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We had forecast already in 2010 that new business models involving distributed generation and energy services would be part of a successful utility in 2020. But at that time Delta-ee’s and Accenture’s conjoint survey of the European utility sector showed that this thinking had not yet penetrated the sector.Now, three years later, a recent study from PwC is confirming that utilities around the world are finally waking up to the challenges that lie ahead.Decentralized Energy – Disrupting The Utility Business ModelAs my colleague Scott Dwyer wrote on this blog before, the feed-in of renewable electricity is increasingly threatening the European utilities’ generation assets. But the business model of the vertically integrated utility is under threat across all parts of the value chain – from generation, over transmission & distribution down to the retail businesses.It is therefore not surprising that PwC’s global survey amongst power utilities found that 94% of respondents expect a complete transformation or important changes to the utility business model in the future. But do the utilities know how to respond to the challenges that lie ahead? Recognizing The Challenge – Only A First StepWell, PwC’s survey shows that they have at least woken up and indeed they are acknowledging distributed generation as an opportunity for their business (82%), rather than a threat (18%).According to the study 67% of respondents were looking for “services to provide distributed generation” as a strategy to overcome the sector’s challenges. However, despite various demonstration projects like RWE’s Windheizung or EDF’s Smart Electric Lyon project, we don’t see much evidence of a successful implementation of new business models – yet.Recognising the challenge is only the first step to making utilities’ business models fit for the future. Responding to the challenge is the hard part and this is what we and our clients are working on together. We see heat pumps as being a key element of the future energy landscape. How the technology fits into the new utility world is going to be discussed at Delta-ee’s next Heat Pumps and Utilities Roundtable, organised together with the European Heat Pump Association on the 6th February 2014 in Paris.
European utilities feel the pinch - Distributed energy to the rescue? The big picture is clear – or at least the story that European utilities are telling investors is clear. The centralised power plant model is no longer the bedrock of utility strategies, with the demand side - and distributed energy - already featuring highly in the ambitions of some.Falling power prices are hurting European utilities – badly. Vattenfall recently announced a €3.4bn write-down on the back of lower power prices, and said that their brand new CCGT in the Netherlands would effectively be mothballed. One third of RWE’s power plants are losing money. E.ON is looking to shift capex completely away from conventional power plants (in Europe) by 2015, and also has a stranded shiny new CCGT in Bavaria. A mix of sluggish demand (in the UK Centrica has seen a 15% underlying fall in gas consumption since 2008), a collapse in the carbon market, and growth in renewables are causing the pain – which is unlikely to go away any time soon. French giant EDF has largely escaped so far, but may not be immune – the French are in the middle of an Energy Transition Debate, with major discussion around energy efficiency, renewables, distributed energy and the future share of nuclear.
DECC has today announced that:
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