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New and Future Business Models for Energy Utilities

New and Future Business Models for Energy Utilities

Historically, the electric utility industry has been a solid performer with strong growth fundamentals. Increasing populations and higher power consumption intensity brought about by increased social development meant that electricity consumption increased year on year; along with this came an increase in profits. This revenue model provided a relatively safe bet for investors that wanted a stable return on investments.

However, the industry has experienced significant changes in the past 2 decades, especially in Europe. EU directives have resulted in the opening of markets to new competition and promoted the use of distributed renewable energy sources to combat climate change.

In addition, the recent economic crisis and improvements in energy efficiency have resulted in reduced electricity demand as production levels have decreased, and additional penalties have been added on old conventional plants due to emission regulations—these have created challenges for utilities.

Some key market participants in Europe, especially Germany, have posted record losses over the past 2 years, with the future still looking grim. Subsequently, many are undergoing a rapid transformation in strategy on how they will generate viable revenue streams in the future. This has resulted in many utilities scavenging further along the value chain for opportunities to develop new business models to ensure their survival.

About this report

The traditional utility business model of a pure-play centralised power producer and provider will soon be extinct. Distributed generation (DG) will increasingly feature in new utility value propositions as utilities try to capture more downstream opportunities. These will include several models, from an aggregator of DG to providing complete energy solutions for prosumers. The transformative effects of technology-enabled change will be seen in new models such as virtual power plants, demand response, cloud solutions, and energy-as-a-service. The supply-driven business models of the past will make way for customer-centric business models and utilities that fail to innovate and adapt will face the Utility Death Spiral in the next 10 years.

  • Executive Summary
    • Key Findings
    • CEO's 360-Degree Perspective on Growth
    • Predictions for the Future
    • Associated Research and Multimedia
  • Mega Trends Defining the Future
    • Global Mega Trends
    • Global Mega Trends and their Impact on Energy
    • Global Mega Trends
    • Future of Energy-Top 10 Trends Driving Change
    • Business Models-The Next Wave of Innovation in Energy
  • The Future of Electric Utility Business Models
    • The Electricity Power Generation Model
    • The Past-`Good Old Days' of Natural Monopoly
    • The Present
    • Utilities Slow to React
    • Key Drivers for Utility Business Model Innovation
    • Drivers Explained
    • Key Challenges for Utility Business Model Innovation
    • Challenges Explained
    • The Utility `Death Spiral'
    • Likelihood of the Death Spiral to Unravel
    • Germany
    • Electricity Sector Value Chain-New Technologies and Developments
    • Customer Role in the New System-Industrial and Commercial Consumers
    • Customer Role in the New System-Residential Consumers
    • Customers Needs
    • Distributed Generation (DG)
    • Financial Health of Top Global Utilities
    • Regional Highlights and Developments
    • Pressure on Traditional Utility Models by Geography
    • Strategy Choices for Utilities
    • `Business as Usual' Scenario
    • Shift in Business Model-Customer Focus
    • Key Business Models for Capturing Downstream Value Opportunities
    • Business Model 1-Virtual Power Plants
    • Business Model 2-Pure-play Aggregator
    • Business Model 3-Technology and Services Provider
    • Business Model 4-Hybrid Approach
    • Capacity Mechanisms
    • Examples of Utilities Changing their Business Models
    • Europe
    • North America
    • US
    • Europe
    • Implications and Opportunities
  • The Last Word
    • Critical Success Factors for the Future
    • The Last Word-3 Big Predictions
  • Appendix
    • Market Engineering Methodology

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