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Distributed energy: Disrupting the utility business model

Distributed energy: Disrupting the utility business model

Full Title:  Distributed energy: Disrupting the utility business model
Author(s):  Berthold Hannes and Matt Abbott
Publisher(s): Bain & Company
Publication Date: April 1, 2013
Full Text: Download Resource
Description (excerpt):

 

Utility executives around the world are watching the rise of distributed energy systems and trying to determine the best ways to react to this challenge to their traditional businesses. The rise of distributed energy (DE)—smaller power-generation systems for homes, businesses and communities—is a response to environmental concerns, rising power prices and regulatory pressures and incentives. In some European countries, the amount of power generated by intermittent sources like wind and photovoltaic (PV) cells also leads major energy consumers to explore on-site generation as a backup solution and to cap costs. In the US, the leasing model, coupled with net metering and tax subsidies, has fueled adoption of distributed solar for residential customers. In less developed countries, such as India, diesel generators provide electricity to small towns or villages that cannot count on the country’s unreliable power grid.

Growth of DE will force change on utilities’ business models. Some of their most profitable customers will reduce their regular power consumption from the central grid in favor of locally produced power. These customers may still depend on the central grid for their emergency or peak use, so utilities will have to maintain their costly infrastructure and power-generating capabilities even as revenues from consumption decline. In many markets, utilities are working with regulators to adapt to this structural change by promoting a pricing model based more on connectivity and capacity and less on usage.

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