P&U is transforming
Why yesterday’s business models won’t work anymore
This is a time of monumental change for the power and utilities (P&U) sector. How energy is produced, who generates it, and how it is bought, sold and distributed is all changing – and all at the same time.
Society is also forcing this change. Consumers are increasingly dissatisfied with:
- Rising energy prices
- Aging infrastructure or lack of infrastructure
- The environmental consequences of fossil-fueled generation.
Solving the opposing yet equally important forces of affordability, accessibility and environmental sustainability has created an energy trilemma. Change is happening today, not in some distant future – and it is having an impact on power and utility businesses across the globe today.
Drivers for transformation of P&U
Infrastructure renewal and expansion is needed on a huge scale – current estimates show a US$17t investment is needed in global power infrastructure through to 2035.
Cheap renewables and distributed generation
The costs of delivering cleaner, smarter and more sustainable energy solutions have fallen dramatically and there is rapid growth in distributed generation (DG) and improved energy efficiency.
Growth in DG, together with the rollout of smart meters and other digital devices, enables two-way data flow that gives customers more control over energy.
Big data and analytics promise to transform and unlock significant competitive advantage. Customer and grid analytics will make sense of vast amounts of data from smart meters to help improve processes and business intelligence.
Political will is a proven catalyst for sweeping change, and many energy markets are set to undergo major reform in the next few years.
Regulatory and policy frameworks
New environmental rules and the low-carbon agenda demand that P&U businesses build more effective relationships with policy makers and regulators.
Lessons learned from other industries that have faced disruptive change include a willingness to adapt business models, develop new approaches to risk and embrace innovation.
The P&U sector is facing enormous human capital risks with a significant number of workers nearing retirement age in many countries. Their vast knowledge – built up over decades – will not easily be transferred to the next generation.
|Source: EY research|
The biggest impact of these changes is that traditional business models need to co-exist and co-evolve with increasingly decentralized models.
We simply can’t meet the trilemma of security of supply, affordability and sustainability with the old model alone.
Utilities need to embrace a culture of innovation and entrepreneurship with a willingness to adopt the best ideas – wherever they come from.
We need diverse thinking in and out of the boardroom. To succeed, we need to bring in and develop new skills and approaches. And one pool of talent that is currently untapped is women.
Read related articles from the Index of women in power and utilities.
|Winning the war for talent: tapping into the potential of women||Diversity: P&U versus other industries||More women on boards: what governments are doing||Both men and women are needed to achieve change|