Navigant Research Blog

Take Control of Your Future, Part VIII: The Emerging Energy Cloud and Final Thoughts

— June 16, 2016

Power Cloud ComputingMackinnon Lawrence also contributed to this post.

In the initial blog in this series, I discussed seven megatrends that are fundamentally changing how we produce and use power. Here, I discuss my last megatrend, the emerging Energy Cloud and its role in changing our industry.

What Is Happening?

Since coming back from Chicago, where I attended the EEI Annual Convention, I am even more convinced that the electric power industry is transforming. In the closing session of the convention, several utility CEOs spoke about the current state of this transformation and shared success stories. Although utilities will continue to focus on safe, reliable, and affordable power, they will also have to embrace clean, distributed, and intelligent energy. It was interesting to hear CEOs’ perspectives on customer engagement (“we now actually listen to our customers”), innovation (“we are all in”), and distributed energy resources, or DER (“we want to play”).

While that’s great, we are faced with an enormous dilemma. It is hard to comprehend the complexity of what we are dealing with here. The Energy Cloud will be the product of accelerating innovation, the bulk of which lies beyond our immediate purview. Although we cannot predict or anticipate all the disruptions that will be triggered by emerging technologies, there is an inevitability to this transformation that cannot be ignored. These changes will penetrate all corners of the industry: customers, regulation and policy, technology, business models, and grid operations.

Meanwhile, there is limited or negative demand growth throughout the United States. And because of more efficient ways to use power and more prosumers taking the plunge to generate their own, less and less electrons will flow through the central power system (indefinitely). At the same time, in order to provide safe, reliable power, as well as support a tsunami of DER, exploding Internet of Things (IoT) capabilities at the edge of the grid, and rapid digitalization, significant grid investments are needed. The number one question is: Who will pay for this evolution? The search for new value and pricing models (and there will be many) has begun.

We are at the beginning of the transformation, and I don’t think we have seen anything yet. I predict we will enter a 20-year period of uncertainty, trial-and-error, and both successes and many failures. Along the way, we will figure out ways to transform our power generation, delivery, and consumption system into an orchestrated, flexible, open, and efficient Energy Cloud platform.

The Emerging Energy Cloud

In my blog, “The Impacts of the Evolving Energy Cloud,” I discussed how we are moving away from a centralized hub-and-spoke grid architecture based on large centralized generation assets toward a more decentralized grid with an increased role for renewables, DER, grid-edge IoT, and digitalization. The Energy Cloud is an emerging platform of two-way power flows and intelligent grid architecture. While this shift poses significant risks to incumbent power utilities, it also offers major opportunities in a market that is becoming more open, competitive, and innovative. Fueled by steady increases in DER, this shift will affect customer relationships, shape policy and regulation, change business models, propel continuous technology innovation, and overhaul grid operations in every single region of the world.

The Energy Cloud

Energy Cloud

(Source: Navigant)

North American utilities are at various stages of integrating distributed generation, demand response, energy efficiency, electric vehicles, and electric storage. Navigant expects this integration trend to accelerate. According to our analysis, DER is projected to grow almost 3 times faster than new central station generation in the next 5 years. That makes DER one of the most disruptive factors affecting the grid today and in the future. From a recent Public Utilities Fortnightly-Navigant survey among 400 utility stakeholders, 90% of survey respondents believe that the growth of DER will force a major shift in utility business models. We believe it is critical that utilities have an integrated DER (iDER) strategy and approach.

Path Forward: The Energy Cloud Playbook

The paths that utilities will follow to transition toward the Energy Cloud will be different. More importantly, the pace by which they move through iDER maturity levels will differ greatly. But understanding the North Star and taking the right steps at the right time are vital to making the transition successful.

At an advanced iDER maturity level, utilities have addressed issues arising from high DER penetration such as intermittency, reverse flows, and power quality issues. Utilities are using both information and operations technology (i.e., IT/OT) and have aligned their business processes, operations, and organizations appropriately. DER management systems (DERMSs) and advanced distribution management systems (ADMSs) are managing DER output at the feeder and substation levels. At this advanced iDER maturity level, the utility has augmented its role as a supplier of electricity and has become a platform provider and network orchestrator that enables prosumers to market their DER assets on an open market. This role is critical to fully maximizing the benefits of DER—and it will be key to providing future value to customers and shareholders.

What’s Next?

While the Energy Cloud is in its infancy today, its evolution will be both pervasive and highly disruptive to stable electric industry revenue streams for the next 30 years or more. Navigant projects that the Energy Cloud’s evolution could result in nearly $1 trillion worth of global investment shifting downstream to the retail segment of the value chain. What’s more, it could add an additional $1 trillion to 1.5 trillion in new value from investments in digital infrastructure and associated services by 2030.

As a follow-up to Navigant’s white paper, The Energy Cloud, we will publish our Energy Cloud 2.0 white paper in the next couple of months. This new white paper will move beyond the “what” to identify the “how.” At the same time, it will provide an Energy Cloud Playbook for the different utility, regulatory, investor, manufacturer, and government stakeholders positioning to build, manage, and protect their future in this emerging ecosystem.

Final Advice: Take Control of Your Future

This post is the eighth and final in a series in which I discussed power industry megatrends and the impacts (“so what”) in more detail. Navigant is at the forefront of what is happening in our industry. We continue to collaborate with our clients to help them navigate the rapidly changing energy landscape.

I have received positive feedback and insightful reactions on this blog series from many. Some readers wanted to understand more about the energy technology trends we see. So Navigant is preparing a new series in which we will cover the specific technology trends that we see disrupting our energy industry. Others have requested a megatrends series focused on oil & gas, which we are working on as well.

The megatrends discussed in this series cannot be underestimated. They are accelerating transformation in the energy industry, enabling the entry of new players, putting pressure on incumbent players, and altering traditional strategies and business models. Organizations will need to adapt, and there will be winners and losers as this transformation takes shape. My advice to senior leadership of energy companies is to take an integrated, holistic view of the opportunities and challenges that are flowing from these megatrends. Only then will you be able understand the full impacts and path forward. And that is the only way you can really take control of your future.

I hope you enjoyed this blog series. Stay tuned for future series.

Learn more about our clients, projects, solution offerings, and team at Navigant Energy Practice Overview.


Take Control of Your Future, Part VII: Merging Industries, New Entrants, and Colliding Giants

— June 13, 2016

Modern commercial premisesIn my initial blog in this series, I discussed seven megatrends that are fundamentally changing how we produce and use power. Here, I discuss how merging industries, new entrants, and colliding giants are changing our industry.

What Is Happening?

The power energy industry (the generation, transmission, and distribution of electricity) is not the sole territory of the incumbent utility anymore. Several players from other industries, including oil & gas (O&G), technology, retail, telecom, security, and manufacturing, are trying to get into the game. Navigant sees many cross-industry movements, and one of them is increased crossover investments between the electric utility and O&G industries. Besides pursuing mergers and acquisitions, which I discussed in one of my previous blogs, we see investments in new areas of opportunity like renewables, distributed energy resources (DER, including distributed generation, energy efficiency, demand response, storage, etc.), transportation, smart infrastructure and cities, and energy management.

As an example, in April, the French supermajor Total announced the creation of a Gas, Renewables and Power division, which it said will help drive its ambition to become a top renewables and electricity trading player within 20 years. According to a statement by the supermajor, “Gas, Renewables and Power will spearhead Total’s ambitions in the electricity value chain by expanding in gas midstream and downstream, renewable energies and energy efficiency.” Other companies, like ENGIE and Shell, have made similar announcements.

A Total Gas Station in Paris


(Source: Reuters)

Fighting for Future Energy Positions

The large incumbent players in the energy industry are under pressure. And the way things are unfolding now, it doesn’t seem like this will change anytime soon. Time to make some minor tweaks? Change course more drastically? Or completely reinvent ourselves? These are discussions that are taking place more frequently at the board and executive levels of the incumbent players.

Electric utilities are under pressure because consumption growth is minimal and, in many cases, flat to slightly negative. The average consumption per customer (both residential and commercial) is declining due to self-generation, energy efficiency, demand response, etc. As a result, revenue is declining. Costs are increasing because of needed investments in a safe, reliable, cleaner, and more distributed and intelligent electric power grid. Utilities are identifying new revenue streams and thinking through new business models that will bring shareholder value going forward.

Oil companies are under pressure because of the continued low oil price. Ever since the oil price dropped to historic lows in 2014, the struggles of the industry have been daily news. Short-term hopes for a recovery were tempered significantly by the outcome of the recent OPEC meetings in Doha. Oil companies are looking for ways to survive by taking out costs, reducing their upstream capital investments, and shutting down unprofitable assets. They are also looking for new opportunities to grow revenue and future shareholder value.

Industry Giants Are Responding

In the last couple of months, I’ve attended several meetings with CEOs from large utilities and O&G companies. It is remarkable how their views on what is happening in the energy space are so similar. What is even more interesting is that their strategies to address the challenges and opportunities are almost identical.

Here is what they say is happening:

  • Energy consumption and gross domestic product (GDP) growth: Although population and GDP growth (at a slower pace) drive growing energy demand, the trend line between GDP and energy consumption growth has been broken. This is especially the case in developed countries. Energy consumption in the United States flatlined from 2014 to 2015 even as GDP grew by 2.4%. Since 2007, energy consumption has fallen 2.4% while GDP has grown by 10%, according to the 2016 Sustainable Energy in America Factbook by Bloomberg New Energy Finance. At the level of individual utilities, we see this playing out. Utilities with no or limited customer growth see their overall revenue declining. Utilities that still see customer growth are reporting that demand (and revenue) is not growing at the same pace. This is creating an unsustainable situation, with flat or declining revenue, while the costs to serve their customers and investments in the grid are growing.
  • Impacts of climate change: In an earlier blog, we discussed the impacts of the growing number of policies and regulations to reduce carbon emissions. It is now clear that this impact is being felt. Beyond the COP21, Clean Power Plan, and other global or federal policies and regulations, many initiatives at the regional, country, state, and local levels are being designed and implemented in support of carbon emissions reductions. Sustainability objectives between government, policymakers, utilities, and their customers are more closely aligned than ever before. States and regulators will continue to discuss how sustainable targets can be met without affecting jobs and the access to safe, reliable, and affordable power. And utilities and O&G companies will continue to evolve to support cleaner, more distributed, and more intelligent energy generation/exploration, distribution, and consumption.
  • Big power to small energy and the rise of the prosumer: Customer choice is driving a large move from big to small energy. More and more customers are choosing to install DER on their premises. DER solutions include distributed generation, demand response, energy efficiency, distributed storage, microgrids, and electric vehicles (EVs). This year, DER deployments are projected to reach 30 GW in the United States. According to the U.S. Energy Information Administration, central generation net capacity additions (new generation additions minus retirements) are estimated at 19.7 GW in 2016. This means that DER is already growing significantly faster than central generation. On a 5-year basis (2015-2019), DER in the United States is expected to grow almost 3 times faster than central generation (168 GW vs. 57 GW). This trend varies by region because policy approaches, market dynamics, and structures differ. However, the overall move to small power will persist. In other words, the movement toward customer-centric solutions and DER will ultimately become commonplace worldwide.

And here are the strategies of large utilities and O&G companies going forward:

  • Search for shareholder value: Both utilities and O&G companies are looking across the entire energy value chain for future shareholder value. Right now, that value is not in exploration & production or power generation. Yet, shareholders are still interested in natural gas pipelines and transmission that support the movement of natural gas and electricity.
  • Attempts to develop new solutions and businesses: There has been more than just interest from incumbent players in new energy solutions such as renewables and other alternative fuel sources (hydrogen, biofuels, etc.), DER, behind-the-meter energy management, electric transportation, smart cities, etc. With serious profitability and growth pressure on their core businesses, more serious attempts to build new, potentially transformational businesses in this space are increasingly evident.

For example, Total’s Chairman and CEO Patrick Pouyanné states, “The goal is to be in the top three global solar power companies, expand electricity trading and energy storage and be a leader in biofuels, especially in bio jet fuels.” To this end, Total announced last month that it is acquiring Saft, a designer and manufacturer of high-tech batteries for the manufacturing, transportation, and civilian and military electronics sectors. The company reported sales of €759 million ($856 million) in 2015 and employs more than 4,100 people in 19 countries. “The combination of Saft and Total will enable Saft to become the group’s spearhead in electricity storage,” Chairman and CEO Pouyanné said in a news release, “The acquisition of Saft is part of Total’s ambition to accelerate its development in the fields of renewable energy and electricity.”

Transportation and Smart Cities

Transport electrification, the increased use of biofuels (including bio-jet fuels), and the use of hydrogen to fuel vehicles are all on the rise. These alternative fuel vehicles will slowly but surely replace existing carbon-based transportation fleets, which represent approximately 35% of the global demand for oil. Now there are reports of 500,000 committed purchases of the Tesla Model 3. If Tesla can produce 500,000 cars a year, with models that are in the $30,000-$40,000 price and 200-plus-mile range, this will be another tipping point and game changer for EVs.

Meanwhile, as part of the smart city movement, cities are examining the sources and efficiency of their energy in order to reduce their greenhouse gas emissions and energy costs. In the process, cities are becoming more ambitious and proactive in setting energy strategy. They are seizing opportunities to work with utilities and other stakeholders to create new urban energy systems. The emerging vision is of a smart city with integrated large- and small-scale energy initiatives, including major infrastructure investments, citywide improvements in energy efficiency, and distributed energy generation. As a result, both utilities and O&G companies are increasingly interested in becoming even more engaged with new transportation concepts and innovation (well beyond fuel) and smart cities.

So What Does This Mean?

Do the above examples represent some isolated, small adventures in crossover investments, or do they mark a trend toward two mega-industries (electric utility and O&G) colliding across the entire energy value chain and looking for shareholder value? Time will tell. What is certain is that there will be winners and losers.

There is a clear push for new revenue streams and growth opportunities given the current oil price situation. But we see also new, longer-term threats that will force the incumbent players to reinvent themselves and become broader energy companies. The industry giants seem to be in the best position to be the winners—and ultimately, they have no choice. After all, these are still the biggest companies in the world, and they have a huge shareholder interest that needs to be fed into the future. They simply are not going to declare “game over,” return the equity to the shareholders, and then advise them to go find new companies to invest in.

This post is the seventh in a series in which I discuss each of the power industry megatrends and the impacts (“so what?”) in more detail. My next blog will be about the emerging Energy Cloud. Stay tuned.

Learn more about our clients, projects, solution offerings, and team at Navigant Energy Practice Overview.


Take Control of Your Future, Part VI: Regionalization of Energy Resources

— June 6, 2016

Tablet Device with StatisticsIn my initial blog in this series, I discussed seven megatrends that are changing how we produce and use power. Here, I discuss how the regionalization of energy resources is fundamentally changing the energy industry.

What Is Happening?

To get access to energy supply and resources, more regions, states, energy markets, and utilities are looking beyond the traditional borders of their energy business and territory. The main drivers playing out right now are:

  • An accelerated shift of generation resources to cheaper gas and low-cost renewables.
  • An increase in carbon reduction policies and targets.

Accelerated Shift of Generation Resources

In part IV of this series, I discussed the accelerated shift in power generation to natural gas and renewables. First, as a result of cheap natural gas—which will be the case for the foreseeable future—investments in combined-cycle natural gas generation plants have increased. Major investments in gas pipelines by utilities have also increased (including from Florida Power & Light [FPL], National Grid, Spectra, and others), mostly supported by states and regions like Massachusetts, New York, and Texas. Some utilities (including FPL) have been investing in the exploration and production of natural gas.

These infrastructure investments still face challenges in getting the required approvals and expected returns. FPL initially received approval from the Florida Public Service Commission (PSC) to recover the costs related to its investment in upstream development in Oklahoma’s Woodford Shale through rates as part of its fuel expenses. However, 2 weeks ago, Florida’s highest court overturned this decision and concluded that the PSC did not have the authority under state law to approve cost recovery for the joint venture as part of FPL’s rates. We will see how this plays out as utilities continue to look to secure access to natural gas and increase shareholder value.

Second, investments in renewables continue to increase. The Navigant Energy Market Outlook projects that in 2016, 19.3 GW of wind and solar generation capacity will be added in the United States, which is about 75% of total new generation additions in 2016. Besides the complexity of the duck curve, regions, states, energy markets, and utilities are also looking at how to get this renewable power (in places where sun and wind are favorable) to places where this power gets consumed. The transmission impacts are significant. Combined with Federal Energy Regulatory Commission (FERC) Order 1000, these impacts will drive new investments in transmission. This has been evidenced already in the Northeast, Texas, Massachusetts, and the western United States, among other places.

Increased Carbon Reduction Policies and Targets

Part III of this series explored the rising number of carbon emissions reduction policies and regulations. Even though the U.S. Environmental Protection Agency’s (EPA’s) Clean Power Plan (CPP) is on hold, many individual states, cities, and utilities are moving toward the CPP goals to reduce carbon emissions, plan for an advanced energy economy, and meet cleaner generation goals. Policymakers are setting clear targets to increase renewable generation in the Northeast. Recently, in order to meet the state’s 50×30 goal, the New York Department of Public Service (NYDPS) described a path forward in its Clean Energy Standard (CES) white paper. The paper outlines the principal policy objectives of the CES, which include increasing renewable electricity supply to achieve the ambitious goal of renewable energy meeting 50% of New York’s electricity needs by 2030 and promoting the progress of Reforming the Energy Vision (REV) market objectives. Regions, energy markets, states, and utilities are looking for access to cleaner energy resources—mainly gas and renewables—either by building these generation assets and securing access to cheap natural gas or by bringing cleaner power into their territory through interconnection.

How Does All This Play Out?

There are many examples now of regional approaches for solving the challenges discussed above. One example is the creation of the western Energy Imbalance Market (EIM) by the California Independent System Operator (CAISO), which is pursuing shared benefits for the participants. CAISO reported recently that the cost benefits of the EIM were $18.9 million during the first 3 months of 2016. The western EIM also saved 48,342 metric tons of carbon emissions during the first 3 months of the year by using 112,948 MWh of surplus renewable energy across the participants to meet demand. “The EIM is now firmly established and is providing considerable economic and environmental benefits,” said CAISO’s President and CEO Steve Berberich. “These successes are the result of the vision and hard work of many across the West.” Oregon-based PacifiCorp, which serves customers in six western states, was the first EIM participant, followed by NV Energy. Other utilities that have announced plans to join the EIM include Puget Sound Energy and Arizona Public Service in October 2016, Portland General Electric in October 2017, and Idaho Power in April 2018.

A second example is the Regional Greenhouse Gas Initiative (RGGI), which was used by the EPA as an example of a flexible and multi-state carbon reduction program. Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont are members of the RGGI, which is a cap-and-trade program to curb CO2 emissions. To comply with the EPA’s final targets for carbon reductions from existing fossil fuel power plants, states may attempt to join the RGGI or establish similar programs that can then trade into and out of the RGGI.

Beyond the United States: Europe a Good Example?

Europe created the Energy Union, which is designed to help deliver Europe’s 2030 climate and energy targets and make sure that the European Union (EU) becomes the world leader in renewable energy. Achieving these goals will require a transformation of Europe’s electricity system, including the redesign of the European electricity market, in order to meet consumers’ expectations, deliver benefits from new technology, facilitate investments in renewables and low carbon generation, and recognize the interdependence of EU member states when it comes to energy security. A critical part of this initiative is connecting isolated electricity systems to secure supply and helping to achieve a truly integrated EU-wide energy market—a key enabler for the region. The EU has set an initial minimum interconnectivity level of 10% to be achieved by all member states by 2020. Depending on the geographical position of a country and its energy mix (e.g., the weight of renewables in a given country), achieving the required 10% minimum may not be enough. The EU is therefore looking into raising the target to 15% by 2030.

These are the underlying objectives as defined by the Energy Union:

  • Electricity systems will become more reliable, with lower risk of blackouts.
  • Money will be saved by reducing the need to build new power stations.
  • Consumers’ increased choice will put downward pressure on household bills.
  • Electricity grids will be able to better manage increasing levels of renewables, particularly variable renewables like wind and solar.

You could argue that these objectives would be very important for the United States, as well. Should we take a much more national, inter-regional approach like Europe?

So What Does This Mean?

First, regions, states, energy markets, and utilities have to adapt their long-term resource plans and incorporate regional scenarios for power supply, while at the same time build in a rapidly changing mix in fuel resources toward renewables and natural gas. Second, they must think out of the box with regard to securing fuel security or access to renewables well beyond their traditional territory borders. Third, to effectively develop system plans, the planning processes need to take into account the entire regional transmission system. Regional entities should find a way to bring together players such as federal agencies, municipalities, and cooperatives so that their needs are also addressed and more holistic solutions are presented. Finally, to facilitate and enhance emerging market offerings such as the EIM, the planning toolkit needs to be expanded to better address the challenges of very large-scale renewables integration across multiple regions.

This post is the sixth in a series in which I discuss each of the power industry megatrends and the impacts (“so what?”) in more detail. My next blog will be about merging industries and new entrants. Stay tuned.

Learn more about our clients, projects, solution offerings, and team at
Navigant Energy Practice Overview.


Take Control of Your Future, Part V: Delivering Shareholder Value through M&A

— May 27, 2016

Energy CloudIn my first blog in this series, I discussed seven megatrends that are fundamentally changing how we produce and use power. As discussed widely across the industry, the pace of transformational change in the utilities industry is accelerating. Low demand growth, increased carbon reduction policies and regulations, changing customer demands, the growth of distributed energy resources (DER), and other developments are shifting the value proposition for incumbent and new players alike.

It is no surprise that with so much change, mergers and acquisitions (M&A) are on the rise, with fascinating implications for the broader industry. We hear mostly about large acquisitions—Exelon’s acquisition of Pepco, Emera’s acquisition of TECO, Southern Company acquiring AGL Resources, and Duke Energy acquiring Piedmont Natural Gas Co, Inc.—but there is much more happening under the surface and on the periphery, underscoring the tectonic shifts reshaping the energy industry.

With the emergence of the Energy Cloud, which is driving broad and pervasive digitalization of the industry, utilities, manufacturers, technology companies, and other stakeholders are pursuing proactive initiatives such as M&A deals to retain customers, increase revenue, and improve market position. Recent activity points to three different flavors of M&A deals occurring with more frequency than others:

  1. Utilities acquiring other utility companies or assets
  2. Utilities acquiring energy technology companies
  3. Manufacturers or energy technology companies acquiring other manufacturers and energy technology companies

 Utilities Acquiring Other Utility Companies or Assets

The table below shows that the value of utility deals has more than quadrupled in 2014 and 2015 compared to 2012. In the first quarter of 2016 alone, 22 deals valued at more than $40 billion have already closed.

Utility M&A Deals (>USD $5M): 2012-2016 (Q1)

Jan Blog table

(Sources: S&P Capital IQ, Thomas Reuters)

The main driver for this increased level of M&A activity is a renewed search for growth, shareholder value, and diversification to offset some of the challenges facing the industry. Additionally, utilities are increasingly hedging against uncertainty and risk, as seen with Duke Energy and Southern Company acquiring natural gas companies as they pivot away from coal. As Southern Company stated after the acquisition was announced, “The addition of AGL Resources’ network of natural gas assets and businesses will provide a broader, more robust platform for long-term success and increase opportunities to invest in future infrastructure and energy solutions.”

Some utility analysts see these high-cost, high-debt acquisitions as unsustainable. Although the acquisitions are in regulated, low-risk businesses, utilities have had to pay a premium for these acquisitions and utilize debt financing, which could potentially put pressure on their credit ratings.

Utilities Buying Energy Technology Companies

We have seen an even greater uptick in the acquisition of technology companies by utilities. In particular, acquisitions targeting renewables, storage, and DER are on the rise.

A couple noteworthy transactions include Engie (formerly GDF Suez) taking a majority stake in Green Charge Networks, a provider of C&I energy storage solutions, and Southern Company acquiring PowerSecure. According to a press release, PowerSecure, a provider of distributed energy, utility infrastructure, and efficiency solutions, gives Southern Company the capability to help meet commercial & industrial (C&I) customers’ energy needs in the areas of individual reliability, energy efficiency, and green objectives.

Additionally, many utilities are acquiring and investing in companies offering IT/OT and data analytics solutions. The latest example is a $20 million investment in AutoGrid Systems from Energy Impact Partners (EIP), a utility group that includes Southern Company, Xcel Energy, Oncor, and National Grid, and Envision Ventures. According to Michael Donnelly of EIP, “Big data analytics and automated control of grid operations will allow utilities to adapt to the increasingly complex distributed energy environment.”

The rationale behind this wave of energy technology acquisitions by utilities reflects their willingness to play both offense and defense as the Energy Cloud takes shape. It also shows a willingness to protect their core business against new entrants looking to provide new products and services to their customers. At the same time, it suggests a willingness to look beyond their current customer base and target customers with a full suite of energy management solutions within the country and internationally.

In a recent announcement, Ted Craver, chairman and CEO of Edison International stated that, “[within] the New Energy Future … large energy users increasingly need a strategic partner to help them navigate through the diverse energy marketplace. Edison Energy will provide the expertise that will enable large commercial and industrial energy users to explore the many options available to them and to select the best portfolio of alternatives to power their operations.”

Duke Energy’s recent acquisition of Phoenix, a provider of energy management systems and services for commercial customers, offers a similar view. In the announcement press release, Greg Wolf, president of Duke Energy’s Commercial Portfolio, stated: “Duke Energy will continue to expand its offering of on-site, advanced energy solutions for commercial customers as the company finds opportunities in this rapidly growing market.”

These are just a couple of examples, and we expect similar acquisitions to accelerate going forward.

Manufacturers or Energy Technology Companies Acquiring Other Manufacturers and Energy Technology Companies

Of the three categories described in this post, this is perhaps the most active. We have seen solar companies buying other solar companies, solar companies buying storage companies, and technology companies buying other technology companies—the list goes on. From Google buying Nest to Oracle buying Opower and many more, everybody wants to get into the game and is looking for unique, differentiating technologies and capabilities to stay ahead of the competition with a focus on technology synergies and customers.

Additionally, there’s a significant rise in the number of new companies entering the energy space, selling new and innovative energy technology products and services. We don’t expect this trend to slow anytime soon. On the contrary, with the scale of investment pouring into newer, greener ways of producing, managing, and using power, we are at the beginning of a greentech tsunami.

So What Does This All Mean?

My advice to all these players: Be alert and think out of the box. Your clients today can become your competitors tomorrow—consider IKEA as one example. Technology companies have the potential to become network orchestrators and provide utility products and services. The risk for utilities is they end up with stranded, worthless assets.

Balancing today’s business with tomorrow’s opportunities is key. Thinking through strategy and future-case scenarios will help you understand the opportunities and threats as technology and customer choice drive new products, services, and business models. Stay close to your customers and innovate; partner where it makes sense and stay in the game. This is Energy Strategy 2.0 for the Energy Cloud 2.0.

This is the fifth in a series of posts in which I discuss each of the power industry megatrends and the impacts (“so what?”) in more detail. My next blog will cover the regionalization of energy. Stay tuned.

Learn more about our clients, projects, solution offerings. and team at
Navigant Energy Practice Overview.


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