Designing the New Utility Business Models – study by IDC Energy Insights

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The traditional utility business model is being threatened by market conditions, industry and social trends. It depends on the sale of electricity, gas or water to the wholesale markets, making capital investments in generation, pipelines and wires, and, in the case of the investor-owned utility, earning a regulated rate of return. Now, utilities are facing […]

The traditional utility business model is being threatened by market conditions, industry and social trends. It depends on the sale of electricity, gas or water to the wholesale markets, making capital investments in generation, pipelines and wires, and, in the case of the investor-owned utility, earning a regulated rate of return. Now, utilities are facing new competition for revenues from new players – competition for customer mindshare, workforce attention, and fuel from emerging economies at a time when energy demand is shifting. Utility leadership must act now to address with erosion of earnings and how to continue to meet the demands of shareholders, customers and regulators.

Major findings of this white paper are:

  • Utilities are faced with new competition for the wallets of their customers from non-utility players with new business models.
  • European utilities have been discussing new business models for several years; North American utilities are just getting started.  Both regions have had encouraging movements towards new market structures.
  • There are a variety of possible new models, but these must be vetted. Utilities will need help from outside to develop viable strategies to adopt these new models.

The threat to the traditional business model of utilities is real. With the speed of change, the time to take action is now. Although late to the game, utilities have the customer base and the knowledge of energy in their favor.

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