Faced with a dizzying array of challenges they seem unable to overcome, utilities should embrace them all, according to experts who schooled utility executives in Los Angeles this week.
"The utility has to become the orchestrator of all of that change, and not just look at batteries and how it might harm them, or Google coming in as a competitor, or SunPower," said Michel Gévry, president at the consulting firm Capgemini Québec, at Itron Utility Week. "What if you were this orchestrator? What if you became this energy services company that can embrace all of that technology and propose it?"
Instead of selling electrons or kilowatts, Gévry said, utilities should sell bundled services, which might include services utilities haven't considered before, services enabled by smart meters and smart home technology, like home security, for example, or monitoring the elderly.
"We think that utilities need to become energy services companies that can provide multiple sources of energy, including renewables, including the batteries and PVs and everything else that will help them not lose the customer. Serve the customer as they know best how to serve the customer, and then deploy much more services," Gévry said. "This requires new business models."
Roger Woodworth agrees, after studying developments in the industry for the last five years as the chief strategy officer for Spokane-based Avista Utilities.
"It’s very likely to be true that our future is more distributed and more integrated. That doesn’t displace the central service, the central grid, but the idea of the new technologies that are coming, for the whole to be stronger those new technologies have to be integrated in some way," he said.
Utilities will also have opportunities to leverage data collected by smart meters and sensors to learn more about their customers and discover new services.
"When you think about the supply chain for utilities, whether gas or electric, we have influence over almost every aspect of the supply chain, but the one we have the least influence over, the least understanding of, is the customer. Yet technology is equipping the customer to do more things to influence the system. A more relational or power personalized system is in our future, and that could make it very different, depending on how things unfold."
By offering bundled services, Woodworth said, utilities can not only prevent upstarts and newcomers from stepping in to provide new services, but also from splitting services off that utilities have traditionally provided.
Gévry offered Tucson Electric Power as an example of a utility that, facing competition from solar providers, got into the solar business.
NRG Energy recently hired Robyn Beavers, founder of Google's Green Business and Operations Strategy Group, who described the new energy landscape at Chicago Ideas Week.
"There’s an emerging ecosystem of new types of energy companies, mostly software startups or control platforms, and from not just the big energy players or the big industrials, but now from our common innovation venture teams," she said.
"The corporate world is trying to figure out exactly how to be a part of that ecosystem, hook up stuff in that ecosystem, or inject capital into it to help it proliferate and make their lives easier in the long run too. So you have everyone coming together to sort of layer all of these things on top of each other. So it’s become a more complex world, but with more abilities to enter that world and offer more kinds of solutions beyond what we were conventionally thinking about for energy."
In Los Angeles, Gévry and Woodworth were looking a decade into the future, trying to find a route for today's utilities to survive. In Chicago, panelists at Chicago Ideas Week were considering the longer term, and arriving at similar outcomes.
"If you look to the more distant future, say a hundred years from now, in much of the developed world the use of fossil fuels is basically going to disappear," said University of Chicago theoretical physicist Robert Rosner, a former director of Argonne National Laboratory and co-founding director of the Energy Policy Institute at Chicago. "So the question really comes down to: what is going to replace it?"
"The utilities of today will be dead within the next several decades anyway," said Philip Warburg, author of the books "Harness the Sun" and "Harvest the Wind."
"So the question is does it go the route of Kodak and Polaroid or does it transform itself and become an energy services provider which deals with storage issues, which deals with smart demand issues, and with power production issues?"
For utilities to transform themselves, they'll need a little help from their regulators—an uncertainty that hovered over the plans being hatched in Los Angeles.
"The question on the table about regulation is how fast we’re enabled to get there," Woodworth said. "And clearly the policy drivers are in that favor, the technology is in that favor, customer expectations are in that favor, but a regulatory architecture that depends on precedent and avoiding costs doesn’t speed that along."
"Regulators don’t move fast except in response to crisis."
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