Navigant Research Blog

Utilities Will Rely on Vendor Ecosystems to Support the Energy Transition

— November 10, 2017

Until recently, I often introduced presentations or blog posts with a warning that the utility industry was about to enter the most disruptive decade in its century-long existence. That is no longer true, because I believe the industry has now entered that decade. Okay, the timing for different countries may vary, as will the length of the period of disruption. In fact, some countries—Germany and Denmark in particular—have experienced significant disruption already. But for most markets, the rumblings, threats, omens, and rumors have only recently turned into action.

Navigant Research has a significant volume of commentary on future energy markets, all based around its concept of the Energy Cloud—where energy becomes more distributed, clean, intelligent, and mobile. The old business model of centralized generation will shift to a decentralized, customer-centric value chain, where energy services become far more important than energy supply. Navigant Research also identified an additional $1 trillion of new value created in the Energy Cloud by 2030.

There Will Be No Energy Transition without a Digital Transformation

It is important to note that the energy transition is as much a digital revolution as it is an energy revolution. The $1 trillion of new value identified by Navigant Research will likely be created through the provision of digital energy services, from automated demand response to transactive energy. None of this value will be delivered without access to vast quantities of data from an enormous and heterogeneous array of devices. None of this value can be delivered without a robust IT infrastructure to support digital energy services.

As part of thought leadership, Navigant Research has identified seven platforms that are critical to the delivery of digital services within the Energy Cloud. Additional white papers are on the roadmap to discuss these platforms in further detail. Next up is a white paper on the neural grid platform, which describes—among other things—the devices, communications, and analytics that will underpin all other digital services in the Energy Cloud.

Vendor Ecosystems Will Help Manage the Complexity of the Energy Cloud

Navigant Research’s upcoming Neural Grid white paper will shine a light on the sheer complexity of the IT infrastructure required. There will not be any plug and play platform for the foreseeable future. The market is new, moving rapidly, and different utilities have different requirements. As a result, over the next decades individual utilities will deploy many platforms that rely on many datasets created by many devices communicated over many networks using many protocols stored in many locations supplied by many, many different vendors.

It is critical for the success of the Energy Cloud that vendors cooperate within official and unofficial partnerships and work toward their customers’ common goals. Join us on November 14 at 2:00 p.m. EST for an Intel-sponsored Navigant Research webinar. We’ll explore in more detail how the energy transition and associated digital transformation requires strong vendor ecosystems and gain some insights from Intel, which sits at the heart of one of the largest smart grid ecosystems.


Innovation Aplenty at the European Utility Week

— October 10, 2017

From October 3 to 5, the European energy industry converged on Amsterdam for European Utility Week, an event I have attended off and on since 2009. In a conservative, slow-moving industry, previous events have felt a little like the utility technology equivalent of Groundhog Day. This year’s event was far from it.

The 2017 exhibition is an excellent barometer for the current speed of industry change. And how things have changed. In 2009, the event was known as Metering, Billing/CRM Europe. This far from catchy title was somewhat misleading because metering and other electrical hardware companies ruled the exhibition floor, with a handful of billing vendors and nary a mention of CRM. Virtually all the exhibitors had many decades’ experience in the utilities industry.

Back to the Future

Fast forward to 2017. The exhibition is now 4 or 5 times larger and the focus has shifted from hardware to software. The hardware vendors of old have expanded their focus to offer a suite of products from the traditional metering business to communications, data, and analytics platforms into services. There is now a profusion of software vendors that would have looked out of place at the event of 2009. This reinforces the message that the energy transition is not just about a shift to smarter, cleaner generation, but a shift toward software that will manage future networks and enable new business models.

However, the most marked difference between this exhibition and those of previous years was the existence of many small booths for startups and several EU-funded Horizon 2020 demonstration projects. Nine years ago, startups in the energy industry were few and far between. Innovation was typically led by a utility that would develop solutions with a long-term partner that would, in turn, create products around these innovations and bring them to market. But how things have changed. Innovation does not have to occur with a utility’s blessing. The shift to software means entry costs are significantly lower, and startups are developing products that can just as easily compete directly with a utility as be adopted by them.

Disruption at the Edge

If this exhibition-as-bellwether idea runs true, utilities should raise their competitive threat levels a notch or two. Disruption at the edge is a key indicator of future disruption at the core, yet most companies fail to closely monitor startups chipping away at non-core parts of their business. The industry has entered the most disruptive decade in its century-long existence. Many utilities are planning for a more distributed, competitive future. Those that don’t run a real risk of becoming irrelevant in the not too distant future.


CES Lessons for Utilities from the Auto Industry

— January 12, 2016

CarsharingstandortI read a lot of news from the Consumer Electronics Show (CES) in Las Vegas last week about automakers embracing disruptive technologies like ridesharing and hailing, self-driving cars, and digital applications in vehicles. For instance, General Motors (GM) announced a $500 million investment in Lyft, Uber’s little sibling in the ride-hailing space. Some analysts wondered why a behemoth like GM would make such a move in a space that could ultimately eat into its sales. I doubt the company would invest that much just to try to ultimately torpedo the trend, so GM must feel like it’s better to be a part of the change in the industry than to fight it. Utilities should take notice.

Parallels at Play

There are a number of parallels between the utility and auto industries and the types of disruptions they are facing. Both sectors started over 100 years ago and enjoyed ever-rising demand for their products until the last few years, when, due to economic and technical reasons, demand growth has slowed and even stopped or declined in some localities. Daniel Ammann, president of GM, said “We think there’s going to be more change in the world of mobility in the next 5 years than there has been in the last 50. From a GM perspective, we view this as much more of an opportunity than a threat.” The same could likely be said for the energy industry.

Ford announced a partnership with Amazon to include the online retailer’s Alexa speech-control technology in Ford’s Sync vehicle voice control system. This would allow a driver to remotely communicate with his home, turning up the heat or opening the garage door. Ford has also started its own pilot ridesharing program, in which owners of Ford vehicles can rent their cars out for short periods to preapproved drivers. Ford CEO Mark Fields said his company was moving to become “an auto and mobility company.” Instead of just making cars, he said, Ford plans to offer transportation services for a generation of customers who may prefer to borrow vehicles rather than own them. “Those two companies (GM and Ford) are signaling that they understand that it’s not about moving metal anymore,” said Frank Gillett, an automotive technology analyst for Forrester Research. “It’s about having an ongoing relationship with the customer.” Ring a bell?

Alexa could be compared to devices like smart thermostats, which allow remote control of energy usage. Ridesharing is similar to community solar programs, where multiple people pool their funds together to share a common resource rather than everyone buying their own. Autonomous vehicles are analogous in some ways to energy storage, where consumers can start to be energy self-sufficient and let software automatically balance and optimize their usage of the energy highway.

Navigant just launched a new Utility Technology Disruption Report series to explore these and other trends that will affect the traditional utility business model. Change is never easy, but if the auto industry is a portent, it may be better to embrace change than wait to be left in the rear-view mirror.


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