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Smart Transition

Embracing a competitive and digital future for utilities.

Fortnightly Magazine - January 2014
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Distribution utilities are facing unprecedented challenges on multiple fronts; indeed, there’s even a debate that goes as far as questioning the distribution utility’s very survival. More specifically, we’re seeing a four-pronged threat from increasing cost pressures and regulatory mandates; rapid growth of distributed generation, including solar, storage, and microgrids; continued pressure to improve reliability and response to extreme weather events; and evolving consumer expectations with a continued decline in consumers’ trust. In fact, our research has shown that today, consumer trust in utilities is the lowest that it’s been in four years, with only 24 percent of consumers trusting their energy provider to offer advice on energy efficiency. 1

These threats taken standalone are surmountable but put together they have the potential to reshape the industry as we know it. Many utilities are actively discussing the scenario where solar PV combined with storage reach grid parity (which will happen in the next 10 to 15 years in some markets). In an extreme case, this could result in a dangerous spiral where the grid is relegated to the role of backup provider and operators are forced to spread their fixed network-related costs across fewer customers, thereby driving up energy prices and further accelerating defections.

This simplistic scenario fails to factor in space limitations in urban environments to accommodate solar PV and storage at scale, as well as significant hurdles in battery technology, and the fact that many consumers will always favor the convenience of being grid connected. Nevertheless, disruptive trends represent a serious threat that many utilities have started to focus on over the past two to three years. 

Figure 1 - Forecast Benefits

As is the case with most transformative change, multiple factors will need to come into alignment in order for change to occur. In other words, while solar PV alone won’t transform the industry, the alignment of solar with storage, severe weather events, electric vehicles, and new residential energy management solutions will have a transformative effect. Our prediction is that it will take some time ( e.g., 15 years) for these factors (and others) to converge; but once they do, the pace of change will be dramatic.

Our research and analysis also concludes that a successful response to this challenge will include both an inward look at capabilities and operating models and an outward look to explore new products, new services, and evolved customer relationships.

Smart Grid Goes Mainstream

One thing is clear: smart grid is fundamental to addressing these challenges. While some fatigue is developing around the term “smart grid,” the concepts, technologies and ideas that it embodies are front and center in utilities’ evolution. Accenture’s Digitally Enabled Grid research confirms that 98 percent of senior executives at utilities agree that the smart grid is a natural extension of ongoing upgrades to the electricity network, with three-quarters agreeing that the adoption of smart technologies will reduce maintenance and upgrade costs by 2030. 

Rather than

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