Flexibility and adaptability are critical to success
The changing market is also enticing competition. Technology providers, digital giants, auto manufacturers, retailers, aggregators and intermediaries are all vying for a share of energy customers’ expenditures. These companies are well positioned to scale-up investment and are already starting to put building blocks in place to compete across the electricity value chain – from large-scale wind and solar photovoltaic (PV) projects, to energy storage, to EV charging infrastructure, to connected devices within the home.
Their arrival is prompting introspection from traditional providers. They are assessing their future relevance to consumers who are digitally connected and, increasingly, self-generators of energy. They are considering what they can do differently to retain customers while:
- Running a reliable, efficient and safe grid at the same time as maximizing returns on asset investments; as traditional funding sources erode due to flat or declining sales.
- Accommodating rising volumes of intermittent distributed energy resources (DER) into a grid that was originally built to enable one-way power flows from centralized generation.
- Delivering greater value to customers whose expectations, influenced by experiences in other sectors, are on the rise.
With so much change going on across the industry, traditional energy companies cannot stand still. They must make fundamental changes to the services they offer, their business models and the way in which they configure and operate their grids, if they are to continue to compete commercially.
Flexibility will be a condition of success. Energy companies should:
- Rethink generation. For the new energy world, this will mean investment in new technologies and distribution capabilities to integrate more intermittent renewables, support DER and accommodate an influx of EVs. It will also mean engaging directly with renewable developers through PPAs.
- Identify new funding mechanisms. The energy transition will be complex and costly for energy companies. They will need to source new funding and work with regulators to develop frameworks that are flexible enough to encourage and reward investment in a high renewables-based system, as well as make certain that all market participants receive the most efficient, cost-effective and fair outcomes.
- Fast-track e-mobility. As EVs become mainstream, energy companies must work with automotive and technology companies, governments and regulators to service e-mobility solutions and make electric transport viable.
- Connect with customers. Energy companies need to morph from supplier to partner and to reimagine the way they engage with customers. They can focus on improving the customer experience, whilst also expanding their offering in areas such as smart home appliances, solar power and EVs, in conjunction with external providers.
To become the business of the future, let go of the past
Ultimately, energy companies need to make conscious, strategic choices.
Some energy companies will be risk takers. They will see the transition as an opportunity to innovate and operate commercially outside the scope of the traditional regulatory framework. They might compete against new players or engage in activities beyond their core competencies. They may also partner with companies from other industries to deliver advanced energy and e-mobility solutions.