Regulation and Business Model Innovation are Key as the Energy Transformation Accelerates
Navigant and Public Utilities Fortnightly identify new opportunities
and challenges as utilities are transitioning to cleaner and distributed
energy systems
Navigant (NYSE: NCI) and Public Utilities Fortnightly have released the
third edition of “State
& Future of the Power Industry,” a special report exploring the
current state of transformation of the utility industry as well as the
major changes expected in the next 10-15 years.
Key findings from the 2018 report highlight that an industry
transformation toward a cleaner and more distributed energy system, as
well as the broader digitization and transformation of the industry, are
driven by changing customer needs (customer choice), new energy policies
(at state and local level), technology, and competition (from new
entrants), while regulation is trying to keep up with the fast pace of
change.
As the utility industry is transitioning to new regulatory and business
models that support cleaner and more distributed energy systems, new
competitors are entering the energy space with new products and
services, supported by innovative revenue models. They are laser focused
on an increased interest from residential, commercial, industrial
customers and governments (cities) in renewables, distributed
generation, energy storage, electrification of transportation,
transactive energy, Internet of Energy, and more.
“With increasing penetration of renewables, a more digitized
infrastructure, electrification of transportation, and proliferation of
distributed energy resources (DER), the power industry will both expand
and collide with other industries, ushering in a wave of innovation and
competition,” says Jan Vrins, managing director and global Energy
practice leader at Navigant. “To prepare, utilities must rethink
approaches that have anchored strategic planning in the past. Providing
a broader set of individualized energy products and services, enabled by
customer-centric and digitalized energy cloud platforms should be the
focus of strategy and planning going forward. The value and impact of
these emerging energy cloud platforms will expand when paired with
connectivity and the ability to manage as an integrated part of the
larger grid.”
Additional findings in the report are based on interviews with key
executive leaders in the segment, including Navigant experts, as well as
a Public Utilities Fortnightly survey of nearly 400 utility industry
leaders. According to the survey, regarding the future of industry
competition, 41 percent of survey respondents find it likely that
distributed resources aggregators (e.g. Solar City, Sonnet) will compete
against utility companies, and 39 percent say it is nearly as likely.
Also, 24 percent of respondents rate global energy companies (e.g.
Centrica, ENGIE, Enel) as highly likely competitors to utilities with an
additional thirty-five percent rating them nearly as likely. Competition
from technology companies (e.g. Facebook, Google) follow closely behind
these results.
Business model innovation is another key trend, with 33 percent of the
participants indicating that “network orchestrator” is the business
model utilities should pursue to remain competitive, with “DER energy
platform provider” following closely behind it along with distributed
resources asset owner and developer.
Additional findings in the report are based on interviews with key
executive leaders in the segment, including Navigant experts, as well as
a Public Utilities Fortnightly survey of nearly 400 utility industry
leaders. The survey results revealed current thinking on the biggest
issues facing utilities today:
-
Nearly two-thirds of people believe the power industry should adapt to
a modern, distributed grid very soon.
-
Regarding utilities’ potential revenue growth and customer value,
respondents see energy storage and electrification of transportation
as the most promising (82 percent), followed closely by renewables and
distributed network solutions (81 percent).
-
For sustained future growth, nearly half of respondents believe
electrification of transportation has high potential, followed by
energy as a service and integrated distributed resources.
-
Nearly one-third of respondents think policy mandates are most likely
to drive utilities to aggressively shift towards DER, and more than 20
percent say it will be driven by customer demand.
-
More than half of respondents say there is a large gap between
regulation and reality. Just 15 percent of survey respondents suggest
the alignment of current utility regulations is better than
satisfactory.
-
In order to prepare for 2030, nearly half of respondents feel
utilities should prioritize grid reliability and existing regulatory
models and rate structures as immediate priorities. Resiliency of
energy supply ranks at 32 percent.
To see the full report, click
here, and join the social media conversation through #FutureUtility.
With over 600 consultants, Navigant’s
global Energy practice is the largest energy management consulting
team in the industry. We collaborate with utilities, government and
NGOs, industries and large corporations, product manufacturers,
investors, and oil & gas companies to help them thrive in a rapidly
changing energy environment. Our clients include the world’s 50 largest
electric, water, and gas utilities; the 20 largest independent power
generators; and the 20 largest gas distribution and pipeline companies.
Navigant’s seasoned professionals and highly skilled specialists form
exceptional teams to help clients transform their businesses, manage
complexity and accelerate operational performance, meet compliance
requirements, and transform systems and governance to address upcoming
changes as the energy transformation takes hold.
About Public Utilities Fortnightly
Public Utilities Fortnightly (PUF) has been, since 1929, the magazine of
record for the electric and natural gas utilities industry. It is a
forum for commentary, opinion and debate on utility regulation and
policy. PUF is must-read for the broad readership of some fifteen
thousand-plus senior utility managers, regulators, policymakers, and
leaderships of the asset owner/developer, advocacy, financial, legal,
engineering, economic and consulting communities that must address the
industry's challenges every day.
About Navigant
Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant’s professionals apply deep industry knowledge,
substantive technical expertise, and an enterprising approach to help
clients build, manage, and/or protect their business interests. With a
focus on markets and clients facing transformational change and
significant regulatory or legal pressures, the firm primarily serves
clients in the healthcare, energy, and financial services industries.
Across a range of advisory, consulting, outsourcing, and
technology/analytics services, Navigant’s practitioners bring sharp
insight that pinpoints opportunities and delivers powerful results. More
information about Navigant can be found at navigant.com.
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