Utilities Fight Back With New Ideas

Utilities have at best a five-year window to adapt and prepare for the new energy economy.
Published: Mon 11 May 2015

Utilities are facing a ‘perfect storm’ of disruption: Solar PV costs are plummeting and by 2020 should be on par with fossil fuel costs in most regions in the world, driving the switch to renewables. The smart home market is accelerating, with an estimated worth around $1.6 billion globally by 2020, driven primarily by energy. Policy directives are demanding increasing carbon emission reductions and energy efficiency increases. And customers are starting to rate utilities on their service performance, not just on their electricity provision and reliability.

Energy market in transition

“We are in a state of transition. We have been since 2008 to 2015 and we predict this transition will continue to 2020 based on the price of renewables, changes in policy and customer expectations,” said Perry Stoneman, Global Head of Sectors and Utilities Global Sector Leader at Capgemini, in an Engerati webinar. [Engerati-From Utility to Energy Services Company – Fighting Back with New Ideas]

But although the situation is undoubtedly challenging, and much of the news is negative, there are ways to respond, continues Stoneman, saying that Capgemini is working with some utilities on these. Briefly the responses can be categorized into four main areas:

1. Bottom line – improving the fitness of and creating a healthier utility through operational excellence around the customer and in the operations channel in how to look at new business and growth

2. Top line – increasing numbers of new customers, potentially through mergers and acquisitions to gain economies of scale, but also with new services offering energy management solutions to end customers and adding to the portfolio of services

3. Watching the competition – watching new players to see what they are doing and responding in kind

4. Digital – developing a digital footprint to keep up with the pace and change of digital technologies, such as social and mobile. Studies have shown that companies with strong digital acumen are most cost effective and have higher topline growth than companies that don’t.

Utilities fighting back

“We are seeing the industry fighting back in creative ways,” says Stoneman. “Utilities are starting to say that by becoming more efficient, with new topline growth, responding to new competition and having a more digital culture, they are seeing opportunity to become more involved with end customers and become a new kind of business.”

Examples that Stoneman cites are utilities offering energy diagnosis, building improvements, or the installation of energy management systems. For example, British Gas in UK recently introduced the Hive Active Heating service, which allows customers to control their heating and hot water remotely, and Eneco Energie in the Netherlands has introduced an in-house control offer with the offer of tablets to customers who sign up.

Despite the changes taking place in the market, there are still utilities, albeit in a shrinking number of jurisdictions, which believe that they won’t be affected. “But they will in time, and we believe there is five-year window at best for regulators to get in line with what’s happening in the rest of the world.”