Key themes from the Utility of the Future Leadership Forum
While I was listening to the interesting and diverse conversations at the Utility of the Future Leadership Forum, I was struck by the themes that cut across all of them. The first thing I noticed was that they all started with the letter “C.” But beyond this coincidental alliteration, these themes provide insights into where the energy industry is headed, and what we need to do to ensure our businesses and our industry succeeds in the future.
The first key theme was Change, which was a part of almost every discussion, no matter what the topic. Quite frankly, because of the trends in technology, customers, and regulation, we, as an industry, are required to change. Change will occur both from the standpoint of our own business models as well as from the standpoint of the regulator models under which this industry works. Certainly the results of our 2015 Utility of the Future Pulse Survey indicated that change is top-of-mind for the industry, as respondents identified “the need for new business models” as the top challenge facing the industry for the next five years, overtaking DG interconnection as the #1 challenge in 2014.
The next theme I recognized was the need for a different Culture, especially a culture of competition. Several attendees mentioned the “M-word”—monopoly—but ultimately the energy industry is increasingly a competitive environment. This is an industry that is realizing that it’s all about competition now, and that we can no longer rely upon a franchise model or a regulatory compact. We must be able to compete for the customer and provide value to them, as opposed to the old monopoly model.
Companies emerged as a third theme: there are many new companies entering the market with different types of business models. Indeed, these new companies are driving much of the change we are seeing in the industry. This theme came up over and over again during the two-day Forum, as cyber security and the need for increased communication is creating a space for innovative companies with new business models to move in. Of course, there is another word—complacency—that we need to guard against, because assuming that someone else will take care of a problem will create vulnerabilities across the board.
Throughout the Forum, I heard a Can-Do attitude. Many people demonstrated that they were taking on the competition, trying new things, and finding better ways to deliver value to customers. They are not sitting back and letting regulations defend their market—they are out there in the marketplace, looking at the new ideas they can implement.
This leads to the next theme: Customers. Indeed, this is the key theme for the entire industry, as in recent years the model has moved from asset- and regulatory-centric organizations to customer-centric ones. More and more of the new market entrants are becoming competitive by understanding the customer. The utility of the future will need to understand what the customer wants, and which activities will deliver the most value to them. We learned in our Pulse Survey that the industry identified energy costs savings as the most important outcome for customers. The interesting thing is that a survey DNV GL conducted in 2013 indicated that reliability was more important to customers than cost savings. That says to me that we as an industry need to do more research into what customers want and need. The 2015 Pulse Survey found that utilities are offering or planning to offer customers a wide range of products and services, with distributed generation leading the pack.
The final theme is Capability—the capability to implement and use the technologies required for demand response markets. This goes hand-in-hand with being customer-centric, as it enables the customer to understand their energy use better, and for us to manage the grid more effectively. Certainly, with my 20 years of involvement in energy efficiency programs, I have observed that we have done an excellent job in improving efficiency in things like lighting, but we are creating a lost opportunity when it comes to demand response. However, Pulse Survey participants indicated that demand response is a top offering for utilities, second only to distributed generation, so capabilities will improve as it becomes more common.
As I was considering the various discussions that took place at the Forum, I thought about my days at utilities, back in the ‘80s. At that time the disruptive technology—which also starts with a “C”—was co-generation. Many people believed that the utility business was doomed, and co-generation would take away all of the business. Except that didn’t happen. We could say the same thing about many of the new technologies coming on board, like distributed generation or demand response. But, considering the new ideas developed and discussed during the Forum, I wouldn’t bet on it.