As the energy industry shifts, many changes that benefit energy consumers (such as increased energy efficiency, on-site renewable generation and other energy services, offered by a growing field of competitors) threaten the traditional utility business model (generating revenue by selling kilowatt hours). In today's world, modernizing the utility industry means evolving the business model as much as updating technology.
Siemens management consultant John Cooper -- a leading smart grid expert and co-author of The Advanced Smart Grid, who is currently working with the Siemens North American Smart Grid Center of Competence -- is intrigued by this historic challenge. The Center is helping to transform New Brunswick Power (their local utility) into a company that does business the 21st-century way.
"It's as if utilities need to become two types of business during what I'd call a transitional term," said Cooper. He envisions a hybrid electricity business -- part focused on the historical mission of delivering low-cost, highly reliable, centrally-produced electricity; and part selling an expanding array of higher-value, higher-margin retail energy services.
A key tool in transforming NB Power is the Siemens Smart Grid Compass methodology, which Cooper compares to a road trip. "When you are about to set out on a trip, think of the steps you take," he said:
1. Get oriented. Figure out where you are now.
2. Define your destination. Envision your objective, where you want to go.
3. Plan your route. Determine the best way to get from here to there.
4. Navigate along the route, to stay on your path.
These are also the steps in the Siemens Compass methodology. In 2012 Siemens completed NB Power's pioneer Compass study (steps 1-3). Currently, Cooper and the Center are engaged in Step 4: guiding the transformation of NB Power's business model and operations.
According to Cooper, the key to developing NB Power's energy services market in its territory is for the utility to get closer to its customers, becoming an expert on their energy use, while maintaining their historic role as the go-to resource in the region for energy expertise. This will help NB Power engage customers more effectively through demand response and other programs.
"This change requires not just sound program management, but also strong strategy, R&D, marketing, and customer communications -- not traditional strengths for most utilities," Cooper observed.
Cooper recommends five pillars that together support utilities evolving into hybrid providers of power and energy services:
- Technology change and business process improvement.
- Business model reform.
- A more engaged relationship with customers.
- Organizational alignment.
- Regulatory reform.
Cooper compares this fundamental shift to the transformation the telecom industry experienced over the past 30 years.
"Just think of the smartphone and the millions of tailored applications we see on mobile platforms today, created by millions of developers, all anticipating niche service needs with a low-cost delivery model," said Cooper. "Energy services delivered by electric utilities will ultimately be about much more than simply presenting meter data on your iPhone. We need to stretch our imaginations on this topic."
Read more about Cooper's views on utility transformation.
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