The energy industry has shifted, and thanks to innovation, we’re moving away from commodities and toward services. As that's happening, we’re seeing big changes in the roles utilities play in the lives of residential and business customers, manifested in electric vehicle infrastructure, new models for energy delivery and changing regulatory approaches. Let’s look at three examples of scenarios made possible by innovation that benefit both you and your customer.
Transportation goes electric
Consumer demand for electric vehicles is mirrored by increasing adoption by fleet owners and mass transit. The benefits, from cost-savings to carbon footprint reduction, are too numerous to ignore. If addressed properly, new load sources can become new revenue streams. There’s opportunity for those utilities that respond rapidly and strategically.
Utilities must find ways to improve system utilization while lowering energy costs. Xcel energy is among the utilities exploring ways to help reduce the impact of electric vehicles on the grid. In our recent report, Innovation Outlook: The 2017 State of Energy Efficiency, Eric Van Orden of Xcel Energy said, “There is an opportunity for increasing energy use in homes with electric vehicles by up to 33 percent.”
Utilities are exploring innovative approaches such as time of use (TOU) rate schedules. These schedules enable utilities to separately meter charging stations, allowing them to send out pricing signals that encourage consumers to charge EVs during times of low demand. Another benefit of the TOU approach is the valuable data it provides about EVs and charging behavior.
Your customer’s trusted partner
Success starts and ends with customer experience. Happy customers make regulators happy. Happy customers buy more services from their utility and cost less to keep. This applies to both residential and commercial customers alike, although motivating forces are different. In fact, commercial customers may be even more discerning than their residential counterparts.
As noted in a Price Waterhouse Cooper article on power and utilities trends for 2017, many commercial and industrial customers are now focused on managing their energy use patterns, and they expect utility companies will provide expertise and innovation to help them. Utilities should measure themselves against that expectation. To position yourself as a trusted partner to your commercial customers, and consequently improve their experience, here are three suggestions from utility engineers: 1. Provide greater clarity surrounding incentives that will help streamline the development of stronger energy efficiency programs. 2. Help with research and development related to energy efficiency. 3. Provide benchmarking reports, in an effort to help them understand their energy usage relative to their peers.
As trusted partners, utilities must do much more than traditional cost management and basic service. This will enable stronger and more durable customer relationships and transform the old customer-vendor relationship into a true partnership.
A shift toward performance incentives
At our Energy Forum, Peter Kind, executive director of Energy Infrastructure Advocates said, “What we want to do is set up performance incentive programs that drive and create value for customers, stakeholders and investors. We can create value by moving towards a value and services driven business, as opposed to a commodity, sales driven business.” More from Peter can be found in our Innovation Outlook report.
A shift to a service-plus-performance incentive model will ensure that all parties thrive. As Kind noted, “With meaningful and well-structured performance incentives, some capital investment will be funded by incentives. So, the utility will have lower capital expenditures and therefore, lower funding needs and therefore, a lower rate base. Net income may be lower—but return on equity will be higher and therefore, stock price will be higher. This is an example of a win-win: with performance incentives, we allow and encourage distributed energy resources as well as energy efficiency, and we have created an incentive for utilities to accelerate that activity.”
This is a time of tremendous change in the industry, and we all have a role to play in ensuring that the path remains clear to further innovation and growth. To read more about how utilities can adapt to new challenges and take advantage of new opportunities, download our Innovation Outlook: The 2017 State of Energy Efficiency for free today.