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.
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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.
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.