WEMO Podcast: Key trends in the North American Energy & Utilities market

Key trends that are affecting the North American Utilities market from the 2018 World Energy Markets Observatory report

Vito Labate in conversation with Perry Stoneman, Energy & Utilities global sector leader, discuss the key trends that are affecting the North American Utilities market as per our latest World Energy Markets Observatory (WEMO) report.

This is the second podcast in the series for the transformation of Energy & Utilities companies to better serve their customers in the digital age. To learn more about WEMO, click here goo.gl/Nw8pqR

Transcript

Vito Labate: (00:17)

Hello and welcome to our podcast series on the transformation of energy and utilities companies to better serve their customers in the digital age. My name is Vito Labate and I am joined today by Perry Stoneman who is the utilities global sector leader at Capgemini. We are here to talk about the latest World Energy Markets Observatory or WEMO report and some of the key findings, specific to the North American market.

Perry, let’s jump right in into the key findings. What are the top two or three trends that you found to be most significant for the US and Canada?

Perry Stoneman: (00:56)

Well two that kind of came as a surprise, the first is the 14% year over year increase in renewable energy. Despite policies and tariffs, I was surprised to see that significant of growth. It does indicate that there’s something else beyond just the price of wind happening out there in marketplace. The second that I was quite interested to see is how some utilities are starting to embrace that as a services model. That means EV charging services, that means home comfort services, energy services for industrial customers. But utilities are really starting these and establishing business units to pursue new forms of revenue around these new energy opportunities.

Vito Labate: (01:39)

Great. Over the last year, there’s been quite a bit of uncertainty particularly in the United States with their withdrawal from the Paris Accord, that’s led to some mixed outcomes in action on climate change. What impact would you say this is having on the energy market?

Perry Stoneman: (01:54)

Well overall the US in on track to meet the Copenhagen targets but significantly behind on the Paris Accord targets. What’s happened as a result of some of the federal policy changes is some of the states are starting to pick up and drive energy transition programs. Even some cities are getting into the business today. We’re seeing the gains in carbon reduction coming from some key states and some key cities and I suspect that’ll be the trend for the next several years.

Vito Labate: (02:24)

You said earlier, one of the key findings of the report showed that power from renewable energy sources soared just over 14% year over year in 2017 but investment faced obstruction from uncertain tax reforms. What’s contributing to this ongoing trend, in your opinion?

Perry Stoneman: (02:42)

Well I think there’s two factors. The first is the obvious one on the levelized cost of electricity of these renewable energy resources. We’ve seen a continuous reduction in the cost of solar and wind for over a decade now. I’ll steal a phrase from another industry, which is the real estate market and it’s, “Location, location, location is what matters.” I think what we’re seeing now that a lot of the investment in the large scale implementations, the corporations looking to install solar and wind, are aware that there’s only so many amazing locations that you can exploit in the United States and Canada and they’re after those locations because of their longterm value as being an ultimate premier location for generation of renewable energy, whether it’s from wind or from solar.

Vito Labate: (03:28)

I want to turn a little bit to the idea presented in WEMO that there’s this risk of obsolescence that a lot of utilities are facing or going to face soon enough, but that there are also key opportunities that could trigger new income streams for utilities. Can you talk a little bit about what those opportunities are?

Perry Stoneman: (03:47)

Absolutely. I don’t believe utilities are going to become obsolete. As a matter of fact, I think the network companies or those that own transmission and distribution networks are going to be incredibly important going forward. To be the backbone that connects these new energy sources. But beyond that, the as a service model I brought up, is starting to gain significant traction. Four out of 10 utilities worldwide, that believe that about five to 8% of their revenue is going to come from the new revenue streams within the next three to five years.

Perry Stoneman: (04:21)

Some of those examples are going to be microgrids as a service, EV charging infrastructure, generation and storage at home. We already have generation and storage in homes, started up by some, quite a few independent companies. I see utility companies that are allowed to, starting to get into that business. And the two that are most popular at the moment, happen to be comfort as a service, so smart homes. And the other is energy as a service, so helping your investor and commercial customers manage their energy more wisely.

The switch to as a service, offers completely new revenue streams for most utilities and as I said, those that can embrace these business models, because the regulatory environment is favorable to them, are starting to do so.

Vito Labate: (05:04)

I want to pick up a little bit on this concept of the as a service economy that you mentioned. Utilities seem to have a greater need to evolve their offers, they’re considering new business metrics to trigger their success and of course eliminate those so called siloed initiatives but do you have recommendations to help them embark on that journey going forward?

Perry Stoneman: (05:23)

Yes, Vito. When you put distributed assets onto the network, they tend to be a lot smaller or granular than the large generation, transmission, distribution network in the past. To manage these discrete resources throughout the network, that are sometimes owned by you, the utility or sometimes owned by others, you need completely different tactics and we call it digital edge strategies.

Perry Stoneman: (05:49)

Utilities to be able to manage these complex new environments that they’re going to be faced with, are going to have to have the ability to have API technologies and have IOT technologies at their disposal and their staff are going to have to be well versed in these digital edge technologies to be able to control that new more complex grid and ecosystem.

Vito Labate: (06:13)

Great. Well Perry listen, thank you for your insights. To our listeners, if you want to learn more and download the WEMO report, please to visit capgemini.com/wemo. Thanks for listening.