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.

 

European Powerhouses Invest in EV Assets

— December 21, 2017

The days of the internal combustion engine in Europe appear to be numbered, as the governments of the UK, Germany, and Norway all plan to end petrol and diesel car sales in the coming decades. The newly empowered replacement market of plug-in EVs (PEVs) continues to rapidly grow, and a trifecta of industries (energy, fuels, and automakers) is jockeying for position in powering PEVs.

Electrifying Partnerships

Fuel company Shell gobbled up EV charging company NewMotion earlier in 2017, and it announced a partnership with Daimler, BMW, Ford, and Volkswagen in November 2017 to install the group’s Ionity EV chargers at Shell locations across Europe. In September 2017, NewMotion signed a deal to provide access to its network of EV chargers to the customers of France’s Total. Competing oil major BP has been in talks with automakers to offer EV charging at its fuel station in Europe, according to Reuters.

Tie-ups between fueling station operators and PEV makers and charging companies make sense since the number of cars in need of petrol will only shrink in future years, so both are looking to provide similar services to PEV drivers rather than concede market share. Ultra-fast charging, at 300 kW or greater, makes sense at these locations since many PEVs will be able to get an 80% (or greater) charge in 15 minutes or less, during which customers can buy snacks, grab fast food, or take a bio break. (I presented on this topic to at the recent NACS Fuels Summit Latin America in Buenos Aires, Argentina.)

Power to the PEVs

European utilities rightly see PEVs as the greatest opportunity to increase load, and the somewhat flexible nature of EV charging allows for managed charging to balance the natural peaks and valleys in electricity supply and demand. Germany’s RWE was in early on EV charging and sells charging infrastructure and other EV-related services through its spinoff company Innogy. Also based in Germany, E.ON is deploying a fast charging corridor from Norway down to Italy in partnership with e-mobility service provider CLEVER. Global sales of direct current (DC) fast chargers are expected to reach 70,000 units annually by 2026, according to Navigant Research’s newest report on DC fast charging.

French energy company ENGIE has also been active, acquiring charging infrastructure company EV-Box in March as well as investing in e-scooter company Gogoro in September 2017. E-bikes, e-scooters, and e-motorcycles need to replenish energy as well, and we’ll likely see more companies offer more than light duty vehicle charging services.

Italy’s Enel reached across the Atlantic to acquire eMotorwerks, an EV charging services company that is also working on vehicle-to-grid integration services. In the UK, a consortium including energy companies National Grid, British Gas, ScottishPower, and ESB is researching the potential for integrating PEVs into operations across the UK.

Down the Road

The EV charging market remains highly fragmented with many small players. Utilities and energy companies have recognized that the stakes (and revenue potential) are much higher with ultra-fast charging and the rapid expansion of PEV models for sale. Making a profit by marking up electrons has proved challenging for startup companies. Energy companies with distribution networks and utilities that understand high power delivery believe they are well-positioned to manage power delivery through EV charging assets. Combining EV charging with other home energy management services is a desired business model for automakers, generation, and distribution companies alike. They will, however, face competition from the US’ largest EV charging network—ChargePoint—which has been fundraising to expand its European operations and has received investment from Siemens, Daimler, BMW, and others.

 

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