Electric utilities across the nation are in the midst of change. The concept of the electric utility of the future, or “Utility 2.0,” continues to gain momentum, market traction and financial backing. Across the electric utility landscape there are a spectrum of realities, from electric utilities that are knee deep in project implementation to those believing that change is somewhere in the distant future — a concern for the next generation. Electric utilities are in need of thought leadership and relevant guidance to develop a holistic, systematic, and coherent approach to navigate Utility 2.0.
Common Utility Challenges
Although differences clearly exist, utilities do share some common challenges:
- Limited Utility 2.0 Expertise — The various components that make up the distributed energy resource (DER) landscape are numerous, interconnected, and growing in sophistication. This necessitates a technical knowledge of various DER resources that don’t fall within the traditional utility practice. DER devices are also dynamically changing, requiring utility personnel to stay abreast of relevant industry patterns and important market movements. Additionally, skills related to branding and marketing are needed to cater to a customer base that is daily becoming more energy conscious.
- Limited Utility 2.0 Staff — Electric utilities typically have limited or no dedicated staff to proactively address the complex challenges of a Utility 2.0 transition. Additionally, utility staff managing various components of DER typically do not have the necessary authority to develop holistic solutions at a corporate enterprise level. The result is various piecemeal approaches within each department’s purview that are bundled together.
- “Utility 1.0” Culture — Utilities typically operate within a conservative, risk-averse environment that moves at a slow and deliberate pace. Electric utilities are now subject to growing competition from third-party business entities that thrive in customer engagement and speed to market environments. Additionally, a Utility 1.0 culture may include executive leadership that places a low priority in seeking progressive, forward-leaning solutions that “go against the grain.”
Considering the understandable challenges electric utilities are facing along with the inherit complexity associated with a dynamic DER future, a utility’s strategic direction can quickly stagnate. Most people, whether in their professional or personal lives, do not proactively seek monumental paradigm shifts — especially ones that are difficult to resolve and will likely be met with resistance by their peers. Utility employees, of all levels, are no different.
DER Focus Areas
There are various facets of the DER landscape that can be explored to identify common themes. These include historical and forecasted generation levels, political and legislative drivers, regulatory activity, and the ongoing evolution of the utility customer. When all of these and other relevant factors are considered, some common industry trends begin to emerge that help shape key DER focus areas.
The focus areas defined represent the proverbial three legs of a stool, as they work most effectively when applied in conjunction with one another. The essence of these three components can be captured by the term “savvy.” In other words, how well does a utility fair across all three focus areas as perceived by utility customers, stakeholders, the general public, and even its internal workforce. Savviness involves a combination of intelligence and acumen, discernment and understanding, and the ability to respond in and agile and swift manner. A utilities’ competence and ability to execute in all three of these areas will ultimately define their success and role within the Utility 2.0 marketplace of the future.
“Stepping Stones” Approach
The DER focus areas identified can be individually analyzed to develop strategic pathways with multiple steps (i.e., stepping stones). The number and types of stepping stones along each pathway can be customized to meet various targets and objectives. The multiple pathways developed within each DER focus area are assembled together to form an array of stepping stones. Within this array, each utility can shape their own custom DER pathway. This approach empowers utilities to define a pathway of their own choosing, while also maintaining flexibility to traverse to another relevant pathway if landscape signposts dramatically change over time.
The combination of direction and flexibility provided by the stepping stones framework, leads to “no regrets” strategies that enable utilities to proactively move forward while mitigating risk. One of the primary risks for utilities is waiting too long to respond and define a DER pathway. As opposing pathways are formed by third-party competitors, market retention and growth becomes more difficult and costly for utilities that decide to wait.
Although it may be difficult for a utility to imagine, individual utilities could be displaced by third-party competitors or survive as a wires infrastructure company with limited clout and upside revenue potential. Instead, by taking regular steps forward along a defined pathway, a utility greatly increases its probability of becoming a successful Utility 2.0-enabled service provider that moves beyond energy as a commodity to provide energy-as-a-service.
This article was originally published on LinkedIn and was republished with permission.