The lights are on. Is anyone home?
The new smart: clean, connected and community based energy
Change is surging through the energy sector. Digital platforms are transforming the market, as they have done to the way we call a cab, to the way we book a holiday, to the way we buy things.
At the same time, the climate crisis is pushing energy providers to search for new ideas on how to provide clean power in modern, connected cities. An opportunity exists for these companies to lead the way. How? With the new Energy-as-a-Service (EaaS) business model.
The EaaS approach shifts from asset-focussed, centralised power generation and the sale of it to passive consumers. Instead, it offers end-to-end management of a customer’s energy assets and services.
By combining the client’s resources into a large ‘smart energy community’, EaaS providers can merge markets, offer predictable load balancing and upgrade the grid in a number of different ways.
A game anyone can play
Because of the physical, digital and communication infrastructure required, a wide range of players can take advantage of EaaS. Major industrial equipment companies and electricity firms are already developing EaaS offerings. And so are telecommunications, technology and oil & gas companies, who have particular strengths they can capitalise on. It won’t be long before larger renewable developers and start-ups join in.
Don’t become the fallen giant
How fast and how big the EaaS market grows depends on several factors, which include technology, economics, politics, regulations, consumer trends and environmental issues.
This report examines four possible future energy scenarios, depending on the balance of power:
- Energy-as-a-Service platform provider: Incumbents have the upper hand. They develop deep capabilities in all digital technologies (including cloud, AI, data analytics, Blockchain and robotics) and distributed energy resources. Flexing their muscles, they manage intricate energy systems and offer a range of bespoke, flexible solutions. They set the standards for product integration across the industrial, commercial, residential, transport and trading sectors. They offer additional services based on their knowledge and portfolios.
- The stagnant utility company: Established companies ‘capture’ government policy-making and regulatory mechanisms to block change. They lock out or slow down new entrants, or hinder the introduction of new services into the market. New and emerging technologies are restricted by the vested interests of network operators and critical technical changes happen slowly, if at all. Roll-outs are frequently delayed or disrupted. Utility-scale renewable generation and distribution fails to achieve critical mass. Companies compete on a limited, commoditised array of services and prices remain high.
- Fallen giant: Consumers switch, in large numbers, to behind-the-meter solutions. Energy is generated and traded at a community level, resulting in inefficiencies in the wider system. The lack of scale inhibits the spread of technology and creates a so-called ‘death spiral’ for incumbents, where declining customer numbers mean falling revenues. Infrastructure is not properly maintained. Service levels drop. Energy companies are reduced to providing the barest of power services.
- Infrastructure provider: New players (large industrial conglomerates, oil & gas majors, tech companies) disrupt the value chain. Digital and communications technologies are essential to providing a wide range of integrated services. Incumbents are reduced to offering basic transmission and distribution services, along with some billing.
These are early days. Companies looking to offer EaaS will need to form partnerships and collaborate to succeed. Over time, competition will likely intensify in specific segments. As providers gain experience, we will see horizontal and vertical integration of players, through mergers and acquisitions.