New and Future Business Models for Energy Utilities

Jan 27, 2016, 18:35 ET from Reportlinker

NEW YORK, Jan. 27, 2016 /PRNewswire/ -- New and Future Business Models for Energy Utilities : Distributed Generation, Smart Technology, and Renewable Energy Drive Business Model Innovation

The traditional utility business model of a pure-play centralised power producer and provider will soon be extinct. Distributed generation (DG) will increasingly feature in new utility value propositions as utilities try to capture more downstream opportunities. These will include several models, from an aggregator of DG to providing complete energy solutions for prosumers. The transformative effects of technology-enabled change will be seen in new models such as virtual power plants, demand response, cloud solutions, and energy-as-a-service. The supply-driven business models of the past will make way for customer-centric business models and utilities that fail to innovate and adapt will face the Utility Death Spiral in the next 10 years.

Key Findings

Transformational changes are threatening traditional utility business models.

-Historically, the electric utility industry has been a solid performer with strong growth fundamentals. Increasing populations and higher power consumption intensity brought about by increased social development meant that electricity consumption increased year on year; along with this came an increase in profits. This revenue model provided a relatively safe bet for investors that wanted a stable return on investments.
- However, the industry has experienced significant changes in the past 2 decades, especially in Europe. EU directives have resulted in the opening of markets to new competition and promoted the use of distributed renewable energy sources to combat climate change.
- In addition, the recent economic crisis and improvements in energy efficiency have resulted in reduced electricity demand as production levels have decreased, and additional penalties have been added on old conventional plants due to emission regulations—these have created challenges for utilities.

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