Navigant Research Blog

In New Utility Era, Energy Must Be Optimized

Carol Stimmel — October 26, 2012

At the Itron Utility Week conference in San Antonio, Texas, LeRoy Nosbaum, President and CEO of Itron, described the forces of regulatory mandates, technological innovation, and customer relationships as “colliding with each other.”  In the United States, energy providers are grappling with mandates while working to improve operational efficiency, protect revenue, deliver reliable service, and conserve energy.  As one of the world’s leading providers of smart meters, control technology, communications systems, and software, Nosbaum asserts that Itron is well poised to help utilities meet these formidable changes.  If Itron’s solutions can help utilities change their habits, he may be right.

Just 5 years ago, when the first iPhone had just been released, the realities of the economic slowdown were not yet upon us, and very few knew who Barack Obama was, dead reckoning on reliable energy delivery made sense.  But today, in the haze of grid modernization and changing industry conditions, utilities must become optimizers of energy in order to survive.  At the Itron event, Lloyd Yates, executive vice president of customer relations at Duke Energy, said this means that utilities must fruitfully partner with customers beyond the meter and empower them to have energy “experiences.”  This requires rethinking fundamental business models and recognizing that more than a century of reliable power delivery guarantees nothing for the future.

In the United States, especially, new patterns in energy supply and demand are emerging.  While many areas of the globe will see rising demand, growth in the United States is expected to be just 0.3% until 2035 (as reported by the EIA).  Compound this with rising rates of domestic oil production and an increase in energy efficiency, and it is clear that utilities face difficult decisions.  Yates articulated the choices a utility will have to make:

  • Continue with business as usual, adapt to anemic growth, and lower expectations among investors
  • Refuse to accept that the industry is in decline, raise rates regularly, and risk angering customers until they are driven to off-grid resources
  • Transform the utility by changing the way energy is generated, while working with regulators and customers to optimize the consumption of energy

Yates believes that for utilities to stay on their current path is a perilous mistake.  Modernizing the grid with technologies that smarten the delivery of power is not enough; the customer must now be part of the equation.  The transformation of the grid also necessitates the transformation of the utility – right to the core of how business gets done.

Vendors that understand these changing conditions, as well as the dynamics and uncertainties facing their utility customers, can help drive the innovation that is required.  Strategic alliances and partnerships will be an important part of delivering comprehensive solutions that can create “energy experiences.”  Itron has made convincing moves that demonstrate its understanding of these forces, including a partnership with Cisco to provide an open infrastructure and, most recently, a strategic alliance with C3 to deliver energy management services directly to consumers.  These partnerships will help the utility evolve and adapt to a new era where the energy relationships are fully optimized.

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