Strategies and Business Models for the Energy Cloud

In an article for EEI’s Electric Perspectives magazine, Navigant explains how utilities can capitalize on new opportunities and business models to best meet the needs of customers and other stakeholders

As the energy grid transforms into a cleaner, more distributed, intelligent, and increasingly mobile infrastructure, new opportunities for capital-efficient and customer-centric products and services are emerging. This transformation presents new opportunities that leverage service-based and network-orchestrator-type business models that rely on technology platforms and offer the potential to scale faster and yield greater profit margins than before.

In an article for EEI’s Electric Perspectives magazine, Jan Vrins, managing director and leader of Navigant’s global Energy practice, and Mackinnon Lawrence, senior research director at Navigant Research, take a close look at how forward-thinking utilities that start planning now can capitalize on an Energy Cloud future fueled by changing customer demand, technology innovations, and the rollout of progressive policies and regulation.

“In the Energy Cloud, things work differently. The way to forecast load growth is different, distribution and transmission planning may need to embrace non-wire alternatives, and generation investment decisions will need to be made very carefully. Also, regulatory frameworks, rules, and ratemaking will require a complete overhaul, as small tweaks will not work long term,” according to Vrins and Lawrence. “Electric companies should develop their own playbooks in addition to five-year strategic plans and longer-term integrated resource planning and investment plans.”

Overall, at least $1.3 trillion in new revenue opportunities will be created in the Energy Cloud by 2030, according to Navigant Research. Most of these transactions will flow through growth platforms, such as integrated distributed energy resources, building-to-grid, transactive energy, or smart cities. To stay competitive, utilities must first decide which Energy Cloud technology platforms they want to invest in; create new revenue streams by developing new business models, products, and services; and implement a holistic approach to planning that accounts for current and future interdependencies across technology, regulation, policy, economics, and customer demands.

According to the article, an updated strategy entails:

  • Engaging more proactively with customers and regulators to help them understand customer choices vis-à-vis price and reliability.
  • Continuing to upgrade the energy grid and to redesign operations to be more flexible and to facilitate the integration of DER.
  • Finding equitable ways to ensure all customers can enjoy the benefits of DER transmission and distribution services (“the value of the energy grid”) in an unbundled manner relative to today’s regulated rate structure.
  • Developing a portfolio of customer, electric company, and third-party-owned renewable and DER assets to appeal to environmentally conscious customers, as well as prosumers.

“While it is too early to predict exactly how the energy transformation will unfold, we can be sure that new policies and regulations, changing customer demands, and technology innovation will yield opportunities far beyond our imagination today,” said Vrins and Lawrence.

For more on changing business models in the utility industry, check out the slides below:

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