Moving with the times
Amidst rapidly changing market demands, new challenges are constantly cropping up, putting utilities on the spot. Utilities must now adapt to technological advances such as intermittent renewable power generation, rooftop solar panels, behind the meter storage, as well as an increase in customer expectations. This new market context is unpredictable and embracing it requires an overhaul of utilities’ operating and business models.
Utilities around the world were used to dealing with a captive customer base with limited alternatives, long-term capital investment and relatively stable regulatory contexts. The future, however, looks very different. Customers will expect from utilities a similar level of service to what they receive from other services industries like telecommunications and banking.
Technological advances call for new investments to upgrade the grid infrastructure and unlock the door to new competition from niche players offering technology-driven energy-related services.
To cope with these changes and emerge as successful companies, utilities require an overhaul of their operating and business models, even more extensive than the one that came with the deregulation and generation divestitures of the 1990s. The transformation required to survive in this context is overlooked by many utilities, which either underestimate the magnitude of the challenge or decide to address it incrementally.
Companies that embrace transformation and proactively begin changes before a significant downturn create seven times more value than those companies that are slower to respond. The transformation that utilities must undertake requires significant planning, commitment and unwavering effort.
From the experience of a few utilities companies in the GCC, regardless of the business model selected, utilities can succeed by developing a strategy based on five pillars: grid modernisation, adaptation to DER, customer centric evolution, flexible generation, and adjusting market and regulatory models.