Just back from the European Utility Week conference in Amsterdam where I spent an interesting two days meeting utility and grid executives, investors, entrepreneurs as well as looking at a whole host of interesting new technologies and business models. That all said it was very difficult to break through the techno jargon. Everyone, or so they said, had IOT, flexibility, DERMs, energy storage and virtual power solutions, not to mention algorithms, machine learning, robots, artificial intelligence and blockchain. But the reality is somewhat different as most companies had only power point slides. However, I did come away with a few interesting conclusions including:
1. European utilities are out of restructuring and into repositioning mode. We have seen Italian utility Enel buy the US demand response company EnerNOC and the Finnish utility Fortum bid to buy the German utility Uniper. Then we have the Danish utility DONG Energy charging its name to Orsted. But this is only the start and after five years of restructuring all European utilities are now focused on M&A and repositioning.
2. Decentralised energy generation solutions and in particular solar are becoming cheaper and cheaper. Solar never ceases to amaze me. My key takeaway is that solar will see another 25% drop in costs because of innovations around power electronics and installation costs. Plug and Play Solar is upon us. Finally, I also believe we are not long away from having electric vehicles covered with solar cells which will go along way to improving range of the car as well as ‘range anxiety.’
3. There is lots of hype around energy startups. The good news is that there is lots of new startups and growth companies providing new technologies to utilities and grid operators, competing with utilities or offering new services. Some are gaining traction but many are not and although there is lots of capital available the bad news is that there is starting of a bubble especially in badly understood areas such as blockchain.
4. Take a look at Australia if you want to know what’s coming your way! Australians are putting massive amounts of solar on their rooftops, with 3-5 year payback periods the norm, which in turn is impacting the whole power system. The amount of rooftop solar is now so big that it is impacting power quality. Solar also reduces the cost of power for those who can afford solar leaving those who can’t paying higher prices. This in turn is going to put pressure on the pricing models of grid operators and utilities noting that Australian customers pay some of the highest power prices in the world.
5. Electrification of transport is a game changer. You would think that the utilities would be all very excited by the electrification of transport. It will mean that power demand will increase and that we will see strong investments in charging and related grid infrastructure. However, traditional utilities remain sceptical which is why new players such as the automobile manufacturers like Tesla and a whole host of startups are entering that area.
6. Finally, change is not easy for the utility. It is not just the male dominated engineering and conservative cultural background of the utility that makes change difficult; it is also the IT infrastructure build up on a piece by piece basis over many years which are not able to talk to each other and are far from future proof. In addition, the corporate structure of utilities with their traditional grid, retail, B2B, trading, and generation split make the development of next generation business models very difficult.