5 things Indian utilities can do now
Whether it’s in 2036 or sooner, grid parity is coming and is only the first milestone on the Indian utilities’ journey to a completely new energy market.
Are energy companies ready? We see many in denial or moving too slowly to seize the potential of changes. As India’s energy market attracts more foreign players, domestic utilities will need to make critical changes to their operating model and culture if they are to survive and thrive:
- Become digitally enabled to equip them with the capabilities they need to operate in the energy future. As most Indian utilities are financially constrained, budgets will need to be carefully directed to those digital capabilities with the potential to deliver the greatest value, such as asset health analytics and blockchain for peer-to-peer trading.
- Review business models to enable growth in a changing sector. Instead of trying to artificially block the changes that are coming to the sector, utilities should consider how playing a bigger role in transformation could generate alternative revenue. For example, following Prime Minister Modi’s September announcement of a target of having EVs make up 15% of the country’s vehicles within five years, several utilities have already announced plans to invest in EV charging infrastructure. Others may explore unlocking value in battery storage deployment, as more Indian states actively pursue this technology. For example, the Solar Energy Corporation of India has recently issued tenders for solar power projects supported by batteries in Himachal Pradesh and Jammu and Kashmir. There also may be opportunities for utilities to shift their business models to adapt to the rise of the Indian electricity prosumer — introducing new behind-the-meter offerings, such as connected homes and EV charging.
- Consider different capital strategies to fund change. More innovative financing mechanisms will be needed if cash-strapped utilities are to generate the capital to fund future investments. Some companies may consider rethinking their capital agenda to free up more funds, while others may want to pursue external funding from government programs or global multilateral organizations, such as the Asian Development Bank and the International Finance Corporation. Companies will also need to prioritize where to allocate resources — to modernize the grid, integrate distributed generation or invest in new business streams.
- Assess capability gaps. As well as the need to be digitally enabled, utilities will need to consider whether they have the additional capabilities needed, particularly in creating compelling customer experiences. The rise of the Indian electricity prosumer, driven by rising awareness and competitive prices, will call on utilities to rethink engagement with customers around billing, metering and new energy management solutions. Companies may consider how to best retrain current employees or recruit new talent to fill gaps.
- Change the mindset. Most importantly, utilities need to recognize that change is coming. The sooner they begin to adapt to change, the more capable they will be of seizing its potential.
Seizing the potential of India’s energy future
It’s hard to find a more dynamic energy market than India’s. The pace of change there is dizzying, as governments and utilities scramble to meet the electricity demands of a growing, increasingly urbanized and economically empowered population.
While EY teams have forecast the first tipping point of the energy transformation to hit a little later in India than in other regions, there is the potential for the milestone to come earlier, if the government can back its ambition with supporting policies, regulations and investments.