Other parts of the value chain are becoming similarly complex. Retail will continue its transformation from energy supply to energy services. In the future, retail will be focused as much on energy management as it is on provision. Smart building technology will deliver significant cost savings to commercial property owners and occupiers. In a decade, hydrogen will be a new energy-carrying vector, with new stakeholders and a value chain that extends into industrial processes, chemical production and power generation. Iberdrola and Acciona are already developing integrated solar/wind and hydrogen plants. If these pilots are successful, a whole new ecosystem will emerge.1
Industrial clusters will rely less on power supply than they will on trusted energy advisors assisting them on optimizing energy use and reducing their carbon footprint. For example, Australia’s Horizon Power has developed energy services that are separate to grid supply. It has outfitted customers with renewable generation, storage and back-up generators which are utility-owned, but not connected to the distribution network. 2
Similarly, the co-operation between Associated British Ports, British Steel, Centrica Storage Limited, Drax, Equinor, Mitsubishi Power, National Grid Ventures, and SSE Thermal aims to reduce emissions and create jobs in the Humber industrial cluster in the UK.3
The transition from me to we
Individual utilities cannot manage all of this complexity alone. While energy will make the transition from fossil fuels to renewables, utilities need to make the transition from Me to We. Success in energy transition will be measured by the successful creation of collaborative, multi-stakeholder ecosystems, including a radically different role played by regulators.
Why are ecosystems so important? It is because utilities cannot deliver the energy transition alone. Utility strategies in the energy transition involve a series of calculated risks. Utilities are laying bets on where they are best able to generate future value. But individual companies, or even industries, cannot be everywhere and do all things – they will be limited by the skills of their employees, capital constraints, regulatory boundaries, and technology infrastructure. Leaning into multi-party systems creates a unique opportunity for a utility to be a leader of leaders in an energy ecosystem: they are positioned to define the incentives for how energy is produced, transported, and consumed.
Traditional utility business models will change, and existing infrastructure will change with them. Multiparty systems, where a utility collaborates with an ecosystem of other infrastructure owners, can help manage a more dynamic market environment. If the energy transition is taken to the extreme, the traditional business model no longer exists.
But there is still time for utilities to identify the areas they believe will create the most value, and to create the partnerships that will deliver this value. For example, The Electric Highway Coalition4 is made up of six large utilities American Electric Power, Dominion Energy, Duke Energy, Entergy, Southern Co and Tennessee Valley Authority. It plans to provide EV charging stations in the Atlantic Coast, the Midwest, South, the Gulf, and Central Plains regions.