| Historically, the relationship between utilities and consumers has been rather lopsided – utilities had the power, both literally and figuratively. But the confluence of climate change concerns, rising energy costs and technology advances leading to greater consumer involvement is now radically redefining that relationship. Our recent surveys of 1,900 energy consumers and nearly 100 industry executives across the globe reveal major changes underway – a more heterogeneous consumer base, evolving industry models and a stark departure from a decades-old value chain. We believe companies need to prepare now for a participatory network that enables customers to choose from a wide variety of suppliers, actively manage their consumption and even sell back surplus power they generate. |
Introduction
In decades past, as long as the energy flowed when and where required, residential and small commercial customers were satisfied with leaving all the decisions about their energy supply to their trusted providers, even if they were unhappy with the bill.
But times have changed. Growing reliability concerns, fear for the environment’s future, and ever higher energy bills have some consumers wanting to manage more of their energy supply decisions themselves. If utilities and regulators allow them to be more active participants, these customers are willing to shoulder more responsibility.
Given this shift in consumer attitudes and the rapid advancement of new technologies, what will the industry look like in five to ten years? How quickly will utilities and regulators respond to these emerging consumer needs? And how much control do consumers really want?
To help answer these kinds of questions, we surveyed 1,900 consumers from six countries in mature economies. In our “consumer” group, we included residential households and small commercial customers, but excluded large commercial and industrial companies. We also interviewed nearly 100 industry executives in Europe, North America and the Asia-Pacific region – one-third from large firms with revenues greater than US$5 billion and the remainder from smaller utilities.
Based on the insights from our consumer survey, interviews with utility executives and our own industry experience, we anticipate a steady progression toward a Participatory Network, a technology ecosystem comprising a wide variety of intelligent network-connected devices, distributed generation and consumer energy management tools. Although the precise timeframe for reaching this end-state is unknown, our research suggests a few major milestones. Within five years, the percentage of the world’s electric utilities that will be generating at least 10 percent of their power from renewable sources will have doubled. In that same timeframe, we believe sufficient supplier choice will allow meaningful consumer switching to emerge in most major competitive markets. Also, based on both consumer and utility responses, we expect utility demand management initiatives to expand dramatically and electric power generation by consumers to make tremendous inroads within ten years.
Leveraging the new technology ecosystem will help utilities harness innovation to meet key objectives in coming years, including:
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Preparing for an environment in which customers are more active participants
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Capitalizing on new sources of realtime customer and operational information, and deciding which role(s) to play in the industry’s evolving value chain
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Better understanding and serving an increasingly heterogeneous customer base
The utility industry is fast approaching a tipping point beyond which consumers can, and increasingly will, demand equal footing with their providers. Those utilities that are fully prepared to share responsibility with their customers and help them meet their specific energy goals will have a significant competitive advantage.
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