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How utilities can cope with solar and battery storage

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Energy-Storage-image_310_180In the first article of this three-part series, I described how utilities face a real crisis. Their current business models are failing to provide electricity in a way that satisfies their customers. Furthermore, their grid-focused approach is generating real competitor risk to their organizations as energy-democratizing technology creates new, financially appealing opportunities for consumers.

But all is not lost. Utilities have the opportunity to create a grand vision that will help them to re-position their businesses and ensure a long and prosperous future. Furthermore, if they start to consider the changing market place there are as many business opportunities as there is competitive risk.

In this article, I will look at how utilities must address positioning and product questions that will allow them to pivot their businesses and remain successful.

Positioning – command the high ground

Positioning is all about finding a high value offering and defending it. Until now, utilities have held an impenetrable position in the market, but solar and battery storage is about to change that. So let us come back to a simple SWOT analysis to assess their options (but keeping it customer focused).

Strengths Weaknesses
Existing connection to every home and businessExcellent understanding of how to control powerAbility to provide power safely and reliablyStrong relationships with regulatorsAccess to low cost, long-term finance High risk of stranded  legacy assets Current business model is not capable of adapting to the changing technology environmentWeak customer relationship and limited abilities to change that
Opportunities Threats
New “smart” technology is creating new opportunities to deliver enhanced services to customersDistributed renewable energy and storage technologies are quickly becoming cost effective for grid integrationThere is appetite by regulators to protect utilities The ‘death spiral’ is startingRegulation is limiting a utilities ability to competeHigh risk of innovative businesses capturing customer base (e.g. solar plus storage)High risk of further eroded electricity demandUtilities are not meeting customer expectations

From this simple analysis, we see that utilities can still hold a winning position. But utilities must leverage their strengths while embracing new technology opportunities to position themselves as energy enablers. To this end, they need to think beyond services provided by the grid to services provided behind the meter, for example with the home. This will require utilities to address the issues of stranded asset risk and their poor customer relationships. It will also require them to develop new business models and promote the development of new, supporting regulation.

Product – in the business of energy enabling services

If utilities move from being electricity distributors to energy enablers, and their customers shift from being consumers to prosumers then a whole new set of services are required. A few customer-focused product (i.e. service) ideas of how this might be achieved are as follows:

This is by no means an exhaustive list but all of these ideas show how utilities can start thinking ‘customer first’. They also show how it would be necessary for the utilities to work with regulators to make it possible for them to deliver such services. It is also worth mentioning that all of these services can help utilities achieve better control of the frequency and voltage of their existing grids.

In Part 3, I’ll consider how careful pricing and business model design are critical for the success of utilities in the future, and what promotion, people and processes are required to support them.

James Allston, an Australian, is the Strategic Marketing Manager for Energy & Environmental Services at Siemens AG in Germany, and a co-founder and former Vice-President of the Energy Efficiency Council in Australia. He is a specialist in strategically marketing and developing businesses that create a sustainable energy future. His views are his own and not representative of Siemens AG or its subsidiaries.

 

 

 

   

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  • Chris Fraser

    If the transmission and distribution grids were sold in NSW and QLD, would the government still have enough control over how the grids are used to allow customer focused services ? I can’t see any motivation for asset buyers. It would be like being forced to spend to keep a taxi roadworthy and then not getting many fares or not getting paid for the fare.

  • TechinBris

    I can see where this goes and agree with what the author proposes.
    Trouble is from what we have always seen and come to expect, when Energy Corporations come out of their boardrooms and advise of their wonderful new product modelling, which always amounts to legalized extortion practices that it leaves us wondering if these Executives insert a “Grub” (thank you Princess Pyne for a polite way to use the ‘C’ word) module into their heads, when deciding on how their Corporation will function, how they will treat their Customers and leaving us just more frustrated and paying dearly for those same Executive’s future retirement in the lap of luxury.
    As such, when planning our solar installation, we did research and trend analysis to work out how much and what model we’d implement against what electricity is costing and the rate of growth in those charges. We were not surprised and it only promoted the fact to do it as big as possible and do a Hybrid Solution that could cope with a normal load for approximately 3 days with heavy cloud cover. Currently it will take us 4.5 years to recoup the cost of our installation and that is at the current prices of electricity.
    But the great thing is we can be guilt free and no angst for electricity charges, when it is a really hot day and we turn the Air-conditioning on, as our system provides all the house’s demands without the Grid being required, even though it is there for backup.
    So the Energy Corporations moves from here on, will be either happy profits, or a nightmare headed for insolvency by their own hand. I can only hope for their sake, they choose in the next Boardroom meeting, to eschew plugging in the “Grub” modules into their collective heads and choose to be nicer to those customers of theirs and can make the sunshine a little brighter in their future.
    After all, their success or failure of their Corporation, is in their hands, by the acceptance of their Consumer’s choices, every time. If not, then we should rectify that little problem immediately.