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March 29, 2016
Catching some rays
By: Jean-Marc Ollagnier

Electricity storage: Vital to the future of the utilities distribution business

Electric utilities’ future is tied to storage, and looking back at the lessons of the past brings their path ahead even more into focus.

Utilities see challenges on the distribution side because the traditional model has met its expiration date. Operating as they currently do, many utilities face technical and financial issues around their ability to effectively balance the volume of distributed generation from residential solar panels, that’s being dumped on the grid network. Meanwhile, ageing infrastructure is putting reliability at risk, while regulations are limiting utility companies’ ability to innovate and expand into new products and services to meet changing consumer habits and expectations.

Accenture’s latest Digitally Enabled Grid research suggests that unless the industry undergoes a digital, regulatory and business model transformation, we risk rising pressure on supply reliability and prices. 

One solution lies with the very same technology that, if not harnessed properly, could also amplify this disruption – electricity storage.

The industry has talked about storage as a potential key disruptor for years. Given its costs were largely prohibitive and its widespread adoption unlikely in the short-term, most focused on the more immediate threat to business models – the growth of distributed generation through residential installations of solar photovoltaics (PV). 

Accenture’s economic modelling shows that the falling price of storage technology could further strengthen the economics of residential PV deployment. Especially in places where the price for selling renewable generation back to the grid is lower than the retail price, or places where the utility charges a premium for electricity consumption during periods of peak demand.

As consumers invest in storage and are able to use stored electricity instead of purchasing it from the grid at times of peak demand and price, distribution businesses will face a decrease in demand and consumption on the network, putting their revenues at risk.

Solar plus storage could mean a crisis for the utilities’ distribution business, unless they get on board and convert the threat into an opportunity.

If deployed across the network, for instance, storage technology could counter the load imbalance created by intermittent distributed generation. Restoring this balance between supply and demand would improve reliability by storing excess electricity generated at peak sun periods, reducing waste and maximizing the use of renewable power, which would keep prices low. Not to mention boost our green credentials by reducing reliance on expensive peak power, which usually comes from burning fossil fuels.  

Consumers have a clear benefit from residential storage – reducing their bills by maximizing their consumption of free, self-generated, renewable power, especially at times of peak demand when power from the grid is more costly. But encouraging consumer adoption of residential storage technology can also benefit distribution businesses by creating new revenue streams in the form of new products and services, such as installation and maintenance.

Our research shows that utilities will be more proactive with storage, than they were with solar PV, where they faced rapid growth in residential deployment without sufficient means to manage the effective integration of the new supply, and lagged in developing complementary services, consequently opening the doors to new competition.  

Last week, I attended Accenture’s annual International Utilities and Energy Conference in Madrid and I was pleased to sense an air of cautious optimism about the future of the industry, awareness of the challenges posed by digital disruption, but also enthusiasm about the prospects for growth and innovation.  

While most are still in early stages of business model transformation, many utilities are either already investing, or planning to invest, in storage technologies and associated services over the next decade. But the race is on. While many utilities are embracing change and moving forward with new, digitally enabled business models, potential partners and competitors are entering the market every day. Take, for example, PV solar installation companies, battery manufacturers, telecom providers, and new innovative customer-focused solution providers.

Meanwhile, regulation is still the main roadblock to change. But those who can stay the course, push the boundaries with regulators and enable innovation, will thrive in this increasingly competitive and digitally enabled environment.

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