Utility Week

UTILITY WEEK | 26TH APRIL - 2ND MAY 2019 | 29 Customers Market view U tilities are approaching a crossroads. With increasing energy efficiency and utilisation of distributed energy resources (DER) affecting their bottom lines, utilities must position themselves as innova- tors and generate new revenue streams to remain profitable in the 21st century. Smart cities represent a significant opportunity for utilities to exploit their skillsets and expand their footprint into additional markets. Navigant Research has identified four key new business opportunities that provide a particularly good entry point for utilities in the smart cities market. 1. Distributed energy resources One of the most obvious connections between city strategies and utility innova- tion is the push towards renewable energy. Cities are responsible for more than two- thirds of the world's energy use and green- house gas emissions, and they have become increasingly aggressive in exerting pressure on utilities to shi† from fossil fuels to renew- able energy to help meet emissions targets. Cities are looking to install DER solutions in municipal buildings and are encouraging the adoption of residential and commercial clean energy solutions through programmes to support solar photovoltaics (PV), stor- age, combined heat and power systems, and other community energy schemes. Distrib- uted renewables development and integra- tion, distributed energy storage systems, and microgrids all offer the opportunity for utilities to make their energy services more efficient, resilient, cost-effective and sustain- able. To date, utility efforts have been largely reactive, focused on issues caused by renew- ables intermittency, shi†ing loads, capacity constraints, and bidirectional power flows. 2. EV charging infrastructure EV charging is one of the most important smart city business opportunities for utili- ties. By 2020, Navigant Research estimates that more than 4,000GWh of electricity will be consumed by plug-in EVs annually in the US alone. If utilities do not become the pri- mary provider of EV supply equipment and services, they will be shut out of the most significant load growth factor within the next 10-20 years. An increasing number of cities around the world will be introducing legislation to ban or fine the most polluting vehicles, and a growing number of countries have announced commitments to ban the sale of petrol and diesel cars, including China, the UK, France and India. With governments all over the world enacting legislation to push consumers towards cleaner vehicles via taxa- tion policies and incentives, and with energy consumption set to continue declining due to energy efficiency and DER, the EV charg- ing market is a must-win for utilities. Utilities can use their expertise as energy providers and managers to help develop and operate the EV charging infrastruc- ture needed for the global transition to EVs. European utilities and energy companies have already been particularly active in the industry, making notable acquisitions to bol- ster their EV charging market position. For example, Engie acquired EVBox in 2017 – a Netherlands-based company with more than 40,000 charging stations in service. In addi- tion to Engie, several European utilities are becoming significant players in the EV charg- ing market, including Enel X (the new busi- ness arm of Enel), EDF (through its Sodetrel division), and Eon (through its 77 per cent stake in Innogy). 3. Smart street lighting Smart street lighting offers a bridge between energy-related services and a range of other smart city capabilities. It utilises traditional utility capabilities as providers of lighting services, so fits well with those street light assets – and there is a strong business case. A number of utilities are recognising the potential of this market and have deployed innovative commercial projects. For example, Dutch utility Alliander partnered with Signify and Cisco on an innovative smart street light- ing project in Amsterdam. Adaptive lighting, security cameras, and a public wi-fi network are some of the applications being tested. Enel X also offers European cities advanced smart lighting solutions – the utility has installed more than 1.8 million LED lamps in Italy. In the UK, SSE Enterprise Contracting maintains more than one million street lights and helps local authorities utilise smart LED technology for street light dimming, fault reporting and energy savings. The company also helps cities integrate smart city applica- tions such as air quality reporting and traffic management with its lighting solution. 4. Smart buildings The drive to increase building energy effi- ciency in cities gives utilities the chance to offer additional services for energy optimi- sation, energy retrofits, combined heating, cooling and power, and advanced energy management services to both public sector and commercial building owners. Collabo- ration between city departments and local energy utilities to improve energy efficiency also enables retrofit programmes to be tar- geted at the most appropriate residents, businesses and communities. Duke Energy, for example, worked with other stakehold- ers in the Envision Charlotte programmes to reduce energy consumption in 61 of Char- lotte, North Carolina's commercial buildings by 19 per cent, in the process saving $26 mil- lion in energy costs and 51,700 tonnes in CO 2 emissions. Market barriers remain While utility interest and involvement in smart city deployments is increasing – par- ticularly in North America and Europe – several key barriers to greater market par- ticipation remain. These barriers include regulatory challenges, utility business cul- ture and organisational structure, technical and operational challenges, and the lack of a business case for some smart city applica- tions. The configuration of these challenges is unique to each utility given its history, location, culture and current asset base, but there are many lessons to learn from the early leaders who are already establishing their footprint in the smart cities market. Ryan Citron, senior research analyst, Navigant Research Smart city opportunities With distributed energy resources and increasing efficiency affecting the revenues of utilities, they must look to business opportunities in smart cities. Ryan Citron details four entry points.

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