Utility Business Evolution & Innovation
National Governors Association Center for Best PracticesLearning Lab on New Utility Business Models & Electricity Market Structures of the Future
Paul De Martini Newport Consulting
July 28, 2015
2
Electric Retail Evolution
Utility functions will evolve over time as customer adoption of DER grows and the opportunity to enable the net value created in this transition
3 Stages of Evolution as DER Adoption Grows & Market Opportunities Expand
3
$-
$50
$100
$150
$200
$250
eCommerce
Mobile
Broadband Video & Data
Wireline
Telecom Industry Transition Example
Revenue Transition
AT&T Break-up
1996 Telecom Act
Telecom revenue growth from new services leveraging modern broadband fiber and mobile platforms and market partnerships
Personal Consumption/Person/Month
Sources: FCC, Industry Analysis and Technology Division Wireline Competition Bureau, Sept. 2010US Census Bureau Retail eCommerce Revenue data used to estimate per adult monthly spend
4
1970 1978 2000 2015 2025 2040
Cust DER Svcs
Market Enabling Svcs
Dist. Platform Svcs
Transp. Electrification
Trad. Distribution
Electric Utility Industry Hypothetical
PURPA
Question is how utilities may be allowed to participate in the new revenue streams that are being created in a more distributed future
Conceptual Regulated Utility Industry Revenue Composition
Revenue Transition
5
Certain customers are spending more on electricity services when considered more fully - including enhanced reliability and home energy automation
Grid Energy 4%
T&D 15%
Solar PV 23%
Onsite Back-up Generation 46%
EE Spending 7%
Home Automation 5%
Monthly Residential - Self Optimization$200.00
T&D 55%
Grid Energy 36%
EE Spending 9%
Monthly Residential – Traditional Service$75.00
Example Customer Energy Budget Allocation
5
Based on PA utility analysis and customer spend
6
3° of Value from Information
Value derived within energy value chain across use, delivery and production
Value derived from insights on behavior of
things such as equipment/appliances
Value derived from insights on behavior of people related to non-energy related services/sales
Derivative information from customer & device behavioral analytics fusing independent information sources is creating new revenue opportunities
7
Future Utility Business Options (depending on regulation)
7
8
Innovation through Value Networks
Successful businesses today create value & revenue through their role and relationships within value networks
Utility industry thinking (regulation and business) will need to transition from “value chain” to “value network”
• Value Chain orientation is zero sum as roles and responsibilities change
• Value Network orientation seeks to expand opportunities for all based on cooperation and coopetition
This requires re-considering old paradigms regarding competition and innovation in electric industry about utilities’ ability to participate
Discussion should no longer be about “Us vs Them”, but rather “Us with Them” to create sustainable value for all customers
Electric Industry Value Network