© 2012, Newport Consulting Group

Customer Driven Business Model Evolution

Paul De Martini

October 1, 2012

Base Case: The transformation takes place, but the pace is

slower, since utilities have neither policy incentives nor strong

market demand.

Market Driven: Progress is limited to areas the market can pull

forward without incentives, mandates or subsidies. Conditions are

chaotic, with policies, regulations and standards varying widely by

region.

Policy Driven: Federal and state legislation and regulation creates

powerful incentives and mandates. Utilities find themselves

pinched as policymakers push changes without providing the

money to pay for them.

Rapid Development: Most disruptive and unpredictable scenario.

The confusion of an Internet-style frenzy is counterbalanced

somewhat by standards and guidelines from policymakers and

regulators. Utilities have the most opportunities in this

scenario…but also the most risks.

Market Driven

Policy DrivenRapid

Deployment

Base Case

Po

licy

Influe

nce

Economic

Growth

Source: EEI Smart Technology Scenario Workshops

EEI Future Scenarios

60 industry experts agree on disrupted end state – question is pace and timing

Signposts point to different experiences and pace of change across US

Market Driven

Policy DrivenRapid Deployment

Base Case

5 Forces Driving Transformation

Source: ACEEESource: EIA

2011 US State Renewable Policy 2010 US State EE Policy

Policy is Spurring DER Adoption

Combined with accelerating improvements in DER technology price & performance are creating opportunities for electric system efficiencies

4

Over 80% of US population under the equivalent of EU’s 20/20/20 Plan

DER will exceed Coal Gen Capacity by 2020

Solar PV system installed in US every 7 minutes in 2012Source: SEIA/GTM Research

New economies of scale & potential network effects driving business opportunities

Customer Evolution

Linking Smart Grid with Web 2.0 Enables Customer Partnerships

6

CustomerIn Control

CustomerIn Context

CustomerCollaboration

CustomerCo-creation

Green Button Zero Net Energy

Evolving Energy Ecosystem

Convergence of Four Key Networks

Responsive Demand

Central to Distributed Transition

Fundamental shift for industry business and operational paradigms

Distributed Gen

Electric Network + Central Gen

Energy Storage

Customer-Grid Evolution

Business opportunities exist on both sides of the evolution curve, but require new

methods to be successful – this isn’t déjà vu circa 1997 or DR aggregation or Texas

3° of Value in Electric Industry

10

Opportunities are expanding beyond traditional value chain creating value

networks – need to look beyond the zero sum game of traditional value chain

27+ potential values, only a handful can be effectively monetized today

1° DER Values & Differentiated Services

Market Facilitator: Energy eBay + PayPal

Opportunity to create distributed market platform with related market services to

enable millions of participants and billions of transactions

Customer Energy Solution: Salesforce.com

Focus on managing customer energy related processes to achieve

business/lifestyle integration

Conceptual View of Customer Energy Related Transactions Occurring Today Across 3°

Business Model Framework

Business model decisions require deeper thinking than what spot on

the continuum looks interesting – platforms, control points, revenue

models & core capabilities are all critical elements

Telecom Lesson: BAU is not a good strategy

16

Telecom growth from new services – basic voice service losing money

Telecom Lesson: BAU is not a good strategyDER Growth will disrupt distribution model

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