Accenture’s report, ‘Digitally Enabled Grid’, said that by 2025 the revenues of US utilities in the US could be down by as much as US$59 billion and those in Europe by US$75 billion as their business models face a growing squeeze from distributed technologies.
The study modelled three scenarios – “status quo”, “demand disruption” and “perfect storm” – to assess how technologies, such as PV, electricity storage, electrification of heating and transport, energy efficiency, energy conservation and demand response, would impact the grid network and utilities’ business models.
Of the three scenarios, the management consultants said they viewed “demand disruption”, the moderate scenario, as being most likely. Accenture forecast that the economies of distributed generation technologies are already compelling enough to make the “status quo” scenario to be likely to remain in place.
Meanwhile, the unlikelihood of customers being able to source and manage all of their energy consumption through solar and storage alone make it unlikely the “perfect storm” scenario will transpire, according to Accenture. In the case of energy storage, the report states that the cost and space required to accommodate a suitable amount of storage for total self-sufficiency of energy supply and use is likely to be “prohibitively large” enough to prevent widespread "grid defection". Earlier this year, Peter Rive, co-founder and chief technical officer of one of the biggest US solar installers, SolarCity, said his company had "no interest" in the 100% grid defection scenario and would prefer to pair creatively with utility companies. Rive's view was echoed and expounded on in an interview given in July to PV Tech Storage by company spokesman and public affairs director Will Craven. Head of another leading US solar company, Tom Werner, chief executive of SunPower, agreed with this assertion and went further by calling the idea of grid independence "naive".
Accenture believes the impact on utility revenues can be mitigated by a rethink on the utilities’ part, “from the pure-play transporter of energy and expanding to sophisticated energy services”. The examples given include behind-the-meter technologies such as energy storage, energy efficiency and automation. Utilities will need to partner with regulatory bodies to enable the electricity market to reward them for these new paths, which could include new tariff structures and opening up new markets for services, as seen in the case of frequency regulation in the PJM service area of the US, for example.
Solar, storage and other distributed technologies may not cause the "perfect storm" scenario, but they are likely to cause disruption, according to Accenture. Image: ABB.
The Accenture report also cited an increase in the number of global utility company executives who view the impact of these new technologies as a threat to revenue streams. Last year, around 43% of respondents believed distributed generation will cause a reduction in revenues at a significant or moderate level. This year, the figure leaped to 61%.
The report is the latest in a series of high-profile findings on the impact of solar and distributed generation, particularly in combination with storage, on utility business models. Barclays sounded a similar note when it downgraded the entire US utility electricity market in May.
The report also follows recent news that German utility giant E.ON will stake its future on renewable energy in a major corporate restructuring. Citing dramatic changes in market conditions, the company announced at the beginning of the month that it will split in two, spinning off its conventional generation, energy trading and upstream activities into a new company, and retaining the existing company as a dedicated renewable energy business.
Additional reporting by Andy Colthorpe.
61% of utility company executives who responded say they believe there will be a significant or moderate threat to revenues. Image: wikimedia user: vbccevents.
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