by Tanya Bodell, Energyzt
Most electricity end users do not think about their electricity until it is unavailable. As a result, it has been easy for utilities to lull themselves into thinking that low-cost, reliable delivery is their primary value proposition. That view seemed supported by the first wave of competition, which took the form of independent power generators, competitive electricity retailers and commercial transmission companies’ capitalizing on FERC Order 1000, all focused on some component of system production and delivery. It’s time to turn around. The next wave of challengers is targeting customers behind the meter.
Sitting in Living Rooms
Energy management services have been a traditional role for utilities, albeit exercised somewhat passively. Treat this role as an unwanted obligation at your peril. Several companies with large balance sheets already are in your customers’ living rooms and are making home energy management plays. After dabbling in and closing Home Meter in 2011, Google re-entered the market last year with a $3.2 billion vengeance when it acquired Nest. Broadband Internet giant Comcast added home energy management to its offerings in Pennsylvania and Illinois the past two years. A major home security company boasts about its energy management equipment, “If Honeywell’s existing technologies were widely adopted today, energy demand in the U.S. could be reduced by 20-25%.”
Yet cross-industry entrants have been entering the residential home management market for the past 10 years with name brands’ such as Microsoft, Cisco and now Verizon quietly exiting after a few years of failing to gain traction. Nevertheless, utilities should not ignore these companies behind the meter. They are testing the market, trying different business models and offering customers control. If not potential partners today, they could become powerful competitors tomorrow.
Perched on Roofs
Distributed generation is power generation capability at the point of consumption, notionally eliminating a number of inefficiencies associated with delivering power from supply to load. A generic term, the concept of smaller, decentralized power production often assumes the technology of the moment, with backup generators, fuel cells and microturbines of yesteryear making way for today’s favored renewable resources such as rooftop solar. Despite the plethora of technologies, however, grid parity always seems to be 10 years away. Furthermore, each distributed generation technology tends to have its own physical limitation that must be overcome. That said, excitement around distributed generation energy storage systems seems to be gathering, especially with Tesla’s April 30 announcement of its home battery systems that would combine with rooftop solar. Ten years away might arrive sooner than you expect, offering customers other options for reliable electricity supply.
Parked in Driveways
Electric vehicles (EVs) have continued to develop as a transportation alternative, but they are well short of President Obama’s goal of 1 million EVs on the road by 2015. Even with only 300,000 highway-capable plug-in vehicles as of December, the U.S. can boast the largest fleet of plug-in EVs in the world, according to HybridCars.com. The impact of EVs on utilities is mixed. They increase load, but nowhere near a level to overcome the transition from the industrial to information age. On the other hand, they introduce energy storage and decentralized ancillary services resources, fueling a move to distributed generation. Potentially most damaging, however, might be the introduction of another set of well-funded companies behind the meter that provide electricity customers with reliable supply.
Who is the man behind the meter? Many companies, business models and service offerings are targeting electricity end users that utilities should be watching. And those spending all their time focused on potential competitors are missing the point.
Monitoring competitive threats is fine; serving your customers is far better. Turn your attention to your customers with all their varied needs and desires. Understand what they perceive as the true value of electricity, and find innovative ways to provide that value. Once you understand the real men and women behind the meter, pursue tactics to serve their requirements in your own innovative way.
Tanya Bodell is executive director of Energyzt, a global collaboration of energy experts who create value for investors in energy through actionable insights. Visit www.energyzt.com. Reach Bodell at firstname.lastname@example.org or 617-416-0651.