How Can Utilities Survive Energy Demand Disruption?
Continued adoption of energy demand-disrupting technologies could drive down utilities’ revenues by between $18 billion and $48 billion a year in the United States, and €39 billion to €61 billion a year in Europe by 2025, according to the latest Accenture research.
In the face of such losses, utilities executives are under pressure to effectively manage the transition to a digital grid. The opportunity? Accenture believes that with the appropriate plan and effective monitoring and control, utilities companies can balance investment with an opportunity to establish a more cost-effective, optimized grid.
The research shows demand could be disrupted as a result of changes in:
- Energy conservation and demand response
- Energy efficiency through insulation and efficient appliances
- Energy substitution, such as the electrification of vehicles and heating
- Distributed generation, such as photovoltaics (PV), storage and mini- and micro-combined heat and power.
Some of Accenture key findings include:
- Continued adoption of new energy technologies could disrupt demand and drive down utilities’ revenues by tens of billions of dollars by 2025.
- The risk to electricity demand is not from customers moving off-grid, rather it is from the combined effects of exported distributed generation output, conservation and efficiency actions.
- By 2015 solar PV will be at grid parity—equal to or less than the cost of power purchased from the grid—across Australia, many states in the United States, and several European member states.
- Electrification of space heating and transportation provide longer-term growth potential for electricity demand, but there are substantial uncertainties over their timing.
- Utilities executives’ expectations on the impact of some technology-driven changes to utility network economics and performance, as well as the potential for new competition have become more pessimistic.
Accenture identified three potential scenarios that could represent the impact of disruptive energy technologies on the industry:
- Status quo: assumes a steady projection of long-term historic trends in energy demand and electricity price, no major breakthrough on technology costs, withdrawal of subsidies by 2018, and relatively low consumer interest in the uptake of new energy products and services.
- Demand disruption: caused by a moderate reduction in load, this scenario is a result of the adoption of energy efficiency and distributed generation being possible without subsidies, leading to greater penetration from shifting consumer sentiment, falling technology costs and a moderate rise in electricity prices, especially across Europe.
- Perfect storm: perhaps closest to the industry phenomenon known as the “utilities death spiral,” whereby an increasing number of consumers migrate off the grid or use it only as back up. This scenario assumes that subsidies continue to the early 2020s, technology costs plummet and electricity prices must rise significantly to cover the subsidy and integration costs, motivating customers to accelerate energy technology deployment. In all, the perfect storm scenario leads to significant load reduction and revenue losses.
According to Accenture analysis, the most likely scenario is demand disruption.
Toward a digitally enabled grid model: Download the executive summary.