Impressions from EUW and EEI Financial Conference

Comparing the 'vibe' and discussions at European Utility Week in Vienna last week and EEI's yearly Financial Conference this week in San Francisco, it's very interesting to see how European and North American energy companies / utilities are taking different pathways as they navigate the Energy Transition. These are definitely very interesting and exciting times in the industry, and there are many parallels between Europe and NA as it relates to this transformation, but there are also some interesting differences.

First, lets discuss common ground.

1. The Energy Transformation is accelerating, driven by changing customer needs, policies and regulations and technology. This transformation will affect the way we live, work, and move around in our communities and cities, as well as the way we use materials, produce and move goods, and provide services. Energy carriers—including electricity, liquid and gas fuels, and heat—will become increasingly interconnected.
2. Increased level of renewables and DER (even more disruptive, as DER is growing 8-10 times faster than central station generation in the US and Europe in the coming decade) are changing the fundamentals of our energy system, at Navigant we call this the Energy Cloud.
3. The biggest opportunity to create customer and shareholder value (not including M&A) is Distribution and Beyond the meter. And we see the transition to renewable gas/liquid fuel as carrier of energy as a significant value creation play going forward.
4. We see two new business models emerging: Energy as a Service and Network Orchestration. Utilities will become the platform orchestrators, to connect new adjacent platforms (transportation to grid, buildings to grid etc.) with the larger neural grid.
5. The network orchestrator model leverages improved connectivity across the Energy Cloud, harnessing enabling technologies to unlock value across a vast interconnected network of new energy assets (e.g., EV charging infrastructure, microgrids, behind the meter storage and distributed generation).
6. If we want to manage the entire system successfully from a reliability, resiliency and total cost of service perspective, we need advanced technologies and platform orchestration by utilities working together with the providers of new energy solutions, products and services.
7. This will be achieved through the deployment of new technologies like advanced sensors, two-way communication networks, Internet of Things (IoT) platforms, and customer engagement solutions deployed on foundational technology enabled Energy Cloud Platforms. Those platforms will evolve over time and progressively offer a range of expanded and enhanced energy products, services and capabilities that will deliver environmental, societal and economic value for customers and communities. These are the platforms and the potential value that can be pursued:

• Integrated DER platforms could support more than $3-4 trillion in value within the next two to three decades
• By 2020, more than 6,000 GWh of electricity is expected to be consumed by plug-in EVs annually in the US, giving rise to Transportation2Grid
• Building2Grid means leveraging more than $50 billion of anticipated investments in behind-the-meter integrated energy assets for residential and commercial customers within the next five years
• More than $1 trillion in projected cumulative global revenue is at stake over the next decade across Internet of Energy platforms
• Transactive energy platforms are expected to see billions of dollars in software-related investments, technology integration, and fees by 2030
• More than $250 billion in cumulative investments focused on smart cities energy projects alone are anticipated through 2030.
• Investments in neural grid infrastructure and emerging technologies through 2030 are expected to exceed $700 billion.

Energy Companies are increasing their investments in new energy solutions and technologies. Transaction history covers January 2015 to date – totaling 1,100 transactions tracked as of October 2018. strong increase in Energy Cloud activity recently, with 80 transactions in H1 2018, a 50% year-over-year growth. See below the solution areas they are investing in.

Now the difference:

When we discuss the energy transition with our energy company/utility clients we discuss two dimensions:

• Disruption to the existing business model
• Maturity of new business models

Clearly, there is and has been more disruption in Europe that have impacted the European utilities. Shareholder value has been impacted significantly, especially in generation, but also supply/retail businesses are under tremendous pressure because of customer choice, new technologies and competitors.

This means that European utility are more aggressively pursuing new revenue streams and business models. In general. Energy Companies are increasing their investments in new energy solutions and technologies. Transaction history covers January 2015 to date – totaling 1,100 transactions tracked as of October 2018. strong increase in Energy Cloud activity recently, with 80 transactions in H1 2018, a 50% year-over-year growth.

European utilities are leading their NA peers investing much more in new energy solutions. Let me take Vehicle-To-Grid as an example. We are doing over 20 projects for Utilities on electrification of transportation. But most NA utilities have not really explored V2G yet, while Enel, Innogy (merging with E.On), Total and others have existing solutions and platforms ready for roll-out globally. EV’s are coming, Car Manufacturers are putting 80-100% of their new investments towards electric vehicles and V2G platforms. By ’25, EV’s to represent 8.4% of U.S. sales. By ’35, EV’s will make up 53% of global sales. For the US at 20% penetration of PEVs, there would be 304 GW of total capacity. For California that would be 33 GW, NY would be 15.4 GW and MA would be 6.2 GW. If North American utilities will not invest in and develop V2G platforms at scale other new entrants with steal market share and business from them. it's theirs to loose.

The European utilities are also leading their NA peers developing transactive energy platform (supported by blockchain technologies). Now, for integrated DER platforms, we see the NA utilities taking the lead, really looking at optimizing and maximizing the value of distributed energy resources. We are at the beginning of the emergence of these Energy Cloud platforms and time will tell who will be more motivated (by shareholders and regulators) and successful to unlock this new customer and shareholder value.

Word of advice - what should Utilities do different:

Different utilities will take different approaches – there is no one size fits all playbook. Impact and approach will vary by region as the policy approach, market dynamics and structure vary. Three pathways, Network Orchestrator, Energy Service Provider or Integrated Energy Platform Orchestrator.

Specifically Utilities should focus on:

• Optimizing their current business (model) to free up resources for new products, services and energy cloud platforms (Defense). Develop platforms on which new products and services are being provided to their residential, commercial, industrial and government customers (Offense).
• Rigorous Customer-centricity – understand changing customer needs.
• Understand disruption to existing business model and maturity of new business models.
• Explore new business models like Energy as a Service and Network Orchestration. Utilities will become the platform orchestrators, to connect new adjacent platforms (transportation to grid, buildings to grid etc.) with the larger grid.
• Book at investments in Energy Cloud platforms differently than investments in your traditional business.

Join the conversation on social media: #EnergyCloud #FutureUtility 

With over 600 consultants, Navigant’s global Energy practice is the largest energy and sustainability consulting team in the industry. We collaborate with utilities and energy companies, government and NGOs, industries and large corporations, product manufacturers, and investors 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 transition takes hold.