In today’s complex energy landscape, back to basics may just work
Electricity demand has stopped growing (box below), utility revenues from sales to customers are flat or falling, and customers are increasingly investing in energy efficiency and distributed self-generation further eroding traditional utility revenues. So what are incumbent utilities doing to survive a seemingly bleak future?
The answer, of course, depends on where you are and whom you ask. Some utilities have belatedly come to the realization that they need to reinvent themselves not only to survive but in fact to thrive in what may seem like a bleak and challenging business environment.
What do you mean? US electricity demand is not growing?
In March 2016, the Energy Information Administration (EIA) reported that total US electricity sales in 2015 fell 1.1% from the previous year, marking the 5th time in the past 8 years that electricity sales have fallen. While the decline in sales is not alarming, the sheer fact that is not consistently growing as it used to, is a major source of concern for regulated utilities and their investors.
The flattening of total electricity sales reflects declining sales in the industrial sector and little or no growth in residential and commercial sectors, despite growth in the number of households and growth in commercial building space.
In explaining the trends, EIA attributed the declining rates of electricity demand growth to the usual suspects: market saturation, increasing efficiency of electricity-using devices, a slowing rate of economic growth, and the changing composition of the US economy including the virtual disappearance of electricity-intensive manufacturing and heavy industry.
The key ingredients of success in this challenging environment are to
- Recognize that the success of any business depends on the success of its core customers; and
- Success in the rapidly evolving energy business requires dedicated focus to meet the customers’ basic energy service needs effectively, efficiently, and increasingly in sustainable ways.
It is that simple. And in late March 2019, Edison International, the parent of Southern California Edison Company (SCE), announced that it was launching a new business unit called Edison Energy focused on the notion of delivering energy as a service – rather than selling energy as a commodity.
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