Mov­ing with the times

Utilities Middle East - - CONTENTS -

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.

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