Sure the utility business model is changing, but not so fast

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By Jared Anderson

 

The changing utility business model has been a major theme in the news and industry circles this year, with many bemoaning that fact that as distributed generation and energy efficiency proliferate, utilities sell less of their product. The trend has even been dramatically called the “utility death spiral.” Scary. But while these are certainly challenges utility companies are dealing with, the 100-year old system is not facing wholesale change overnight.

 

“This is an inherently slow moving sector and it will likely take many years for these changes to take place,” Ron Norman, Global Energy & Utilities expert with PA Consulting told Breaking Energy.

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Technology is the driving force, as it is in many industries. One of the most famous comparisons is the way cellular phone technology disrupted the telecommunications industry.

 

“At root we’re seeing the effect of technology change on utilities and those technologies are appearing in the form of distributed generation and customer awareness tools. Like every other industry that’s been affected by technology, utilities will adapt. That process of adapting is something utilities have gone through many, many times. So again, it takes place over many years,” said Norman.

 

“They [utilities] will be providing different products and services and in different quantities than they currently provide and the rate structures will look different.”

 

The timeframe needed for this change to materialize will likely exceed 10 years for a lot of utilities, but the degree to which companies are impacted will depend on whether they are regulated or deregulated and the segments of the value chain in which they operate.