Change is happening fast in the electric power industry. From regulatory enactments to technology advances, a number of factors are causing rapid shifts. Over the past few years, energy conservation has emerged as a top business priority, and utilities have fundamentally re-thought their business models. As costs for utilities continue to rise and electricity demand levels remain uncertain, these emerging industry trends could spell trouble for utilities that fail to adapt.
In such fast-moving markets, the challenge is to create business strategies that exploit upside while hedging risks. In terms of generation, few companies can lead the race to create the product with the lowest cost per watt. Instead, utilities need to focus on innovative models for generating revenue that embrace a range of possibilities:
- Capitalizing on new sources of demand, such as from the increased use of consumer electronics and the growing popularity of hybrid / electric vehicles
- Delving into new opportunities in electricity generation and storage for both business and residential customers
- Creating a diversified investment portfolio to reduce overall risk
- Expanding the electricity value chain by bringing in new actors
Given the need for new capacity to replace aging or insufficient generation and transmission assets, utilities cannot afford a “wait and see” approach to developing a strategy that ensures future success. While they often have reams of projections about future demand and costs, they sometimes lack a process for weighing this data against future scenarios. Utilities need to ensure that they carefully consider the business model implications of smart grid rollout, electric vehicle recharging stations, and other major innovations re-shaping their environment. We provide a disciplined approach for strategy formulation that has been developed specifically for markets undergoing disruptive change.
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