Distributed energy threatening utilities
The rise in distributed energy in the United States threatens the business model upon which the power and utility sector has been built, according to Ernst & Young (EY). The power and utility industry must shift from its defensive posture regarding distributed energy resources (DER) and go on the offensive to lead the revolution.
“The critical success factor for U.S. electric utilities will be changed behaviors. Utilities have to have the capabilities and the mindset that says, ‘we want to compete, not just defend the status quo,'” said Dean Maschoff, executive director, Ernst & Young LLP, and one of the authors of the report.
The value for DER in the form of distributed solar PV systems has never been more attractive, and utilities will increasingly feel the impact on profitability as customers adopt the new technology. There is no “one size fits all” solution, but there are imperatives that will help utilities survive and thrive, according to EY.
- Position the utility to compete. Utility leadership teams need to design and commit to a transformation roadmap that will create a more efficient and effective utility operating model — one that will be able to offer new products and services and compete against new entrants.
- Transform the grid. As DER grows as a market force, the grid must evolve into a more distributed, digital and dynamic system that provides two-way communication between customer locations and the utility.
- Manage the transition. Utilities need to take actions that seek full cost recovery of legacy assets to recover investments made and costs incurred in a pre-DER world.
- Focus on the customer. To maximize the benefits of a pro-DER strategy, utilities need to increase their customer knowledge and the range of their offerings.
- Innovate and accelerate. Utilities should adopt a business model that can adapt to changing conditions — one that captures and provides value in connection with distributed energy.
– see this report