In presentations and interviews with Greentech Media at DistribuTECH 2015, utility executives expressed various strategies for coping with the power industry's impending transformation.
Several recently released reports have also tried to get a handle on emerging trends in the power sector. Overall, the reports show that utilities are keen to embrace change in their industry and profit from new opportunities. The tricky part is figuring out how.
The biggest growth opportunities
According to a survey of 433 U.S. electric utility executives conducted by Utility Dive, the majority of respondents (31 percent) said that distributed energy resources -- which were long seen as a threat -- could become the biggest driver of industry growth. In contrast, only 8 percent of executives viewed centralized generation as a growth opportunity.
Executives listed enhancing the customer relationship as the second biggest growth opportunity (23 percent). New companies that have stepped in to offer distributed energy products and services, like rooftop solar, threaten to degrade ties between customers and the utility. In response, many utilities are adopting a more service-oriented business model to keep up with competitors.
Overall, the U.S. electric utility industry expects increased adoption of natural gas, wind, utility-scale solar and distributed energy resources over the next 20 years, spurred by new business opportunities and environmental regulations. Meanwhile, coal and oil use are expected to decline.
Energy storage is viewed as a particularly important new product, with 53 percent of utility executives saying they should invest more in the technology.
But while the report found that a majority of utilities in the U.S. see distributed energy as a business opportunity, 56 percent of respondents said they still arent sure how to build a business model around it.
Dated regulatory frameworks designed to encourage more sales make it even harder for utilities to capitalize on new opportunities. Most utility executives (56 percent) said they would prefer performance-based ratemaking over the traditional cost-of-service regulation.
What do consumers want?
Itron recently conducted a broader survey of 900 informed consumers and 900 executives from gas, water and electric utilities in 16 countries that found a similar emphasis on the need for change. A total of 83 percent of utility executives surveyed believe transformation is necessary, while 55 percent believe the industry is not running efficiently and 21 percent believe the state of infrastructure will be worse in five years.
The report found that each year, a whopping $40 billion is wasted in lost electricity, natural gas and water resources in the U.S. alone. By recapturing even a small portion of that, utilities could make significant investments in new technologies and infrastructure that increase resourcefulness and lay the groundwork for a future-proof business model.
Interestingly, informed consumers think the challenges facing the utility industry are more urgent than utility executives seem to. For instance, 29 percent of consumers think the inability to manage changing customer expectations is an urgent concern for the industry, versus 15 percent of utility executives. Consumers also think the adoption of new technologies is more urgent than do utility executives -- 32 percent versus 23 percent, respectively.
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