Readers of this blog will already know that I believe many industry sectors are now facing significant disruption. Today I want to share some insights on how transformation in the power utilities industry is set to disrupt a whole host of other sectors – and fundamentally change the way you think about electricity.
The new electricity ecosystem
Until recently, for most users, electricity has been a commodity they had little choice over.
But that’s changing. In the past, there were clearly defined roles in the global electricity market. Generation, transmission, distribution, trading and retail were separate parts of the value chain. But now, there are new players and technologies, more provider–customer interaction, broader options and eroding borders between industries. As a result, consumers can choose from a whole range of potential power sources and providers.
The falling costs of renewables like solar, breakthroughs in large- and smaller-scale energy storage, and new energy-efficient technologies are also speeding up greater distribution of power generation, as our recent Global Power & Utilities Survey shows.
In short, technology is giving consumers more choices and independence in the way they source, use and store electricity. Some may even be able to make money too. The electricity industry is evolving from a unilateral system to an integrated networked ecosystem that’s highly digital and dynamic.
Market disruption is already here
So, why are markets changing so radically now? The root causes for the sector’s transformation are a unique combination of global megatrends. In addition to the impact of technological breakthroughs, concerns over emissions and climate change are putting providers under great pressure to change the mix of fuels they use and to encourage efficiency.
This isn’t just a vision of the future. In some parts of Germany, my home country, more than 80% of the local demand is already filled by distributed generation - much of it in the form of rooftop solar or wind projects run by land-owners rather than utilities.
And these changes aren’t just happening in Germany; our global survey confirms that energy transformation is underway all across the world, as our results from power company senior executives in 52 countries show:
Your company in a post- energy transformation world
This revolution carries implications for all businesses, whether they’re part of the electricity sector and its supply chain or completely outside it, whether they’re interested observers or simply customers – from large businesses to individual households.
Instead of simply being a cost over which companies have very little control, electricity is becoming much more variable – and potentially more valuable. These transformations are opening up immense opportunities while forcing – and allowing – consumers of electricity to approach power in a new way: as prosumers, who both produce and consumer energy.
Companies can participate in demand management programmes, strike power purchase agreements for wind power (and hence bolster their green credibility), install storage that allows them to avoid peak demand charges, and deploy data and software services to manage use effectively. Each of these options presents business opportunities for new entrants, for companies in adjacent fields, and for savvy consumers. And that’s just the beginning.
New entrants are already operating in energy markets. Take US-based home security company Vivint, which now provides solar panel installation. Or UK private-equity backed company Hydro 66, which offers data centre space in northern Sweden, taking advantage of a naturally cool climate and proximity to sources of hydro-electric power. Traditional industry suppliers are expanding their activities too, for example, by partnering with agricultural or other operations to construct micro grids. And cross-over between power utilities and other industries will continue to increase. Tesla, the US automotive company, is using the expertise and scale it's built in constructing advanced car batteries to offer a new home energy storage product called the Powerwall, which can store excess electricity produced by solar panels as well as provide backup power.
No matter what industry you’re in, the time has come to think strategically about energy demand management and to imagine the possibilities for your own business.
Norbert Schwieters leads PwC's Global Consumer and Industrial Products & Services group. He's also the Global Energy, Utilities & Mining Leader and heads up the Energy industry team in Germany. Read more