Utility Week

UTILITY Week 10th June 2016

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Page 26 of 31

UTILITY WEEK | 10TH - 16TH JUNE 2016 | 27 Customers Market view T he days of the traditional electrical power utility are numbered. Despite recent changes to the subsidy regime announced by the government, disruptive forces – a combination of subsidies and advances in technologies such as micro- combined heat and power boilers, solar pho- tovoltaics and battery storage – are making it relatively easy and cost-effective for people in developed countries to unplug from the grid. Yes, fossil fuel prices have fallen, but pho- tovoltaic and battery storage prices are also dropping quickly. As a result, households and small businesses are rapidly becoming more energy independent. If current trends hold, the amount of power generated by UK residential and com- mercial customers will more than double within the next ten years, reaching a record amount of approximately 23 terawatt-hours a year. While that represents just under 10 per cent of the UK's consumption, this amount is steadily growing. By 2050, UK customers will generate the equivalent of £4.5 billion-worth of electricity, provided energy prices stay close to their present level, supportive regu- lations remain in place and low-cost technol- ogies become even more commonplace. The major shi underway in electric- ity generation is similar to upheavals that other industries have experienced, and have emerged all the stronger for it. Consider the telecommunications industry. In the 1990s, when deregulation fundamentally reshaped the market, smart competitors refocused their attention on anticipating and meeting their customers' preferences – by pioneering a wide range of alternative products and ser- vices. Now, as well as a basic landline phone service, most telecoms companies offer inter- net, cable and applications that communi- cate with and remotely manage everything from home security systems to car tempera- tures and bill payments. Coming out on top To come out on top of this disruptive wave, the utilities industry will need to better antic- ipate and meet their customers' needs – even if that means enabling customers to become their competitors. Specifically, utilities are best positioned to understand the econom- ics of power generation. Instead of just try- ing to sell their power, they should sell their knowledge, by advising a broad range of customers on whether they should invest in mak- ing their own electricity. Increasingly customers, rang- ing from businesses to house- holds, are turning to a variety of sources for energy to ensure that their power is secure, abundant, hassle-free, cheap and sustainable. But they need technical expertise and practical support – the core competencies of utilities. In addi- tion, utilities (like telecoms before them) will have to streamline and automate their legacy operations while investing in developing their people. Employees will need to be capable of articu- lating and delivering a much more expansive range of new products and services than is currently offered. Finally, the electric utility of the future will have to be at the forefront of incubat- ing, developing, investing in and imple- menting new energy-related technologies. To do so, utilities will need to co-operate effectively with a much broader network of investors, researchers, government policymakers and development programmes. It is tempting for utilities to think customers' fledgling efforts to produce their own electricity are temporary. They are not. They portend a new, more diversified wave of electrification that will alter our way of life. Utilities need to become more attuned to cus- tomers' needs – and start acting as both expert providers and advisers – to remain part of their old customers' new electric equation. James Basden is a partner, Adam Witkowski a consultant, and Tim Wright a principal, with Oliver Wyman A world of DIY generation Distributed generation means many of your customers will be generating their own electricity – you should help them do so, say James Basden, Adam Witkowski and Tim Wright. 800,000 UK homes have solar PV electricity panels 250,000 UK homes have solar thermal hot water heating panels KEY NUMBERS SOLAR DEPLOYMENT IN THE UK Source: Decc 12,000 10,222 8,000 6,000 4,000 2,000 0 Capacity (MW) Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 25MW+ 5-25MW 50kW-5MW 10-50kW 4-10kW 0-4kW 2010 2011 2012 2013 2014 2015 2016

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