The Shift in Energy Consumerism

Few years ago, I published an article titled “Utilities 2.0” in Public Utilities Fortnightly where I proposed some tangible value co-creation opportunities for power utilities through the lenses of DART (a framework devised by Prahlad and Ramaswami). I am pleasantly surprised to see how the term “Utilities 2.0” has caught on since then, and more amazingly, how rapidly the concept has been becoming a reality.

The 2012 “Actionable Insights for New Energy Consumer” report from Accenture reveals some really fascinating data that perfectly align with the evolution of Utility 2.0. The shift in energy consumerism is not vaporware, - it is real - “…from isolated to connected, from unaware to informed, from passive to active.” And this shift is transforming the stale business models for traditional utilities.

Below is an example of how different opportunities shape up for Dialogue, Access, Risk Assessment and Transparency (DART) and their intersections.

On Utility Branding

For last two years, IDC has been doing a remarkable job in ranking electric utilities by their Intelligent Quotient (IQ). I wonder if someone could do a similar ranking for utility branding. Traditionally, utilities are super rich in tangible assets, but how do they stand on intangibles? Moreover, with so much of investments (and hype and hoopla) around Smart Grid, has there been any change in brand asset value?

If you look through Y&R’s model for Brand Asset Valuation, it’s clear that Brand Strength must have been refueled by the smart grid investments leading to energized differentiation. However, have there been any boosts around Relevance, Esteem and Knowledge? How differently do the consumers really feel about their utilities now?

Twisted value net for utilities

An ominous theory has been wafting through the air for sometime – gypsies like Google will eventually shrink the utilities to some dumb wires. A utility company will be like a skinny skeleton wearing other people’s fleshes. Before my imagination rolls down the gory trail, let me come to the point...

Recently I had the opportunity to speak at a DeTech meet, facilitated by DEFG and hosted by San Diego Gas & Electric. The topic was how the inclusion of third party companies will change the current business models for electric utilities. Intensely intriguing.

Smart Grid and associated technologies are essentially unveiling the electric utility industry out of their burkas. In the last three years, venture capital spending in the advanced metering technologies has been over $1.5 B. In 2010 alone, about $2.75 Billion has been spent on smart grid products around advanced metering, demand response and distribution grid management.

In HAN (Home Area Network) ecosystem alone, there are more than 200 vendors. The network providers such as Verizon are opening up their backyards. Demand side aggregators like Enernoc and CPower are mushrooming with froggy leaps. Google is up on its mission to “organize the world’s information” through the PowerMeter. Microsoft is using Hohm as their homing beacon to make inroads. Do not forget Opower. Galvin  is up with Microgrids. The list runs on and on. Too many smarty pants in the room, - and utilities, like selfless hermits, are cannibalizing their sales through Distributed Generation, Demand Response and Energy Efficiency. Huh!

Remember the value net by Brandenburger and Nalebuff? It becomes really interesting as you start plotting the newbies against the four pillars of the net. Not only that the list for Complementors and Substitutors start hanging below the bottom, - but in cases, the line of demarcation seems really slim. Sometimes, an entity could fall into multiple pillars. Take the example of DR Aggregators – are they Substitutors or Suppliers? Both, really. How about Distributed Generation? Talk about twisted value nets.

The question is - what should be the go forward strategy for utilities - compete, co-operate or co-opetate? I think co-opetition will be the name of the game. We will wait and see.