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Five things looming for utility companies

published, Feb 26, 2014 8:43am
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The traditional utility company is being disrupted like never before.  There are so many new things in the energy landscape now making their classic business model obsolete.  

In my view, the major are distributed generation, energy efficiency and large scale variable renewables, and will have significant impacts in the longer term.

Utilities have always been a +margin business, with growth regulated or predicated on an economists view of ever increasing consumption, and subsequent investment into asset gold plating. Distributed generation and energy efficiency are proving this an incorrect position.

The role that a poles and wires co. play essentially stays the same, shipping electrons, however these businesses seemingly loose sight of this when faced with distributed generation. Their model needs to change.

It's the same with retail, they need to understand the market prices and have these reflected in terms of feed in tarrifs that are fair and reasonable. Purchasing renewable energy at 6 cents from 22 High street and selling it to 24 High street at 36 cents is an abomination that will send people off the grid (it's doing so now, and will increase as distributed tech becomes cheaper), and impact the whole end to end.

Fossil generation has it's days numbered, sunk cost into increasingly un-economic plant in terms of maintenance, fuel costs, dropping market prices from reduced demand will make these businesses non competitive and untenable in the future.

The overall perspective is that the utility culture, business and operating models are being disrupted. Typically when companies are faced with such disruption and inability to change, the eventuality is predictable, just look at Kodak... The difference here is the utilico potentially has a huge base of redundant sunk assets, compared to intellectual property.

One thing is sure, we have interesting days ahead.

Sam, @samotage.

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