Business Models For Sustainable Electricity

As varied as the quirky spectrum of people dressed from t-shirts and shorts to suits and ties at SXSW Eco in Austin was the spectrum of sustainability topics covered — from improving fashion’s supply chain to building transportation hyperloops. For the first time ever, though, the workhorse of energy sustainability, the electric grid, was also tackled as a focal point.

These discussions reminded me that what has been essentially the same industry for 100 years is now being turned on its head. Chaos rules in the utility industry today. And that’s a good thing, because it’s enabling a much-needed sustainable transformation.

Yet how do companies find success in this turmoil?

The Big Issue: A Rapidly Changing Business Model

There are certainly issues driving change in the utility industry: climate change, aging infrastructure and distributed generation, for starters. How business models are changing in response to these is creating significant challenges — as well as opportunities.

“Digitizing” the grid is a somewhat recent step that started with the widespread introduction of smart meters. While utilities brought them in to primarily automate meter reading and customer billing, these meters and other digital grid technologies have actually unleashed ideas and companies that are shaking the very core of what it means to be a utility company, as evidenced by the ways SolarCity, Google and Comcast now work directly with consumers.

What is going to become of utilities? Who owns what? On one of the Eco panels, Michael Bates, Global Energy Director at Intel Corporation, said, “There will likely be utility companies that don’t survive in their current form.”

Yet even the business models of the companies challenging utilities are being shaken up. At SXSW Eco we learned how the business model of rooftop solar owned by individuals is shifting to community-owned solar. We also were told about smart thermostats being replaced by smart phones and about the impact of energy storage’s evolution.

The complexity of issues and scale of these changes means that success isn’t necessarily going to come from one source.

What will the business model look like for utilities companies, utility challengers and their technology providers? The solutions jumping in to save the day at this point seem to be anything from energy storage to nanotechnologies for sensors to water conservation. However, it isn’t so much about the specific solution as how it can address the broader changes happening in the industry and society.

Solutions To Those Issues

The complexity of issues and scale of these changes means that success isn’t necessarily going to come from one source. Solutions will need to consider how they fit into the bigger puzzle of electricity delivery and generation. Some thought-provoking considerations include:

Developing Products At Scale. There are a lot of great technologies out there, but as Kevin Phelan, Chief Marketing Officer at SoCore Energy, noted at Eco, “Real change only comes when you can apply it at scale.” Solutions need to demonstrate their usefulness at the scale of the grid or a community. This means looking to utilities as partners in ensuring the scalability of solutions. “Innovations and investments tend to come from disrupters, but the utility industry has the potential to be its own disrupter, too,” added Mike Carlson, President, Smart Grid NA at Siemens.

Outside Input Is A Must. Utilities are still just part of the mix, because sustainability challenges reach beyond these organizations. Partnerships need to include a variety of key stakeholders — from communities to the federal government to consumer advocacy groups.

Matching Up While Challenging Business Models. Companies need to find the right partners and do things at the right scale, but they still have to fit within a business model and nudge the industry to think about what’s next in electricity.

Thinking about the next generation’s business model for energy, and the partners to help get there, will help transform today’s chaos into sustainably based change.