The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
Embracing a competitive and digital future for utilities.
of smart or digital technologies.
Finally, the “smart grid embracer” is aggressive in its pursuit of new revenue streams and internal performance improvement. It’s prepared to make substantial investments in smart technologies while accepting some level of risk and positioning itself as an early adopter or fast follower. It will engage with the regulatory framework to drive change and create a new and different marketplace.
While each utility must craft its own course at a pace that makes sense based on its own geographic, regulatory, and legislative parameters it’s clear that a strategy premised on resisting technological change or worse, assuming that “this too shall pass,” is doomed for failure.
The pace of change will be gradual over the next 15 years (in most markets) though we predict a sudden acceleration in pace once key factors align. This type of medium- to long-term change is extremely challenging to plan for and even more challenging to execute as most companies thrive under immediate pressure or threat.
The digitization of the grid and the advent of increased competitive threats is upon us, and industry winners are the ones that will proactively embrace this reality and start the transformation process today.