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Digital Growth Strategy: Three new models for growth in the utilities industry

Digital is enabling utilities to chart new paths to growth and profitability

Overview

With their traditional value chains under threat, utilities need to embrace digitally enabled business models that focus on optimizing generation, distribution and customer experiences. Accenture has identified three “power plays” that hold particular promise. Utilities can become:

  1. Low-carbon energy producers that optimize the mix of energy sources

  2. Distribution platform optimizers, which meet demand with the optimal sources of supply

  3. Branded energy solution integrators that provide entirely new services to help customers optimize their energy production and consumption.

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Key Findings

Accenture has identified five threats that are eroding the utility industry’s traditional business models:

Energy technologies will contribute to a 15 percent reduction in energy demand by 2025—leading to revenue drops of $61 to $115 billion for utilities in the United States and Europe. 1

New, non-traditional competitors are providing entirely new services in multiple areas. The greatest competition will emerge in the areas of data-related services, beyond-the-meter solutions and distributed generation.2

Utilities’ cost performance has deteriorated sharply. In the 2005-2013 period, costs associated with serving customers in the United States rose 109 percent.3

Consumer behaviors and expectations have changed, and are heavily influenced by digital and distributed technologies. They want new services—and new ways of interacting with their utilities.4

Policymakers and regulators are recognizing the need for new incentives to drive system efficiency, conservation and optimization.

1 “Accenture Digitally Enabled Grid Research 2014: How Can Utilities Survive Energy Demand Disruption?,” Accenture, 2014, retrieved March 25, 2015 from http://www.accenture.com/us-en/Pages/insight-digitally-enabled-grid-utilities-survive-energy-demand-disruption
2 ibid
3 Capital IQ and Accenture Research analysis
4 “The New Energy Consumer: Architecting for the Future,” Accenture, 2014. Retrieved March 25, 2015 from http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-New-Energy-Consumer-Architecting-Future.pdf

Recommendations

Accenture believes utilities should consider three “power plays.” To become:

  • Low-carbon energy producers, utilities need to shift from centralized to decentralized supplies and build capabilities in asset management, process improvement, capital project management and commercial investment optimization.

  • Distribution platform optimizers, utilities need to invest in intelligent grid capabilities and use digital technologies to enable asset analytics, storage integration and digital field work.

  • Branded energy solution integrators, utilities need to build a trusted brand, establish partnerships with other providers, and build digital capabilities that support multichannel interactions, analytics and customer insight, vendor and contract management, digital marketing and service fulfillment.

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BUSINESS MODEL MASHUP

In a September 2015 Public Utilities Fortnightly article, Greg Bolino, managing director-Strategy for Accenture Utilities, talks about how the business model of the traditional utility company is breaking down—but in different ways for individual utilities. Ironically, however, this may be a good thing for the industry, as it may help to point the way forward.

This article was published in Public Utilities Fortnightly in September 2015. Copyright PUR Inc. (www.fortnightly.com). Used by permission of the publisher.

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