For today’s leaders, energy is at the top of the agenda. There are worries about problems in electricity and gas markets, re-assessment of coal for power generation, the challenges of global warming and renewables, and the re-emergence of nuclear. Utilities, in particular, are currently undergoing significant reinvention due to a rapidly changing market and political environment. The industry desperately needs to develop new business models to ensure new top-line growth.
Utilities are undergoing significant reinvention due to a rapidly changing market and political environment. A constant network cost structure, coupled with the decline in on-grid consumption (mainly driven by the growth of decentralized renewable resources), means utilities are experiencing shrinking profit margins.
The trend could worsen, as the current grid parity of residential renewables is no longer considered the final price level in many geographies. In fact, rooftop PV is expected to be almost two times cheaper than on-grid tariffs in 2025, and up to five times cheaper in 2050.
At the same time, a number of major trends are affecting how consumers use energy. Digital transformation is one of them. This transformation is not limited to changing how companies interact with their clients, but also impacts the way they operate internally, as well as where and how value is created. Small-scale, distributed generation and power storage are opening up space for households and enterprises alike, as well as cooperatives and other associations of local consumers.
Network utilities should view these future trends as an opportunity to fully transform the network business into a provider of value-added services to end customers and an enabler of efficient use of distributed-generation resources via virtual power plants.
There is an increasing set of technologies that will allow network operations to become more effective and efficient, and choosing not to adopt them will lead electricity companies to fall behind in this industry transformation.