lose much business as a result. Utilities will have to adapt their systems and technology to stay ahead.
New entrants and disruptive models
Asioli says that the number of new entrants offering disruptive models is growing, particularly in the Netherlands, UK, and Germany where disruption is favoured and encouraged.
“Utilities are taking startups very seriously. They are either partnering with them or investing in their innovative services or products. Startups have a serious part to play in this disruptive landscape and utilities should be open minded and flexible when it comes to startups,” says Asioli. “Creating value for customers should be their aim and this is where innovation and flexibility will be key.”
Asioli concludes: “Take disruption seriously. We don’t know what the future looks like but create a clear strategy and roadmap, embrace innovation and be flexible or you will miss the train. Use a third party to help as they will often have learnings that can be drawn from. Why reinvent the wheel?”
Sebastian Asioli Macchi, manager energy and utilities, Capgemini, will be attending European Utility Week 2016.