Not so long ago, DistribuTECH was a trade show focused on core Transmission & Distribution (T&D) engineering equipment. The shift in the last few years has been dramatic and the event now resembles a high tech, Silicon Valley conference.
Our industry, like many others, has become a digital one. While it is one of the last industries to make the shift, the rate of change continues to increase as we migrate to a digital and distributed utility model.
So what will be the key trends that define the industry’s evolution in 2014? (This question alone highlights the current rate of progress. A few years ago it would have made no sense to identify yearly trends in an industry that measures progress in 10 to 20 year intervals).
Solar Continues its Exponential Growth
Solar is, and will continue to be, the big disrupter in the US utility industry. Anyone who purchased stock in SolarCity can attest to the market’s view of the overall potential, with a market cap that has quintupled in the last 12 months. Solar still only accounts for 0.3% of US generation and the addressable market is every rooftop in the country; the shift has only just begun.
Prices will continue to drop (driven by an oversupply in manufacturing and demand in Asia) and while solar is now at grid parity in 10 states, and likely reaching 14 by the end of 2014, our analysis shows that the entire country could be at grid parity by 2030.
Once customers move to self-generation and become mostly self-sufficient, they are not coming back to the grid for their power, except as peaking capacity and back-up, since solar energy is unpredictable and intermittent. However, this could all be turned on its head, if there is a breakthrough in energy storage, which leads me to my second point.
Storage Costs Decrease and Storage Becomes a Critical Focus for Cleantech VC Funding
Storage costs are still around $1,000 / kWh but we are starting to see mainstream applications, such as SolarCity’s usage of Tesla batteries paired with solar, and mandated deployments in California. While this is a longer term trend than solar, it is one to watch closely. Costs will continue to decrease in 2014 and we will see more applications combining renewable distributed generation with storage technology.
The Internet of Things Becomes Mainstream Starting with Home Automation
The connected home has been discussed for more than ten years and Accenture performed its first study on this subject for a utility in 1998. Since then, many solutions have come and gone (e.g. Google has tried Android@Home and PowerMeter) but we are finally seeing solutions take hold.
According to GTM Research, some home energy management vendors have surpassed one million customers, including Alarm.com, Tendril, OPower, Vivint and ADT. The acquisition of Nest by Google is a further critical catalyst in an industry that will merge home energy management, home security, appliance control, lighting, smoke detection and demand response.
2014 will see mergers and acquisitions and continued venture capital investment in this space, as well as the convergence towards open technology platforms. As companies vie to capture the energy consumer, the question is whether utilities will play a prominent role or cede the opportunity to new entrants. This is a high touch consumer market which will require a step change in customer engagement capabilities.
Analytics are Deployed at Utility Scale
While the first three trends are potential threats to utilities, the fourth provides the foundation for future success.
The volume of data generated by smart meters and energy distribution continues to grow. Initial applications of analytics have demonstrated significant value creation in areas such as asset management, outage restoration, and theft and customer segmentation, estimated to total between $40 and $70 per meter per year.
That said the growth in analytics has not met original predictions over the past two-three years. Utilities have treated analytic deployments as pilots or small scale proof of concepts with a focus on testing technology options. 2014 will see a few utilities deploy enterprise analytic solutions and treat analytics as a critical competency. While only 25% of utilities believe they are well prepared to make analytics a core competency, the key success factor will be in the war for analytical / data scientist talent, not in the mastery of technology.
The shift towards analytics is part of a broader trend around the use of digital technologies (including mobility, cloud, social media) which has potential to drive differentiated capabilities and significant O&M reductions.
Whether a utility company thrives or not, will depend on how it responds to these trends. I, for one, look forward to progressing these discussions at DistribuTECH and continuing our work with the industry to help position it to embrace these trends for future growth.
Jack Azagury is the global managing director for Accenture Smart Grid Services and leads Accenture’s Digitally Enabled Grid research program.
