DNV GL © 2015 14 May 20171

RETAIL STRATEGIES: A SPECIAL DNV GL WORKSHOP

May 19, 2017

DNV GL © 2015 14 May 20172

How do we integrate

strategy goals into financial

plans? What are the

pricing, investment, and

risk dynamics and how do

they yield ROI?

What are the necessary

strategies to navigate

markets and position

greater value? Does

business trajectory align

with strategic business

goals and values? What

barriers exist preventing

strategy migration?

How is value being

coordinated, aligned, and

delivered? Is there a

pragmatic approach

prioritizing values? Are key

organizational players

aligned? Do current

business models need to

be refined?

What products and

services are demonstrating

value in the market? What

gaps exist that can be

exploited? What new

services can we expect to

see emerge? Are retailers

looking to build, partner or

buy?

What is the current landscape and how it is evolving? What

policies and regulations should we be aware and how might

they change in the short-term? Who are the key players and

drivers affecting change in the market?

Retail Landscape: Capturing the MOOSE

DNV GL © 2015 14 May 20173

Competing in Convergence – Key Considerations

Capabilities

Scalability

Funding

Customer

Adoption

Demand

Generation

What are the operational and cultural shifts necessary to meet changing market demands. Will you build, buy, make,

or partner to build capabilities (and why)?

How must your business model evolve to increase scalability? What new targets, products, and services must be

developed?

What are the key drivers and scenarios impacting customers adoption? How are Convergence trends driving

customers’ adoption?

What new financing strategies are necessary? How is the Convergence creating new opportunities and challenges

that require your company to revisit its strategic investments?

What are the current drivers of demand generation and how are they changing based on new market dynamics?

What new opportunities for demand generation can be explored in this converging landscape?

DNV GL © 2015 14 May 20174

Retail Electricity

MARKETS

DNV GL © 2015 14 May 2017

Retail Electricity Commodity Landscape: Current Players & Metrics

5

The U.S. retail electricity commodity landscape is incredibly crowded, with over 2,000 active companies, representing nearly $390 Billion in revenue (~162 Million retail customers) and nearly 4,300 TWh as of 2015.

Source: EIA-861, 2015

0

500

1,000

1,500

2,000

2,500

3,000

Investor-OwnedUtilities

Retail EnergyProvider

Municipal Cooperative Federal/StateAuthority

Solar DG(residential only)

0

50,000

100,000

150,000

200,000

250,000

TWh

$ B

illio

ns

Revenue

MWh

DNV GL © 2015 14 May 20176

U.S. Retail Energy Markets Context

20%

31%

52

%

all U.S. TWh are competitively served

of the 63.5 million electricity accounts eligible to switch to a 3rd party for commodity have switched

of all active channel partners licenses in the U.S. are in only 4 states (IL, OH, PA & TX)

>1,270 active electricity supplier licenses

>2,500 active electricity channel partner licenses

Source: DNV GL REM

DNV GL © 2015 14 May 2017

Current Market Developments

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Nevada - First stage of ballot initiative to

allow retail choice passed in 2016. Initiative

must past again in 2018 to become law.

California - Hearing on May 19, 2017 to discuss potential electricity market deregulation.

Minnesota – Bill introduced to allow large electrical

customers to choose supplier where wheeling is

required. Status: introduced to House.

Washington - Special retail wheeling contract with PSE

allows Microsoft to obtain alternative supplies from wholesale

market.

Oregon- Bill introduced in March 2017 to allow retail electric customer choice if generated by renewable resources. Status: introduced and public hearing held.

Missouri – Bill Introduced in January 2017 to allow large

commercial and industrial customers to contract for

renewable energy. Status: introduced to House.

Nebraska - Bill introduced in January 2017 to

allow competitive choice for all customers.

Status: indefinitely postponed.

Kansas- Bill introduced in February 2017 requiring state to implement retail electric choice. Status: introduced and referred to State Committee on Utilities.

DNV GL © 2015 14 May 2017

What We Are Seeing: Solution Evolution & Share-of-Choice

8

Robust Data

M&A

Partnerships

Investments

New models, applications

Data integration & automation

Ultimate customer value

We are here

DNV GL © 2015 14 May 20179

Retailer

OFFERINGS

DNV GL © 2015 14 May 2017

Q&A: Product & Services Offerings

10

What products and services are you looking to either bundle, acquire, or build to implement your company's strategic vision?

• Data Analytics, Platforms• Generation Procurement• Forecasting, Pricing• Hedging, Risk Management• Financing, Credit• Centralized Renewables• Distributed Generation• Energy Storage• Electric Vehicles• Combined Heat & Power /

Cogeneration

• Demand Response• Energy Efficiency, Conservation• Home Automation Systems• Smart Appliances• Building Energy Management

Systems• Communications Systems (Wired

and Wireless)

DNV GL © 2015 14 May 2017

Products & Service Offerings

11

Source: DNV GL REM

What products and services are you looking to either bundle, acquire, or build to implement your company's strategic vision?

DNV GL © 2015 14 May 2017

New Offerings – But how?

12

43%

23%

3%

16%

3%

11%

63%

23%

2%

7%5%

23%

23%

23%

18%

14%

2015 2016 2017

Source: DNV GL REM

DNV GL © 2015 14 May 2017

Convergence Through Partnerships

"At what point do you get past denial (of

disruption) and make an agreement with a

capable partner to give up load or a revenue

stream in order to get something else?“

-Todd Michaels, CEO Correlate

13

DNV GL © 2015 14 May 2017

Q&A: Make, Build, Buy, Partner

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In the next 12-24 months, what represents your highest priorities to deliver customer value?

Make (new creation)

Build (add on to existing)

Buy (acquire)

Partner (joint or other ventures)

DNV GL © 2015 14 May 2017

Products & Services Offerings – Build, Partner, Make or Buy?

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Source: DNV GL REM

In the next 12-24 months, what represents your highest priorities to deliver customer value?

DNV GL © 2015 14 May 2017

Q&A: Offerings

16

How do you track the success of non-commodity products & services?

DNV GL © 2015 14 May 201717

How do you track non-commodity success?

Retailer Offerings – Tracking Success

Source: DNV GL REM

DNV GL © 2015 14 May 201718

Retailer

ORGANIZATION

DNV GL © 2015 14 May 2017

Q&A: Business Model Evaluation

Which of the following is the most important factor you consider as

you evaluate whether to maintain, modify, or change your current

business strategies?

19

Customer Satisfaction

Industry, Market Trends

Customer Data

Technology Costs/Benefits

Financial Performance

Growth Metrics

Product/Services Diversity

Competitor Dynamics

Regulatory Risk, Opportunities

DNV GL © 2015 14 May 2017

Organization: Business Model Evaluation

20

Source: DNV GL REM

Which of the following is the most important factor you consider as you evaluate whether to maintain, modify, or change your current business strategies?

13%

19%

25%

25%

25%

38%

50%

75%

38%

19%

38%

25%

38%

44%

38%

44%

13%

44%

63%

31%

50%

31%

25%

13%

6%

19%

6%

13%

6%

6%

13%

6%

6%

6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other (specify)

Competitor Dynamics

Product/Services Diversity

Industry, Market Trends

Technology Costs/Benefits

Regulatory Risk, Opportunities

Customer Data

Growth Metrics

Financial Performance

Customer Satisfaction

5 (Highest Priority) 4 3 2 1 (Not a Priority)

DNV GL © 2015 14 May 2017

Organization: Meeting Market Demands

21

Source: DNV GL REM

What operational changes is your

company considering to meet changing

market demands?

68.75%

43.75%

68.75%

56.25%

31.25%

56.25%

31.25%

43.75%

New talent acquisition

Simplifying the business model

A more comprehensive the business model

Leading a product or sector solution

Yes No

New Skills and Capabilities Needed

Make the retail value proposition more SIMPLE

Innovative thinking to anticipate customer buying behaviors

Data & customer analytics

Innovation partnering with technology and service enterprises

Product management from outside the industry

Do the “basic” stuff better

DNV GL © 2015 14 May 201722

Retailer

STRATEGY

DNV GL © 2015 14 May 2017

Q&A: Business Models

23

As you consider the migration of your next business model, which of the following models is your company

considering?

Expansion into new markets, industries

Digitalization of products/services

Outcome-based models

Platform business

Competing as an ecosystem

Shared-economy business model

DNV GL © 2015 14 May 201724

Retailer Strategy: Your Next Business Model

As you are considering the migration of your next business model, which of the following models is your company considering (and when?)

33%

50%

63%

67%

70%

91%

50%

33%

13%

17%

30%

9%

17%

17%

25%

17%

Shared economy business models

Competing as an ecosystem

Platform business

Outcomes-based models

Digitalization of products, services

Expansion into new industries, markets

1-2 Years 2-4 Years 5 or More Years

Source: DNV GL REM

DNV GL © 2015 14 May 2017

Customer Value Gaps in Old (Current) Energy Business Models

25

Commercial, Industrial Customers

60%of C&I customers surveyed report dissatisfaction with the information that they have to make choices about energy prices, products & services

Source: DNV GL REM, April 2016

Largest Energy Billing, Management Gaps(% C&I responses)

Residential Customers

Common threads: customers do not want technologies; they want outcomes and often don’t trust vendor blitzes

What Word Best Characterizes Your Customers’ Experience in Evolving Energy Markets?

Source: DNV GL. 2016 Market Pulse Survey, April 2016. Respondents include regulators, wholesale

operators, generators, utilities, competitive retail suppliers, DER providers, manufacturers, developers

DNV GL © 2015 14 May 201726

As more products and services are offered, an organized and efficient sales approach is essential to boost sales

and ROI. And your sales team wants it.

Current sales strategies are largely disjoined

and inefficient. DNV GL REM found that only

24% of REPs have integrated products and

services offerings.

Channel Partners cite Customer Education &

Engagement and Operational Efficiencies as

the top 2 issues with the largest impact on

evolving sales strategies.

Source: DNV GL REM’s Energy Blueprint: Sales Strategies, September 2016

Retail Strategy - Sales

DNV GL © 2015 14 May 2017

Retailer Strategies - Hypergrowth

Hypergrowth Strategies in Adjacent Industries

(Surveyed retailers – rank 1-5, where 5 is Strongly Considering)

The following received at least one “5” rank:

– Air & Water Quality

– Entertainment

– Healthcare

– Home / Building Security

– Insurance

– Real Estate

– Telecom

– Warranties

27

DNV GL © 2015 14 May 201728

Retailer

ECONOMICS

DNV GL © 2015 14 May 2017

Retailer Economics - Pricing Trends

29

April 2016 April 2017

DNV GL © 2015 14 May 2017

Retail Economics – It’s not just the kWh

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DNV GL © 2015 14 May 201731

Retailer Economics: Investment Focus

31% 31%25% 25%

19%13% 13%

6%

38%31%

31%

13%19% 31% 31%

6% 19% 31%

19% 19%13%

25%

13%

19% 6%

25%31%

25%

25%

13%6%

19%13%

19%6%

Enhancing internalbusiness ecosystem

Linking externalvalue to internal

capabilities

Gaining externalcompetitiveadvantage

Simplifying thebusiness model

Leading a product orsector solution

Developing acustomer outcome-

focused solution

Developing a morecomprehensivebusiness model

Other (specify)

5 (Highest Priority) 4 3 2 1 (Not a Priority)

Which areas are an investment focus for your company?

Source: DNV GL REM

Intangible assets – enhancing the internal business ecosystem and linking external value to internal capabilities are the highest priority areas of investment for retailers. Despite nearly 70% of retailers reported considering a more

comprehensive business model, only 44% prioritize investing in that model.

DNV GL © 2015 14 May 201732

“If you received a capital injection today, what would you use it for?”

Source: 2016 Forum Audience Live Poll - % Audience Responses

Retailer Economics: Investment Focus & New Solutions

DNV GL © 2015 14 May 2017

SAFER, SMARTER, GREENER

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