Are global companies weighing a future without utilities?

Are global companies weighing a future without utilities?

Yesterday I facilitated a GreenBiz webcast called “Surviving the Utility Revolution.”

We put this program together specifically for the utility industry, allowing them to hear directly from our panelists – Brian Janous from Microsoft, Jed Richardson from Johnson & Johnson and David Ozment from Walmart – about how their high-energy-consuming companies imagine procuring and using energy in the future.

Why?

  • Because carbon reduction is a mandate at so many of America’s largest companies. Eighty-six percent of our country’s largest companies now publish sustainability reports, and you can bet “reducing environmental impact” is a goal in every single one of them.
  • Most companies are working to hit their carbon reduction goals via energy efficiency and renewables.
  • That has huge implications for the utility industry – they should expect their load to contract significantly as a result of these efforts over the next 20 years.
  • At all the major sustainability conferences, companies are outlining the ways they’re working to reduce their conventional energy consumption – yet there are almost never any utility people in attendance at those conferences. They’re all attending utility industry conferences instead and comparing notes with each other, which keeps them insulated from the customer perspective.

If you missed the webcast, you can register for free to view/listen to it here. Here are my takeaways:

  • Of the 700+ people registered, only about 100 were from the energy industry (traditional utilities, municipalities, renewable energy companies and consultants), even though this event was specifically designed for a utility audience. I’m not sure what to make of that. Was it that our marketing effort, which went out to utilities specifically, wasn’t compelling enough? Or that the industry isn’t as concerned about what the future holds as I am?
  • The remaining registrants largely represented other high-energy-consuming organizations. They directed a long list of pointed questions at Microsoft and J&J, such as, how do you measure your carbon footprint and how did you set your energy efficiency goals? That tells me many other companies are actively looking to figure out the right metrics related to energy consumption reduction so they can judge success or failure. And that’s one more reason to believe that utilities can expect to see load contraction continue.
  • All three panelists gave examples of energy efficiency and renewable energy projects they’ve already completed. Though many in the utility industry will scoff at the EE and RE goals of some big companies and say “it doesn’t pencil out,” the reality is that companies are doing it. And every single panelist said they’re not willing to pay a premium. So somehow they’ve figured out how to do the projects they’ve done without paying more than their current utility rate.
  • Although I couldn’t get any of the panelists to say this directly, it’s clear they’re going to continue pursuing EE and RE and they’ll partner with whatever organizations come to the table with the best deal. If that happens to be a utility, great. If not, great. They’re agnostic, and though they all said nice things about how much they’d like to work with their utilities, my sense is that if utilities don’t figure out how to offer projects that make financial sense, these companies will go their own way and figure it out with other parties.
  • It was also clear they’re interested in potential partners coming to them. Yes, Microsoft may decide they want to do a renewable project and send out an RFP looking for help, but they’re also looking for new ideas/models and want third parties to bring those to them. David from Walmart gave a good example of a utility coming to them with an outdoor LED lighting program that worked for everyone. Walmart didn’t ask, the utility offered, and it happened. It sounds like utilities need to be making more overtures like this.
  • The business model needs to change and change now. All the panelists said this explicitly. Brian from Microsoft said that they’re “rethinking ownership models and want to work with utilities at the megawatt scale to figure out new models that can work at the kilowatt scale.” David from Walmart said, “Services from utilities need to change. We want clean, reliable, cost-effective options, we want third-party financing, and we want the ability to buy output from a renewable project that’s delivered directly to our stores.”
  • Opportunity vs tragedy? Based on the questions from the audience, it seems as if those outside of the energy space see utilities in an impossible quandary. How can you offer what these big companies want without giving up a lot of load and control? How can you create a new business model when you’re in scramble mode trying to fend off competition from other energy providers? David suggested utilities look at this as an opportunity instead of as a “death spiral.” He encouraged the industry to get some quick wins under its belt (like the LED example, I presume) while working with regulators over the long haul to seriously redesign rates that reflect where the world’s heading.

I think he’s right that now is a time of great opportunity – for utilities and others in the energy products and services business. After the webcast, someone in my office said, “I think somebody’s going to have to tell utilities exactly what to do.” Brian, David and Jed did an excellent job of that. The question is, will the utility industry listen?

Skills

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Posted on

September 10, 2014

About the Author

Suzanne Shelton

Where Suzanne sees opportunity, you can bet results will follow. Drawing on her extensive knowledge of both the advertising world and the energy and environment arena, Suzanne provides unparalleled strategic insights to our clients and to audiences around North America. Suzanne is a guest columnist in multiple publications and websites, such as GreenBiz, and she speaks at around 20 conferences a year, including Sustainable Brands, Fortune Brainstorm E and Green Build.

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