Westar Energy in Kansas last week joined a long list of US utility companies that foolishly believe they can stand in front of tidal waves with their hands up like traffic cops to stop the rising threat rooftop solar poses to their business models.
As US utilities tack on fees and try to charge customers with rooftop solar installations more than those without them to stem the tide, the rest of the world has already realized those punitive efforts are futile and will do little more than distract utilities and delay their inevitable demise.
Accenture Strategy in Australia recently released a report on the fate of that country’s utility companies in this fast-evolving energy environment. The report revealed, not surprisingly, that innovation is the only way forward for utility companies.
“To manage the threat of the extinction, the industry needs to act now and take a leap of faith through reinvention, convergence and innovation rather than relying on the traditional mindset of defending the status quo,” according to the Accenture report. “This approach will favor the brave, and demands exceptional leadership.”
In South Australia, grid demand for huge parts of the day are expected to drop to 0 by 2023, according to a report released last week by the Australian Energy Market Operator. Because of dramatic growth in the rooftop solar industry, the AEMO estimates there will be no demand for grid power between 11:30 a.m. and 2:30 p.m. in South Australia within the next eight years.
In this scenario, rooftop solar will account for a quarter of all electricity generation in the state. One in four home and business owners in the state already have installed at least some rooftop solar, and electricity demand in Australia has dropped more than 7 percent since 2009.
Power provider Alinta announced last week that it would shutter two of its base load coal-fired generators.
“The ‘death spiral’ is in its early stages with consumption declining and mass uptake of rooftop solar allowing customer less reliance on the grid,” according to the report. “Ironically, the industry invested in infrastructure expecting demand to rise. Instead, it has steadily fallen but the investment is still needed to be recouped through increases in electricity prices. In response to this irony, savvy consumers have harnessed solar and utilized smart meter data to take control, proactively manage their electricity use and reduce their reliance on the grid.”
“The ‘death spiral’ will kick into overdrive” once energy storage become more cost-effective and viable, enabling mass grid defection, according to the report.
With that bleak outlook, it’s no wonder utilities are trying in desperation to find a way to beat back the solar revolution. However, Australia is committed to clean energy and if utilities want to make it through, they have to innovate. That’s what the good ones are doing.
Innovative utility companies are shifting from a monopoly commodities model to a customer service and interconnection agent.
“Powershop, for example, which is owned by New Zealand’s Meridian Energy, describes itself as an online power company and provides applications to allow consumers to monitor their energy use and bills and does not lock them into contracts,” according to the Accenture report. “The company has a light footprint compared with many traditional electricity retailers, employing only 70 people. It’s an approach that has secured it around 15,000 customers to date with ambitious plans to expand.”
The report highlights that utility companies will have to quit thinking like monopolies and start thinking like businesses. They will need to brand themselves, market themselves and invest in research and development. Accenture noted that water providers in Europe had to improve their tap water product and market it to avoid losing its customer base to boutique bottled water companies.
Product research and marketing are both uncommon requirements for monopoly utilities.
But utility companies are not monopolies anymore. They have competition from rooftop solar, and that competition is coming ashore white glove raised or not.