Technology Vision 2021

Every utility leader is a technology leader

June 8, 2021

Overview
Stack Strategically
Mirrored World
I, Technologist
Anywhere, Everywhere
From Me to We

Overview
Stack Strategically
Mirrored World
I, Technologist
Anywhere, Everywhere
From Me to We

RESEARCH REPORT

In brief

Utilities have endured upheaval over the past decade and the pandemic brought further disruption, forcing utilities to invest in new technologies.
It led countries to accelerate their decarbonization policies and as the energy transition accelerates, expect this disruption to intensify.
The world’s most complex machine—the electric grid—must become far more flexible and resilient to deliver sustainable, affordable, reliable power.
As our Tech Vision 2021 makes clear, big changes today require bold leadership.

The energy industry has endured significant upheaval over the past decade. The pandemic brought further disruption. It forced utilities to invest in new technologies to support remote working and field worker safety. It also led countries to accelerate their decarbonization policies. As the energy transition accelerates, expect this disruption to intensify over the next 10 years.

Embracing a new mindset to shape a better future

A number of large utilities in Europe and North America are leading the renewables expansion. The world’s most complex machine—the electric grid—must become far more flexible and resilient to deliver sustainable, affordable, reliable power. Combined with ongoing digitalization of assets, processes, and products, the effect has been profound.

Renewables now account for over 20% of the electricity mix in Europe and the US¹. But this is just the beginning. By 2025, the share of renewables in total electricity generation is expected to be 33%, surpassing the coal-fired generation. Renewables will account for 95% of the net increase in global power capacity through 2025². The industry will look to its leaders to deliver change, because change is needed for the industry to seize new opportunities.

New competitive forces will reshape the electricity value chain. Why? Because utilities are not alone in their pursuit of these new opportunities. Oil majors’ significant investments in renewables and storage will increase. In deregulated markets, telcos will increasingly bundle power with other services. New, cloud-native start-ups will threaten incumbents with Amazon-like customer-centric business models.

New leadership is needed to address the areas where utilities have struggled. Industry leaders will draw on the lessons learned in extreme weather events and the pandemic to power a new era of transformation, and usher in a new kind of leadership.

Old approaches will not address the increased complexity in the energy mix, network management, and energy markets. New approaches are required to deliver sustainable, affordable, reliable power. Customers will look to utility leaders to strike a balance between ensuring reliable and safe energy supplies, bring new products and services to market faster and manage the energy transition.

Ørsted is a perfect illustration of this strategic commitment to change. Less than five years ago, it divested its oil and gas business, and is now widely recognized as one of the world’s most sustainable companies.³

Let there be change

Requirements differ across the value chain and in different markets. A retailer in a deregulated market has different challenges to a transmission operator or a vertically integrated, regulated utility. But there is one constant: change is coming. Despite their differences all utilities and energy providers face a more complex, fast changing, and uncertain future. The industry will look to its leadership to navigate through this uncertainty, not just to survive, but to succeed.

Change is not for the faint-hearted, but it cannot be avoided. There is a risk that if utilities do not step forward, others will. A new leadership must deliver a new innovative, connected, and digital culture. It must shake off the old, risk-averse, asset-based, engineering culture it has developed over decades. Industry leaders will become Experts at Change, and engender a digital-first, innovative culture to effect this much needed transformation.

This new mindset will dramatically change utilities’ approach to technology adoption. The utilities industry has never experienced the level of disruption or the pace of change it currently faces. Some find these new challenges daunting. But Experts at Change are emerging, showing the industry the art of the possible.

Leading utilities recognize the need to do things differently. They are innovating to compete in the energy transition. They are creating new business models to meet customers’ changing needs. For example, Enel has formed Enel X: a separate organisation⁴ with a stronger tech profile, standalone branding, and a stronger focus on purpose. Exelon is separating its regulated utility assets from its power generation and retail business, to allow both to pursue their own strategies.

Australian market operator AEMO has opened a DER register to accelerate the creation of the world’s most sophisticated two-way electricity market.⁵

But innovation is not just restricted to single-company initiatives. In the future, collaboration will be vitally important. The Northeast corridor in the United States, which extends from Washington DC to Maine, will be one of the world’s largest EV markets. Utilities are working with Electrify America and state governors to create a charging infrastructure to support this new market.⁶

Many more utility leaders must follow suit and seize the opportunity. Why is this imperative? Because most of the value in the energy transition will be created in new, competitive markets, in collaboration with customers, regulators, and a broad ecosystem of suppliers. Utilities will not be alone offering products in services behind the meter, in renewable generation, or electric vehicle charging. The energy transition is accelerating and the time for change is now. Utilities are uniquely positioned to take charge and play a more central role on the path to net zero by reinventing their businesses with technology at the core to deliver greater value to all stakeholders.

¹ “US power generation by renewables exceeded 20% in 2020” Renewables New, Feb 25, 2021; History made: Renewable energy surpassed fossil fuels for European electricity in 2020, CNN Business, Jan 25, 2021

² “Renewables 2020: Analysis and forecast to 2025, International Energy Agency” © OECD - Used by permission

³ “The world’s most sustainable energy company – three years running” Ørsted

⁴ “Separation facts” Exelon

⁵ “NEM Distributed Energy Resources Program” AEMO

⁶ “Northeast Corridor Regional Strategy for Electric Vehicle Charging Infrastructure 2018-2021” Nescaum, 2018