Navigant Research Blog

Consumers Are Ready for Upgraded Energy Platforms, and Utilities Should Oblige

— February 13, 2018

Utility managers in the US seeking to shake-up and modernize customer engagement have new evidence to support such efforts. A recent study supports the idea that many consumers are ready for an upgraded online platform to interact with their utility. The study, by Smart Energy Consumer Collaborative, finds nearly half (48%) of respondents said they would use an online platform that combines current and historical household energy usage data, preference settings, utility (or third-party) programs and offers, and use this information to help better understand and manage their energy use.

According to respondents, the two most popular applications are energy rewards programs (52% probably or definitely would use) and energy manager tools (46%). The study authors call on energy market stakeholders to move beyond energy alone and imagine how new innovations from other industry sectors can be applied to their businesses. In other words, think and act more like Amazon.

The study also underscores the growing trend of increased spending by utilities on customer experience tools across the globe, as noted by my colleague, Michael Kelly, in his recent Navigant Research report, Customer Management and Experience Technologies. In this report, he notes how engagement has become a much more complex process for utilities, and exhorts them to take a more proactive approach, deploying across multiple channels in a holistic manner so customers experience a consistent set of information and tools, no matter how they engage.

Behind-the-Scenes Work Needed, Too

There is no question engagement tools should keep pace with current consumer expectations. The customer-facing online tools they see today are often not up to expectations.

That said, there is also work to be done on the backend, those behind-the-scenes processes that can speed up the mundane and create a better experience for customers. Duke Energy has taken such steps by adopting robotic process automation (RPA), a new method of processing customer information. In the past, the company would have to manually process hundreds of thousands of requests a year for starting, stopping, or transferring energy services. That could take 3 business days to simply turn around the request during a peak season. Now, by using RPA technology, Duke Energy processes such requests around-the-clock, and can immediately send a confirmation to a customer who is then assured that their request was received and that follow-on services have been scheduled. This step reduces friction in the system.

Whether it is improved customer-facing platforms or deploying backend system upgrades through new tools like RPA, these steps must be taken by utilities. The customers have come to expect them. It still boggles my mind, though, at how slow the shift to new digital tools is in the utility sector compared to others. But at least the movement is headed in the right direction.

 

Corporate Climate Leadership at the Dining Table

— February 13, 2018

Over the last 3 years, 341 companies have joined the Science Based Targets initiative, of which at least 40 are from the food and beverage sector. These companies include household names such as Walmart, Coca-Cola, General Mills, Kellogg’s, and PepsiCo, with billions in combined revenue. Why are these food and beverage companies integrating climate science in their strategies and how is consumer behavior influencing this?

The agricultural and forestry sector alone is responsible for over 10 gigatons of CO2 equivalent annually. This equates to about 20% of the world’s total greenhouse gas emissions, according to a 2016 joint report from the University of Aberdeen, the energy experts of Navigant and Ecofys, and PBL. These emissions are embedded in the food we eat and the beverages we drink. Due to increasingly better corporate citizenship and pressure from non-governmental organizations and investors, major food and beverage brands are developing climate targets to reduce emissions from this sector, and they are publishing their targets online.

What Is the Purpose of Science-Based Targets?

Science-based targets (SBTs) are both an approach and a communications vehicle to help companies contribute to the Paris Agreement’s target of limiting warming to 2°C and pursuing efforts to limit it to 1.5°C. Consumer brands with a climate SBT not only look at their own emissions, but they also seek to reduce emissions in their supply chain. These emissions include those related to the agriculture sector, such as meat, dairy, and any other crops, as well as processing and logistics. This full value chain approach in the end helps consumers reduce their climate impact.

Investors Recognize Climate Threats to Business

Investors recognize that the food and beverage supply chain is exposed to many climate risks, including physical risks such as changes to weather patterns and sea levels, and those linked to the transition to a low carbon economy, such as policy and reputational risks. Major food, beverage, and apparel brands take this to heart and are responding by developing roadmaps to reduce emissions and risk management procedures to prepare for a changing climate. I will discuss climate related risk in more detail in my next blog.

Consumers Increase Their Opportunities to Make Better Decisions for the Climate

The Science Based Targets initiative, an initiative of World Wildlife Foundation, CDP, and World Resources Institute, provides a unique opportunity for consumers to reduce emissions by identifying the brands that are actively engaging on climate change and developing strategies to reduce their impact. Consumers can also reduce emissions by being mindful of the choices they make at a restaurant or store. For instance, beef has higher embedded emissions than pork or chicken, and dairy has higher embedded emissions than plant-based products. However, for companies that are on an SBT pathway, the gap between the carbon footprint of these ingredients is likely to decrease.

SBTs and increased customer insight in the embedded emissions of what they buy are trends that are here to stay. If you are looking at how to approach this theme for your organization, contact Vincent Hoen for information on the corporate sustainability services Navigant offers.

 

European Utilities Have Increased Their Activity in New Energy Platforms: Part 2

— February 8, 2018

The energy industry is experiencing a profound transformation as the sector moves towards the more intelligent, more distributed, and cleaner use of electricity. Utilities’ traditional business models are being challenged by disruptive firms offering new services leveraging new technologies. In the previous post, I described how European utilities have significantly reinforced their strategic interest in new energy platforms. In this post, I highlight the key regional differences in new energy platform activity between North America and Europe. In the final post, I will argue that some of the new energy platforms have been highly active recently as European utilities strive to build their portfolio of digital services.

Key Regional Differences

Major differences can be drawn between North America and Europe: European utilities tend to acquire or invest in North American companies whereas they are mostly partnering in Europe (see the following figure).

(Source: Navigant Consulting, Inc.)

Activity in North America mostly consists of investments and acquisitions. California leads the way, attracting nearly two-thirds of partnerships, investments, and acquisitions announced in 2015-2017. Examples include investments in distributed energy resources (DER) management system provider AutoGrid and urban mobility data analytics company StreetLight Data, and acquisitions of EV charging platform provider eMotorWerks and battery storage systems integrator Green Charge Networks.

Additionally, European utilities have been strengthening their presence in California. Building upon the acquisition of EV charging platform provider Oxygen Initiative, Innogy set up Innogy e-Mobility US. The Los Angeles-based entity is responsible for expanding the utility’s Electric Mobility solution offering in the US. Similarly, Total Energy Ventures relocated part of its team from Paris to the San Francisco Bay Area to be closer to the local startup community, which accounts for half of its investment portfolio.

States such as California, New York, and Massachusetts benefit from qualified talent and access to capital. Many startup founders are alumni from leading US universities who developed their initial product in partnership with a research lab at their universities. Additionally, the US incubator, accelerator, and investor ecosystem is recognized as one of the most active in the world, thereby attracting startups looking for financial and advisory support.

Most of the activity in Europe relates to partnerships. The geographical proximity partially explains this trend, as European utilities typically test energy services in their core market before expanding. Enel has been building an EV charging network totalling 2,700 stations in Italy as of October 2017 and plans to nearly double the network capacity by the end of 2018. E.ON partnered with Google to expand Project Sunroof to Germany. Homeowners in selected German cities can purchase solar panels, energy storage, and system management software from E.ON—and the utility guarantees the financial returns estimated by the online tool.

New Trends

One new trend is the rising number of investments and acquisitions realised with companies based in Europe. The total number of deals concluded in 2015-2017 nearly matches the figure for North America (21 vs. 25), making Europe an attractive region for startup activity. This shift is also related to the trend of startups building upon successful business deployment in Europe and expanding to North America. Netherlands-based EV charging infrastructure developer EVBox, acquired by ENGIE in 2017, is now expanding to the US.

In conclusion, European utilities’ activity in North America remains focused on investments in, and acquisitions of, new energy platform companies. In Europe, although the majority of activity still consists of partnerships, an increasing number of investments and acquisitions has occurred over the last few years.

In the final post, I will argue that some of the new energy platforms have been highly active, as European utilities are striving to build their portfolio of digital services.

 

China Seizing Leadership in Global Solar

— February 8, 2018

In November 2017, I wrote about the surging Chinese solar market. On January 2018, China’s National Energy Administration (NEA) confirmed this trend when it announced that 52.8 GW of solar were installed in 2017. To put this into perspective, this is more than the cumulative solar installed capacity in the US at the end of 2017. At the same time, PV became the technology of choice for the country—at least on installed capacity terms—as in the same period, China only installed 45.78 GW of conventional generation.

China As an Example for Solar Development

With a record year in 2017, China’s cumulative solar capacity reached 130.3 GW, or around 7.3% of the country’s national power generation capacity—3% of it coming from capacity installed in 2017. While this is still far from the levels of conventional generation, it does show the potential of PV to scale quickly and have an effect on a country’s electricity system. After all, China has the largest generating fleet in the world, with close to 1,800 GW of capacity.

Perhaps more surprising about the record installation figure was the take-off of the Chinese distributed solar generation sector. The country continues with the trend shown in 1H 2017 and is estimated to have closed the year at around 20 GW and a massive annual growth of 370% to reach 29.7 GW of cumulative capacity. As explained in November, this rise was caused by a rush to capitalize on highly attractive feed-in tariff (FIT) premiums that expired at the end of 2017.

Duration and Stability Expected

Despite the opportunistic nature of the surge in distributed solar, this sector is not expected to collapse in 2018 (although it might see a fall in new additions). There are several trends that still support the distributed sector. First, the new FIT, although not as attractive as the previous one, is still interesting enough to keep investment in the sector. In addition, the Solar Energy for Poverty Alleviation Program will also support new installations.

Distributed solar has also been beneficial for more fundamental changes in the Chinese electricity sector. The Chinese market is seeing increased competition thanks to China’s power sector reform, now nearly 3 years old, which has included a gradual effort to unbundle retail and distribution business from the large grid companies to varying degrees across provinces. On October 31, 2017, NEA and the National Development and Reform Commission jointly announced a new initiative for Market-oriented Distributed Power Generation as a new part of the power sector reform. The document calls for the creation of platforms that will facilitate electricity trading between distributed generation projects and end users across a local electricity distribution network, starting with large-scale pilots in yet-to-be decided locations. Although it will take time to implement, this initiative should help develop distributed solar installations as behind-the-meter installations will be able to trade their generated electricity freely, paying only distribution network costs, not transmission network costs.

 

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