From Defense to Offense: How Can Utilities Thrive in the Coming Energy Transformation?

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A new report released by EY reaffirms what others have been saying: utilities need to transform to adapt to the impending energy transformation. The time to act is now, if utilities want to stay in the game.

An energy transformation is coming, and utilities need to move from fighting it to leading it. That’s a common refrain these days and the message from EY, a provider of assurance, tax, transaction, and advisory services. EY has released a new report that provides a strategic approach to guide the sector through this fundamental transformation. 

The report, From defense to offense: Distributed energy and the challenge of transformation in the utilities sector, says the utility industry must shift from its current defensive posture toward distributed generation (DG) and instead “go on the offensive and lead the revolution.”

 

“The critical success factor for U.S. electric utilities will be changed behaviors. Utilities have to have the capabilities and the mindset that says, ‘we want to compete, not just defend the status quo’,” said Dean Maschoff, Executive Director, Ernst & Young LLP and one of the report’s authors, in a statement.

 

What can utilities do in the face of ever-increasing distributed generation? There’s no “one size fits all” solution, but the EY report details five imperatives for utilities to survive and thrive:

 

  • Position the utility to compete: Utilities need to design and commit to a transformation roadmap that will create a more efficient and effective utility operating model, offering new products and services.

  • Transform the grid: As DG grows as a market force, the grid must evolve into a more distributed, digital, and dynamic system that provides two-way communication between customer locations and the utility.

  • Manage the transition: Utilities need to find ways to recover costs incurred and investments made in legacy assets from a pre-DG world.

  • Focus on the customer: Utilities need to increase their customer knowledge and the range of their offerings.

  • Innovate and accelerate: Utilities should adopt a business model that can adapt to changing conditions and that captures and provides value in connection with DG.

 

Distributed generation, the report points out, is triggering the need for fundamental change not only for utilities but also for customers as they become providers as well as consumers.

 

For utilities, the message is: Act now. Now is the time for utilities to start transforming their business models, if they want to be positioned to compete.