Navigant Research Blog

European Utilities Are Moving toward New Energy Platforms at Different Paces: Part 4

— April 5, 2017

The energy industry is experiencing a profound transformation as the sector moves toward more intelligent, more distributed, and cleaner use of energy. Utilities’ traditional business models are being challenged by disruptive firms offering new services that leverage more advanced technology, as described in Navigant’s Energy Cloud analysis in its Navigating the Energy Transformation white paper. In the first post of this blog series, I described six new energy platforms underpinning the energy transformation. In the second and third posts, I showed that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms. In this post, I argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

Generally speaking, these new energy platforms have a higher risk profile than a traditional utility might pursue. Digital technology and advanced data analytics are key in these new areas—a domain not historically considered core business by utilities. A logical step for a utility is therefore to identify and approach startups as they test new energy platform services. A growing number of European utilities have set up venture capital funds allowing them to make riskier investment decisions than what the investment arm of a utility would typically approve. For example, Total created a venture capital fund (Total Energy Ventures) in 2008 to invest in startups, including Stem, Off Grid Electric, and AutoGrid. Similarly, ENGIE launched ENGIE New Ventures in 2014 with €115 million ($120 million) and RWE created RWE Venture Capital in 2016 with €130 million ($140 million). Meanwhile, some utilities have opted for external management. For example, most of EDF’s investments into startups have been done via independently managed Electranova Capital.

These strategic investments and partnerships are a win-win situation for both the utility and the startup. The utility invests in, or partners with, a yet-to-be-proven technology without bearing all the initial risk. In return, the startup gets access to funds, resources, and customers to test its pilots and accelerate the innovation of its business model. For instance, following acquisition by Enel, distributed energy resources (DER) management system provider Demand Energy now has access to one of the world’s largest renewable energy portfolio with 36 GW of capacity installed across four continents—a significant step up from its current portfolio of 3 MW of installed storage capacity.

The race to new energy platform services has started and some European utilities are further along than others. Enel has signed several strategic partnerships in Electric Mobility, in line with their recent focus of offering new services to customers in a digital world. Other European utilities such as Centrica and EDF seem to have been less active in developing partnerships and making investments in new energy platforms. Successful players in a smarter, more digital energy future will be companies that have pioneered new services and successfully scaled up innovative business models. All of the large European utilities have the ability to be one these future energy leaders—assuming they embrace the new energy platforms now.

 

European Utilities Are Moving toward New Energy Platforms at Different Paces: Part 3

— March 29, 2017

The energy industry is experiencing a profound transformation as the sector moves toward more intelligent, more distributed, and cleaner use of energy. Utilities’ traditional business models are being challenged by disruptive firms offering new services that leverage more advanced technology, as described in Navigant’s Energy Cloud analysis in its Navigating the Energy Transformation white paper. In the first post of this blog series, I described six new energy platforms underpinning the energy transformation. In the second post, I showed that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms. In this post, I focus on the geographical distribution of activity to show that the majority of partnerships are with companies located in Europe, while most of the investments are made in organizations based in North America. In the next and final post, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

(Source: Navigant Consulting)

In terms of geographical distribution, while the majority of partnerships are with companies located in Europe, it is worth noting that most of the investments that eight major European utilities have made over the last 2 years are concentrated in North America—and California more particularly (see above figure). This is not surprising, when one considers that most startups offering services in Distributed Energy Resources (DER) Integration were created in California. These include AutoGrid (which raised funds from both E.ON and Total), Stem (in which RWE and Total invested), and Green Charge Networks (acquired by ENGIE). French utilities ENGIE and Total and German utilities E.ON and RWE have been the most active investors in California-based companies. While both French utilities have been focusing on companies offering DER Integration services, the German utilities’ activities have been more diversified across multiple platforms, such as Internet of Things (IoT), Electric Mobility, and DER Integration.

The majority of partnerships have been signed with companies located in Europe. An obvious reason is the ease of having operational teams able to work closely together across European countries and time zones—rather than across continents. In the Electric Mobility sphere, Enel has been partnering with automaker Nissan to offer a bundled product consisting of Nissan’s EV and Enel’s home charging point and smartphone app locating charging points across Italy. In the DER Integration field, E.ON and solar PV system provider SOLARWATT have signed an agreement to jointly offer a solar PV and battery storage system, an energy monitoring app, and a green electricity tariff to their German customers.

Lastly, utilities that are competitors in their home European markets sometimes invest in the same startup, while other times betting on competitor companies. Both E.ON and RWE have invested in Bidgely, which provides real-time appliance-level energy consumption applications for residential customers. The California-based startup will use both German utilities’ funding and customer bases to expand from North America to Europe. On the other hand, ENGIE acquired battery storage system and platform provider Green Charge Networks, which is a direct competitor of Demand Energy—the company acquired by Enel in early 2017.

In the next and final post of this blog series, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

 

European Utilities Are Moving toward New Energy Platforms at Different Paces: Part 2

— March 22, 2017

The energy industry is experiencing a profound transformation as the sector moves toward more intelligent, more distributed, and cleaner use of energy. Utilities’ traditional business models are being challenged by disruptive firms offering new services that leverage more advanced technology, as described in Navigant’s Energy Cloud analysis in its Navigating the Energy Transformation white paper. In the first post of this blog series, I described six new energy platforms underpinning the energy transformation. In this post and in the next post, I will show that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms. Finally, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

I analyzed the level of activity for eight of the largest European energy utilities engaging with companies offering new energy platforms. Partnerships, which often take the form of exclusive contracts, and investments, which are characterized as direct capital into companies, were grouped and assessed. Note that only partnerships and investments announced in 2015-2016 were included in the analysis; any previous announcements do not appear. The analysis also excludes any internally developed products and services that may fit in the new energy platforms.

(Source: Navigant Consulting)

The matrix above provides a high level overview of the major European utilities’ strategic positioning within and across the six energy platforms. Distributed Energy Resources (DER) Integration and Electric Mobility are the two energy platforms with the highest level of activity from the major European utilities. Internet of Things (IoT) and Smart Cities are platforms where European utilities are more moderately active, while Transactive Energy and Telecommunications Networks feature the lowest level of activity. Of the eight European utilities covered, ENGIE, Total, and E.ON/Uniper are most active in DER Integration, while Enel, RWE/Innogy, and Vattenfall are most active in Electric Mobility. ENGIE also stands out as being particularly present in IoT and Smart Cities. Although Centrica and EDF appear to be relatively less active in new energy platforms, one should recognize that they have been developing new products and services internally rather than externally—an element that is not captured in this analysis.

The relative activity in partnerships versus investments varies across energy platforms. Electric Mobility activity consists almost entirely of partnerships—where companies prefer signing agreements with automakers and charging infrastructure developers. In contrast to some of the other platforms, utilities may not consider Electric Mobility to be a core business and so are less prone to directly invest in this new platform. This is the case of Enel with Nissan and RWE with Volkswagen. On the other hand, almost all of the European utilities’ activity with the IoT platform has been through investment. For example, Centrica acquired water leak detection and flow monitoring company FlowGem and added it to the Connected Home portfolio Centrica offers to British customers.

In the next post of this blog series, I will show that the majority of partnerships are with companies located in Europe, while most of the investments are made in organizations based in North America.

 

European Utilities Are Moving toward New Energy Platforms at Different Paces: Part 1

— March 15, 2017

The energy industry is experiencing a profound transformation as the sector moves toward more intelligent, more distributed, and cleaner use of energy. Utilities’ traditional business models are being challenged by disruptive firms offering new services that leverage more advanced technology, as described in Navigant’s Energy Cloud analysis in its Navigating the Energy Transformation white paper. In the first post of this blog series, I describe six new energy platforms underpinning the energy transformation. In the next two posts, I will show that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms. Finally, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

(Source: Navigant Consulting)

Integrating Distributed Energy Resources (DER) into a single automated system allows utilities to manage resources more simultaneously and optimally than traditional network operations. DER include distributed generation (mostly solar PV systems and combined heat and power plants), energy storage (which can be used as both load and generation depending on the need), EVs (which act as a mobile battery), and demand response (i.e., adjusting customer load in response to a grid signal).

Electric Mobility refers to the electrification of transport and includes bikes, cars, buses, and trucks. The use of electricity as a substitute to traditional fuels requires the deployment of an electric charging infrastructure covering major routes and endpoints—both homes and offices. In addition to decreasing carbon footprint as compared to internal combustion engine vehicles, EVs can be used as a mobile battery providing capacity and flexibility services to the electric grid.

The Internet of Things (IoT) allows remote monitoring and control of objects connected together via a digital network. It provides new services in energy consumption intelligence and optimization for end customers. Residential customers can benefit from a connected home and commercial and industrial customers can benefit from a more intelligent building.

Smart Cities encompass a combination of services in energy, transport, water, and waste management. Such services are enabled by the three abovementioned platforms—DER Integration, Electric Mobility, and the IoT. City managers can benefit from a reduction of the city’s energy consumption and carbon emissions, improvement of residents’ quality of life, and resilience against catastrophic disasters.

Transactive Energy is a more granular approach to exchanging electricity. Traditionally, electricity is generated by large power plants and sold on a central wholesale market to retailers that in turn sell electricity to the end consumer. Transactive Energy leverages peer-to-peer trading technology such as blockchain and allows a more localized exchange of electricity at the individual level. Consumers with onsite DER such as solar PV and battery storage become prosumers and sell the excess electricity to neighboring consumers at a mutually agreed price.

New Telecommunications Networks based on wide-range technologies enable IoT and machine-to-machine communications. Traditional energy and telecommunications companies are competing in deploying and expanding these new networks that are complementary to existing communications systems.

These six new energy platforms require entrepreneurial creativity that is more likely found in a startup environment rather than a traditional utility. This is why several energy utilities—including the largest European utilities—tend to partner with, or invest in, recently created companies focused on some of the new energy platforms. In the next post of this blog series, I will show that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms.

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