Issue link: https://fhpublishing.uberflip.com/i/976659
THE DISRUPTION: ASSET-LIGHT NETWORKS What's the deal? The concept of "asset light" u lity infrastructure operators is arguably a logical extension of the considerable degree to which construc on and maintenance of u lity assets are already delegated to key contrac ng partners. The idea essen ally involves today's monopoly u li es – our energy networks and water companies – taking a declining stake in asset ownership, instead building capability to operate their systems at a high level, managing data flows and overseeing new markets for balancing demand and supply. Meanwhile, current er one suppliers or new entrants could compete to provide system capacity and enabling infrastructure. According to our survey, over a third (36.5 per cent) of supply chain partners said they believe their company could undertake the bulk of infrastructure management as a service to u lity companies within the next 10 years. Why it ma ers: A total shi to asset-light u lity networks would be a radical step for the industry. At U lity Week Live 2016, UK Power Networks' chief execu ve Basil Scarsella openly speculated about the poten al for networks to follow the models pioneered by the likes of Airbnb and Uber which have rapidly risen to become the largest hotel and taxi companies in the world, but which own no hotels or cabs. Such a model might become increasingly a rac ve in the energy system as distribu on network operators move to take on roles as distribu on system operators, Scarsella implied. Meanwhile, recent regulatory developments suggest Ofgem and Ofwat too see benefits a ached to decentralising asset ownership for u li es. The introduc on of compe ve tendering for offshore transmission connec ons – previously provided by the monopoly transmission owner - has already taken hold with the aim of driving down connec on costs, and onshore links will soon follow suit. THE DISRUPTION: PROSUMERS What's the deal: Smart home technologies and rapid growth in decentralised energy resources are powering a prosumer revolu on – enabling individuals to understand their consump on, control it and par cipate ac vely in u lity markets. The rise of the prosumer is increasingly recognised as both a challenge and an opportunity for u lity companies. It's in rela on to energy, however, that the prosumer is having the most notable impact on u lity strategies. Here, where flexible energy technologies linked to consumer-grade control tools provide the scope for individuals and communi es to move off-grid and become energy self-sufficient, the prosumer concept is promp ng compe ve innova on, market reform and even fear of industry "death-spirals" for both retailers and grid infrastructure owners. But U lity Week Live's research shows that the rise of the prosumer is also shaping the way in which supply chain partners to u li es see their future. Asked to what extent prosumer trends will impact their organisa onal strategies in the near, medium and long term, supply chain respondents said they expect increasing levels of influence. On a 15-year me horizon, respondents rated prosumer impacts on business strategy at a significant 7.2 out of 10. Why it ma ers: In one sense, it's li le surprise to see the supply chain expects increasing levels of business impact from prosumer trends. A er all, we know that the desires and demands of prosumers are a significant driving force behind lead u lity company strategies. It therefore makes sense that savvy suppliers are thinking about how they can support their major clients in developing and delivering new opera ng and services models that match these. Increasing levels of investment in establishing independent energy communi es are already exci ng big providers of technology and asset management. Another opportunity area for today's supply chain par cipants to usurp conven onal u lity-customer rela onships is via peer-to peer trading. Whether supply chain players have the appe te to seize these opportuni es whole heartedly remains to be seen. But one thing's for sure, prosumer trends will have a defini ve impact on the whole u lity value chain of the future. CONCLUSION Our research suggests that supply chains are about to be transformed by a wave of technology, disrup ons and innova ve thinking. As Trudy Salandiak of the Chartered Ins tute of Procurement & Supply (CIPS) puts it: "Global supply chains will be reconfigured out of all recogni on." Salandiak says automated sourcing decisions will need to have more detailed specifica on, to be integrated into algorithms that will increase speed to market. On the upside though, she adds the tender process should become less expensive: "This will remove barriers to entry and inevitably increase compe on and develop dynamism in the marketplace. This will be great for SMEs who can adopt new technology with agility and minimal costs." There will be winners and losers as the fourth industrial age emerges - and the whole industry needs to be prepared. I N A S S O C I A T I O N W I T H NETWORK / 33 / MAY 2018