Navigant Research Blog

European Utilities Have Increased Their Activity in New Energy Platforms: Part 3

— February 15, 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 first post of this blog series, I described how European utilities have reinforced their strategic interest in new energy platforms. In the second post, I showed that regional differences in new energy platform activity persist between North America and Europe. In this post, I argue that some of the new energy platforms have been highly active recently as European utilities strive to build their portfolio of digital services.

DER Integration and Electric Mobility Are Still Leading

Distributed Energy Resources (DER) Integration and Electric Mobility remain the leading new energy platforms, and they experienced increased levels of activity throughout 2015-2017.

(Source: Navigant Consulting, Inc.)

Most of the selected European utilities have announced key partnerships, investments, and acquisitions in these two platforms. A 50% increase in the number of announcements was recorded between 2015 and 2017. Activity in the Internet of Things, Transactive Energy, and Telecommunications Networks platforms has been steady, with the most active utilities being Centrica, ENGIE, E.ON, and Innogy. Fewer announcements were made in Smart Cities in 2017 versus the previous 2 years. Most originated from Enel and ENGIE, which remain pioneers in the platform serving municipalities and local communities.

Activity Types Are Shifting

There has been a shift in the activity type by platform. The Electric Mobility platform once consisted almost entirely of partnerships. Utilities would typically sign agreements with car makers and EV supply equipment providers to develop bundled offerings and run pilot programs. In 2017, several investments and acquisitions were announced: Total invested in Xee and OnTruck, ENGIE acquired EVBox, and Enel acquired eMotorWerks. This is representative of a platform getting more mature as utilities better understand where the value lies and which companies are the key acquisition targets. The activity in this platform has also intensified because the prospect of electricity as the major transportation fuel is becoming clearer. Several major car makers have announced aggressive plans to electrify their vehicle offerings, providing more evidence that the mobility sector is changing rapidly.

Lastly, the number and size of acquisitions have been increasing. The largest deals announced in 2017 are EnerNOC’s acquisition by Enel for $250 million and REstore’s acquisition by Centrica for €70 million ($80 million). Both companies had established leading positions in the demand response (DR) markets: EnerNOC in the US and part of Asia Pacific, and REstore in Europe. These deals epitomise the DER Integration platform reaching a critical maturity state. After several years of market consolidation among DR players, some large utilities are buying their way in by acquiring the leading, established players.

The Race Is Intensifying

The race to new energy platform services has intensified among European utilities. Players building a balanced portfolio across several new energy platforms and multiple geographies are more likely to succeed in a fast-moving industry. While numerous products and services developed by the new energy platform companies seem promising, not all of them will be successful. Utilities need to strategically select the players that have the most agile talent and can quickly react to market changes and evolving customer needs. Some of the new technologies are prone to disrupt the energy industry. Incumbent utilities should watch market signals and adjust their portfolio of partnerships, investments, and acquisitions accordingly. Some of the utilities covered in this analysis appear to be further along, while others are still defining their strategic priorities. 2017 was a highly active year for new energy platforms—2018 will be a year to watch.

 

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.

 

European Utilities Have Increased Their Activity in New Energy Platforms: Part 1

— February 1, 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 this post, I describe how European utilities have significantly reinforced their strategic interest in new energy platforms. In the next post, I will highlight the key regional differences in new energy platform activity between North America and Europe. Finally, 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.

Partnerships, Investments, and Acquisitions

The underlying analysis used here was built upon a methodology that I developed for a previous blog. I analysed the level of activity of the same eight major European energy utilities and grouped their strategic announcements into the six emerging energy platforms. This update reflects an extension of the time period analysed and a refinement to the categorisation of announcements. 2017 announcements were added, extending the time range to 2015-2017, and the categorisation was extended to differentiate between minority stake investments and majority stake acquisitions. Utility announcements were grouped into three categories: partnerships, investments, and acquisitions.

(Source: Navigant Consulting, Inc.)

New Energy Platform Activity

Most European utilities significantly reinforced their position in new energy platforms over the course of 2015-2017 (see the figure above).

Italy-based Enel has emerged as the most active of the selected European utilities. Enel’s most significant announcements in 2017 included partnerships with car makers (Audi, Groupe PSA, and Nissan) and electric utilities (Dubai Electricity and Water Authority, Rosseti, and Saudi Electricity Company) and acquisitions of battery storage management system provider Demand Energy, demand response (DR) service provider EnerNOC, and EV charging platform provider eMotorWerks.

France-based ENGIE and UK-based Centrica have been focusing on acquisitions. In 2015-2017, ENGIE led six major acquisitions of companies offering new energy platforms. Deals concluded in 2017 included EVBox, an EV charging infrastructure developer, and Fenix, a connected solar PV solutions provider in Africa. Centrica has been steadily acquiring a similar number of digital players. The utility recently took control of REstore, a DR service provider in Western Europe, and Rokitt, a data discovery and analytics provider based on the US East Coast.

Other utilities, including E.ON, Innogy, and Total, have led strategic investments and partnerships. E.ON and Innogy have been developing partnerships with companies offering new energy platforms. E.ON has been leading a joint initiative of over 30 energy suppliers with software company Ponton to develop Enerchain, a decentralised European marketplace for electricity trading using the blockchain. Innogy signed a groupwide cooperation with Kiwigrid to develop new services, such as industrial energy monitoring and vehicle-to-grid integration systems. Total Energy Ventures added eight new energy platform companies to its investment portfolio in 2015-2017. The latest additions include France-based Xee, a connected vehicle platform providing predictive maintenance and pay-as-you-drive insurance solutions; and Spain-based OnTruck, a road freight shipping platform optimising truck utilisation.

Vattenfall and EDF have remained the least active of the selected European utilities. Vattenfall made a strategic investment in Northvolt to help the Sweden-based company build Europe’s largest battery storage manufacturing facility. EDF recently established an in-house venture capital arm. It complements independently managed venture capital fund Electranova Capital, through which EDF holds an indirect stake in startups. One can therefore expect more investment activity by EDF from 2018 onwards.

In the next post of this blog series, I will highlight the key regional differences in new energy platform activity between North America and Europe.

 

The iDER Playbook for Utilities: A Firsthand Report from the EEI Strategic Issues Roundtable

— November 14, 2016

SmartCityMichael Rutkowski and Jay Paidipati coauthored this post.

Navigant’s new integrated distributed energy resources (iDER) maturity model provides a valuable tool for immediate application to address today’s emerging industry needs. Using the tool, utility planners can evaluate their current state of readiness for DER integration and value capture, as well as provide guidance for future investments. We recently had the opportunity to apply the iDER maturity model during a highly interactive session with a senior utility audience at the Edison Electric Institute (EEI) Strategic Issues Roundtable, and the findings tell a compelling story.

After sharing some of Navigant’s latest insights on DER and our industry tipping points, we opened the dialogue to focus on the five dimensions of the iDER maturity model—Customers & Programs, Regulation & Policy, Business Models, Technology, and Operations. After outlining the context of each dimension, we described the characteristics of a utility at the highest maturity rating—Level 5—and described what such a utility would look like in terms of strategic focus, operational capability, and market structure.

Scoring DER Readiness and Importance

We prepared the audience, a group of about 80 utility executives, for deeper discussion by asking an initial strategic question for each dimension: How important is it for your utility to be mature today and 5 years from now? Respondents gave low and high scores for each dimension, and after a brief discussion, we recorded an average score across the group. The scores varied for good reasons and were dependent on the role of each utility executive, the current adoption rate for DER in their jurisdictions, and whether or not their companies were already offering DER programs and solutions in regulated or non-regulated business units.

We then asked a second question, again for each dimension: How mature is your utility today, and how mature should it be in 5 years? This resulted in a rich dialogue for each score, and afterwards we tallied average results accordingly. For example, some utilities have an active DER business unit already focused on customer product and service offerings. Naturally, their scores suggested greater importance regarding readiness and importance for Customers & Programs.

The results often reflected wide variations across different utilities, as well as divergence from different stakeholders within the same utility. Summary results are outlined in the two tables that follow.

Readiness

Readiness

 Importance

Importance

 Source: Navigant analysis

Operations (e.g., organization and processes) scored the highest in terms of importance to utilities today and 5 years from now for a fully mature iDER company. However, this dimension had one of the lowest readiness scores from the group, setting it up as an area with considerable gaps to fill over the next 5 years. Some of the reasons cited for this lag include the lack of a robust telecommunications network for high-speed connectivity to DER devices on the far edges of the grid, as well as limited ability to handle high volumes of data and provide sufficient analytics in the middle and back office. There was also mention of softer elements, such as the right cultural mindset and ability to hire talent that fully understands and embraces new digital applications and advanced customer analytics.

Furthermore, the utilities generally felt that their Business Models were not ready today but would be the most important area for readiness 5 years from now, suggesting that considerable work needs to be done along this dimension. On another level, the utilities felt that Regulation & Policy was highly important for iDER maturity and that they were further along today in this dimension. Some of the representatives in the room were from states where these regulatory constructs are well underway, including New York (i.e., REV proceedings). Others were in areas of the Midwest, where traditional, vertically integrated market structures are not expected to change in the near future.

Finally, we noticed variations in scores from representatives within the same utility. This implies that maturity model scoring needs to take place across multiple functions within a utility in order to inform an overall strategic approach. Navigant is applying this model with a number of initial utilities and will be publishing a white paper showing where the industry currently is and benchmarking against Navigant’s vision of a fully DER-integrated utility. Through this effort, we will present an industrywide view on the state of utility readiness for DER integration, as well as the top priority areas for utilities in readying their organizations to serve as a useful basis for utility strategy, planning, and resource allocation efforts as this industry transformation takes place.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"Energy Transformation","path":"\/tag\/energy-transformation","date":"2\/18\/2018"}