business models

A new report released by Guidehouse Insights and Public Utilities Fortnightly suggests that utilities need to diversify their investments to thrive in changing energy business models.

The report is based on a survey conducted on 4,000 utility executives and influencers across the US and Canada.

The survey has revealed that climate change, business model evolution, and distributed energy resources (DER) integration are top of mind for industry stakeholders as both new and existing challenges accelerate unprecedented change.

71% of the survey participants believe climate change is already threatening current business models, whilst 66% say technology and telecommunications companies pose the largest competitive threat.

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62% say rapidly increasing renewables and DER are the most disruptive force to the utility business model and 46% said utilities’ own risk-averse culture is the biggest hurdle preventing investment in new business models.

Climate change

Two thirds of the survey participants said utilities should take multiple actions to proactively respond to climate change threats.

The actions include converting generation fleets to renewables and storage, embracing sustainability initiatives across operations, and integrating resiliency across the network.

Investment

Grid modernisation initiatives remain a high priority for most utilities and a critical evolutionary step to improve grid resiliency.

54% of the survey participants plan to strategically focus on electrification, and about 30% plan to look to diversify products and services as commodity electricity demand continues to decrease.

Business Models

Nearly 50 % of survey participants recognise the importance of embracing network orchestration roles like enabling transactive energy and facilitating third-party participants.

Only 28% of respondents last year felt that utilities should serve as a transactive energy orchestrator.

19% of respondents said the industry is still focused on more structural barriers to innovation like restrictive regulations and utility operating culture.

Dan Hahn, leader of energy providers practice at Guidehouse Insights, said: “We have witnessed significant transformation unfold in the energy sector in the past decade, but we are only at the beginning, especially as new challenges arise from the COVID-19 pandemic.

“Utilities have to further adapt and make different investment decisions as the customers, cities, and communities they serve seek to rely on a partner that can evolve as their energy needs continue to change.”

Mackinnon Lawrence, director at Guidehouse Insights, adds: “This year’s survey results confirm that utilities are facing challenges in several parts of their business, but the opportunity to create long term customer and shareholder value is far greater, and it’s up to utilities to find pathways to unlock this value.

“It’s not an easy task, but utilities seem to be better prepared for it than even a year ago.”

Click here for more information about the report.