Navigant Research Blog

From Grid to Cloud: A Network of Networks in Search of an Orchestrator

— October 8, 2015

In my blog, “The Impacts of the Evolving Energy Cloud,” I discussed how the power sector is undergoing a fundamental transformation. It is transitioning from a centralized hub-and-spoke grid architecture based on large centralized generation assets toward a more decentralized grid with a bigger role for renewables and distributed energy resources (DER). Navigant calls this new grid the Energy Cloud.

Where networks of networks exist, the business model that Wharton School dubbed the network orchestrator has been found to achieve faster growth, larger profit margins, and higher valuations relative to revenue, compared to three other types of business models (asset builder, service provider, and technology creator). The network orchestrator role will capture value by tailoring electricity supply and demand services for a customer, utility, or grid operator. In Navigant’s latest article in Public Utility Fortnightly, we explore how network orchestrators will emerge from the developing Energy Cloud and who might be candidates for such a role.

The New Uber

This week, in an interview with Energy Post, RWE’s Head of Innovation Inken Braunschmidt talked about the different business models that RWE is pursuing to capture an important position in the future energy system in Europe. She states, “In that energy system, it’s much more about sharing … you go onto a platform and say: I have electricity left over from wind or today I want to order some electricity from wind. It will be like ordering Uber.” This is a good example of how a large utility wants to transform its business and build a network orchestrator business model on top of its traditional business models. Many utilities have recently started new businesses, evaluating and making the initial investment in network orchestrator roles in areas like virtual power plants, building energy management systems, microgrids, storage, and others.

Another example this week was General Electric’s (GE’s) announcement of Current, powered by GE, an energy company that integrates GE’s LED, Solar, Energy Storage, and Electric Vehicle businesses to identify and deliver cost-effective, efficient energy solutions to its customers. This is clearly a move to become more of an orchestrator. The new company combines GE’s products and services in energy efficiency, solar, storage, and onsite power with its digital and analytical capabilities to provide customers—hospitals, universities, retail stores, and cities—with more profitable energy solutions.

Since companies employing the network orchestrator business model outperform other types of companies on several significant dimensions, it may only be a matter of time before pure network orchestrators emerge and establish themselves as key orchestrators within the Energy Cloud. As in other industries, Navigant strongly believes that new players will enter this field to become the network orchestrators of the utility industry.

So with that said: Who will be the Uber of the utilities industry? More to come on this soon.

 

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