Business models of energy businesses are being transformed around the world, some spectacularly such as those in Germany, while others are more considered and evolving like California and New York. What are their drivers, differences and key features? How can they be classified and what new capabilities will be required to make them a success? More importantly, what can Australia learn from these examples?
These are the questions addressed in Accenture’s and the Energy Network Association’s Network Business Model Evolution report, which reviews existing business frameworks and offers bestpractice approaches for energy system transformation; providing a clear pathway that empowers collaboration, growth and continued evolution of the energy industry. The report identifies two major factors determining the depth and pace of business model’s transformation; shifts in regulatory and public policy and the market penetration of Distributed Energy Resources (DER), such as solar and battery storage.
Overall, companies could benefit from the adoption of new ‘resiliencebuilding business models’ and move away from a ‘one size fits all’ approach. Digitally-based solutions that prioritise individualisation, integration and efficiency can be categorised into four major responses:
1. Platform enabled: the establishment of a platform that enables optimum grid performance via real-time demand and supply management.
2. Intelligent grid: advanced communications technology and automation that allows for real time grid management.
3. Beyond the meter services: new service offerings that extend beyond traditional services such as remote monitoring, smart metering and home energy management systems.
4. Information services: monetising data gathered from meters/other sources.
The extent to which companies will evolve to adopt these responses will depend upon regulatory mandates, advancements in technology and a sense of urgency brought about by changing market conditions. The following findings were distilled from a global scan of distributors in selected jurisdictions:
- DER integration is fundamental to future business model evolution by enabling greater network capacity and energy diversity to optimise grid performance for supply and demand.
- Environmental conditions, regulatory policies and the relative cost of technology influence selection and rate of adoption of DER technology.
- The European Union (EU) has undergone fast paced disruption that has displaced retailers and generators.
- Market conditions faced in the US differ greatly from those in the EU due to a lack of a country-wide mandate to renewables, historically lower electricity prices, and high up-front costs of DER technology.
- Partnerships spread risk of investment whilst leveraging proven, best-in-class capabilities to accelerate time-to-market.
- Many of these initiatives are in the early stages of development and testing therefore it remains to be seen how distributors will derive value from renewables investments.
Building on these findings, the report identified six initiatives common between highly progressive utilities. These initiatives provide a foundation for future business models:
1. Build external partnerships to accelerate change and source renewables expertise and technology.
2. Strengthen core activities whilst developing new opportunities, through the establishment of a robust series of pilot programs, testing
a series of initiatives that address efficiency, renewables and new revenue streams.
3. Invest in building a digital grid network to optimise demand and supply through real-time monitoring and communications.
4. Engage in multi-phase business model planning to enable an agile response to future regulatory mandates or market conditions and competition.
5. Integrate and optimise DERs into the traditional grid network through targeted incentive programs.
6. Diversify revenue streams through new products and services such as smart metering services, and the provision and management of DERs (including Virtual Power Plants, biomass or Electric Vehicles) offer a shift in traditional revenue sources.
The report also highlights new operating principles which progressive business models are adopting. These include being able to integrate all types of generation, and enabling consumers to provide services back to the grid. The report was authored by Accenture Australia resources lead Ann Burns, Accenture Australia utilities strategy lead Simon Vardy, and Accenture Australia utilities practice manager Eloise O’Mara, from Accenture on behalf of the Energy Networks Association.