What's going on?
President Obama recently announced he will not be supporting the Keystone Pipeline project. As an energy consumer this is probably not the most high profile news you’ve heard relating to the energy industry in the last few weeks. A lot of talk has been about the hard to monitor (or even enforce) COP21 Agreement, a great step that will require a lot of hard work. Some other pieces of energy news that that you might have missed in the last few months
- The Clean Power Plan and the fact it will impact thousands of utilities, jobs and Trillions of Dollars of market capital.
- Reducing your electricity usage for a monetary compensation from your utility (demand response) lies in the hands of Justice Scalia et al?
- Did you hear that over 60% of Texas new generation in 2015 came from renewable energy?
- Or that in Chicago, New York and California/Hawaii we now have the largest utility in the country, the most forward thinking utility in the country and the most solar and storage deployed in the country (respectively)?
- The renewable energy tax credits got extended for wind and solar and it might help us get to grid parity (projected by some as 2020)
None of these got on your radar? Well the utilities are paying attention to all the changes happening and you should too.
See, you the consumer are at the center of all this change. It all boils down to one thing; how you consume energy. This is because how you use energy fundamentally affects or is affected by
- The utility business model: You pay money for the energy you use but the energy is now coming from different sources (some renewable) and your usage no longer follows the old profile. Will the utility still continue to send you a bill that you pay once a month?
- Policy: are time of use prices right and should we all bear the cost of renewables coming on the grid? And the one change that’s already affecting how you do everything else in your life...
- Technology: The mobile phone has changed your expectations from your service providers and also (again) changed your energy usage behavior (87% of us now watch TV with a second device on) . Which cheaper products will come after the early adopter products like the Nest thermostat, Solarcity panels and smart meters?
Yes. These are all related and have YOU at the center. If you think this is confusing imagine how utilities, that haven't changed since Thomas Edison, feel? It's all chaos and as Robbie Wright, VP Innovation at Direct Energy said at ETS@Chicago in July 2015
‘We’re undergoing massive disruption, whether we know it or not, in the energy space and it’s delicious and chaotic.'
How to make sense of all this chaos? I'll be moderating a panel at ETS16 which will be looking at "Transforming the Chaos". The idea is to bring utility leaders finding scalable revenue generation amidst chaos, and exploiting new ways to solve these problems. The expectation is that the conversation will be about you and I as the center of this chaotic industry. This was not the case at an industry conference I attended a few weeks ago; it felt like everyone was happy to pretend things aren't changing at a rapid pace. My hope is that ETS will be about you the consumer as a partner in this transition by bringing great minds, institutions and doers from the utility industry to the table to discuss and debate what happens next.
What is required to survive?
Smart thermostats and appliances, solar panels, and electric vehicles that are now beyond just being a good idea, are they worth investing in? Impact of new mandates handed down from conferences in Paris? What happens when solar hits grid parity in a few years? Or are we already there? What about energy storage in the form of Tesla's Powerwall? Impending reality or marketing ploy? What if oil prices stay low and continue to negatively impact renewable adoption? What does this mean for utilities? What does it say about the industry when one of the few utility CEOs who tried to transition to the renewable future gets fired for his troubles?
A lot of unanswered questions (which will be discussed at the conference) but some things are obviously required to weather this chaos
- A willingness to transform: utilities will have to overhaul business models (and look to other methods of making money). The industry will have to redefine standards, regulations and policy. Investments will have to be made with an eye on the long term (and not just on the current stock price or on lobbying against renewables).
- Emergence of the 'new': Investment is required in a new class of leaders and technologies from within and without the industry. The time for lip service is over.
- Recognize convergence of trends: As it was in the telecomms industry, where we moved from centralized assets and uninformed consumers to distributed assets and prosumers, so will it be in the energy industry. Mobile as an enabler for the consumer and the workforce, analytics for managing the assets and their utilization and system design changes are all coming together to ensure things will not stay the same.
- The role of the consumer (aka humans): humanizing energy and energy service delivery through purposeful storytelling based on a thorough understanding consumer context (something now enabled by insights from data). This is counter to how the utility has always engaged. To stay that way is to ensure extinction.
This whole dynamic currently fuels the national economy and due to the critical nature of the energy industry there is a massive opportunity here and it will require change. To survive the incumbents must change. Chaotic times ahead...
Exciting times ahead...