The Nuclear Regulatory Commission has a five-member slate for the first time in over three years. Recently sworn in were Nils J. Diaz and Edward McGaffigan, Jr. Diaz was a professor of nuclear...
Energy Marketing: Is There Added Value in Value Added?
In Norway and in England and Wales, power retailers are learning hard lessons.
The U.S. electric industry has long tried to follow Thomas Edison's dictum "to sell light instead of current" (em to get beyond the meter. But what is beyond the meter at industrial and commercial sites?
In energy-intensive industries one sees processes such as smelters, pulp mills, rolling mills, refineries and chemical plants. In general manufacturing, although some electricity is used for specialized electrotechnologies, most is used for lighting, motive power, computing and robotics. On commercial premises, electricity is mainly used for lighting, air conditioning, refrigeration and computing.
What is beyond the meter is diverse and characterized by a wide range of technologies and products. These products are manufactured and marketed in different ways with different skills, many of which are a far cry from the technical and commercial skills available in the electricity supply industry. Electricity industries in the U.S. and Europe have spent a lot of money trying to go beyond the meter. Based on the diversity of what is out there, it is not surprising that they have not established a significant foothold.
More recently, gas marketers have suggested that by analogy with their activities in the gas wholesale market, they can add value in the electricity market by services such as aggregation, fuel management services, asset optimization, reliability through diversity and risk-management services. But in reality, most of these services (with the notable exception of risk management) are for the wholesale market, rather than the general retail market. Furthermore, some only exist because of inefficiencies in the gas wholesale market.
Now various people are hoping that electricity is not a commodity, and that it can be sold as a value-added product. To be skeptical, if not cynical, some seem to hope to rise in the industry on marketing magic and get bigger budgets, and some consultants are peddling snake oil. Much of the muddle in the debate has arisen because the character of power retailing has not been understood. The meaning of value added has not been clear; and there has been no experience to draw on. But we now can get a reality check from markets in England and Wales and Norway.
Many of the marketing activities undertaken in other competitive markets either do not apply or, perhaps more importantly, cannot be applied cost effectively in power retailing to medium and large industrial and commercial customers. It is false to draw close analogies between competitive and noncompetitive markets. What is required is a "paradigm shift."
In the 1980s, the Electric Power Research Institute promoted the concept of integrated value-based planning to shift the focus from least-cost planning and apply text-book marketing concepts to "adding value." The report concluded:
Utilities need tools and methods to help identify how best to provide value to their customers in order to respond to competitive threats, and to take advantage of market opportunities. Utility customers do not purchase kilowatts and kilowatt-hours; rather they purchase the end uses of electricity. ... They value activities or work that can be