Distributed energy resources (DERs) integration can be a source of numerous opportunities for investment and innovation for utilities.
We have previously explored how utilities can integrate DERs to innovate business models, and we have demonstrated cases of utilities making the most out of DERs in innovative projects involving solar energy, electric vehicle (EV) integration and smart cities planning.
As such, it has been repeatedly proven that the modernisation and diversification of business models for utilities is well on its way, with the traditional model of operations for utilities being quickly being phased out in favour of more innovative approaches.
To David Stansell, Co-founder of management consultancy organisation Distributed Energy Futures, so many fast innovations happening in the sector means that utilities need a new strategy to cope with the new industry landscape.
"There are several unpredictable forces affecting the sector, and it's unclear when and how they will impact it," says Stansell. "These would be things like digitisation, deregulation, renewables, technologies built on top of digitisation, communications networks, demand response, storage, and so on.
"We want to help our clients build a strategy where they feel confident they can carry on prospering in the future, and actually exploit some of the massive changes that are going on rather than having to just put defensive strategies in place and pretend that change isn't going to happen."
Transforming the business model
According to Stansell, there is a significant demand from utilities for help in how to properly transform their business model and integrate DERs and other technological innovations into their service offering. "The sector is moving from a top-down model towards a much more distributed model," he comments.
"The traditional electricity generation sector is quite a conservative environment. We're very much seeing that there is a need for change in mindset in the energy sector to keep up with what's going on, with the advent of renewables, new technologies and so on."
This mindset change is what will truly make a difference in future-proofing operations for utilities. "The entrepreneurial mindset is going to be key for these utility organisations to survive in the future, because what we're seeing is a gradual shift from selling energy as a product to selling energy-based services.
"Just as people hardly use their smartphones to make phone calls anymore, they do a lot of other things with it; and energy is heading in the same direction. The energy sector is turning towards solutions for powering transportation, enabling digital devices, managing energy consumption in the home, and others. People are realising that they need to convert the industry to a service model from a utility model."
Collaboration with tech startups
Forming partnerships with startups is an extremely effective way to fast-track this business model transformation and develop projects with real-life applications, says Stansell. This approach can turn out to be a significant differential in customer services, renewable energy integration and DER integration, for instance.
"Another lesson to learn from this exercise is that there is a learning cycle between startups and corporate players in the sector," says Stansell. "There's a virtuous circle between the corporate environment and the startups, which offer these quite specific technologies and new business models that help the corporates do a better job. We are seeing a lot more of that partnership model develop between these two types of player."
"For example, we are currently helping an organisation which has developed an optimisation algorithm for EV charging locations, and we're helping them to connect with some of the corporate players in the EV market. An issue for owners of car parks is that you don't want to have too many EV charging points at the wrong place, because that would mean you've locked out valuable space in your car park for non-electric cars.
"We are introducing this startup organisation, which is based in Belgium, to car park operators around Europe to enable them to optimise the location and number of EV charging points in their car parks."
Distributed Energy Futures thus serves as a mediator between the two parties, "because the traditional model of engagement between startups and corporates is sub-optimal. These small organisations can't really do it all by themselves and many corporates don't know the latest innovations, so we can help bridge this gap."
How can utilities find the best startup partners?
However, for utilities to successfully integrate projects with DERs and EVs, for example, they must also be able to find the best partners to achieve optimal results, whether through consultants or internal programmes.
"Quite a few utilities now have a similar model in their heads. They sometimes use consultants directly, and they sometimes try and do the same sort of thing with accelerator programmes in-house so they can attract organisations that look promising. It's not a new observation, but it's a new thing that needs to be done - I would say that people haven't cracked yet how to do it as successfully as they could, so we see us having a key role in that process," comments Stansell.
Utilities have a variety of assets at their disposal to ride the waves of innovation that are sweeping the industry. Taking advantage of such assets - be it through industry partnerships, acquisitions or projects around DERs, renewable energy and EVs - is a must to actively participate in the process of transformation.