Business Side of Running a Utility in 2022

The global electricity demand estimated to be growing at 2.1% would push electricity’s share of the total energy consumption to 24% in 2040.  Therefore, the Government policies, market and technologies would further push towards carbon neutral goal.  The accelerated efforts on renewables, nuclear energy and carbon capture technologies are believed to compensate for the decline of coal fired power generation which was dominant so far.

The demand for electricity follows two distinct directions – growth in advanced economies would be linked to digitalization, energy efficient improvements.  However, the same demand would account for rising incomes, expanding industrial sector and surprisingly, it is this developing economies that account for 90% of global electricity demand in 2040.

IMPACT OF THE PANDEMIC:

While progress in agriculture, electricity, education etc is indeed vital in lifting the capability of human beings with long and healthy living, we have to accept the uncertain challenges as well.  The recent pandemic has been one such challenge and a lot of research has gone into it all round the world.  A number of precautions have been warned, understandably to avoid community spread as well including the shutdown of a number of industries (academic institutions, shopping malls etc. as well) and power sector in this regard has been no exception.  While energy demand due to this came down drastically, it did provide an opportunity for introspection as well.   However as mentioned above, many governments had geared up to the electricity demand in building the infrastructure.  This may hit on the mismatch between power generation and demand.   Indian power sector is the third largest power sector in terms of power production and number of customers.   Considering the changed scenario in post pandemic phase and tuning towards ‘Carbon Neutral’ option throw up pretty serious challenges to re-strategize the power scenario not only in India but,  even globally.

POWER STRATEGY FOR THE FUTURE:

Energy consumption has four categories – commercial, residential, transport and industrial.  The power sector now needs to balance generation and demand with the support of hydro, gas and renewables depending upon the percentage contribution.  Among them, renewables seem to have caught up attention from many countries – may be because of its economics currently and also the technical developments over the period.  Undoubtedly therefore, the discussions center on renewables.

Although it seems a simple task on the face of it, it is really not as easy as many utilities would perhaps struggle to deploy growth capital and to sustain current growth rates in the regulated business over the next decade.  There seems to be three major challenges facing them – Load growth may not return; Rate and competitive pressures are increasing and Regulator and stakeholder scrutiny seems to be growing.   In addition, Customers (commercial and Industrial) have been demanding services beyond simple kilowatts seeking ‘Green Energy’ and reliable one too.  If the utilities need to survive, growth in regulated utility, leverage and new growth engine like utility could be very important.

The pandemic not only was a wakeup call to the utilities but even for the customers who realized how important quality and uninterrupted electricity supply is.  In order to meet this greater expectation of the clients, the utilities need to re-orient themselves in terms of equipment/Technology and IT solutions to suit customer applications and requirements.  In fact, many countries have already been geared up with plummeting prices for renewables and energy storage combining of course with carbon regulations and distributed energy resources. 

There seems to be an over emphasis on the renewables especially Solar and Wind as we still are ignorant of many issues that may crop up after a few years (may not be apparent at this juncture) similar to the fate of coal power generation.  The massive investments in the renewables would understandably interfere with the existing grid network and the specific topic has already been discussed on this platform earlier. The way that things are moving, there could be a day when the building material could be replaced with solar panels all round in order to capture maximum power that would be required in the next few years when the globe turns entirely DIGITAL.  Some utilities tie up with third party vendors to offer link up energy technologies with major appliances in consumer’s home. These seem to be an attempt towards ‘smart homes’ leading to fully connected home energy system.  This could be an additional revenue earner for the utilities.

The two examples cited above are perhaps the trends that change the outlook of the electric utilities which were traditionally restricted to power supply. The power generation, distribution and marketing seem to be delinking to assume independence as each of them has unbelievable challenges and scope for innovation.  These trends will be different depending upon the specific requirements that vary both regionally and even country wise.  So it is absolutely clear that the utilities have bid farewell to the traditional style and grooming themselves in a new dress of attraction for the future

One must be thankful in a way to the pandemic despite its devastating impact globally.  In addition to the discomforts, they also provided a great opportunity for humanity to think loud and clear for the next few decades.  The greatest advantage has already been brought out in the above paragraphs on the trends in the power utility.  Apart from this, Work From Home (WFH) as it is popular has in a way given a new thought to the corporates who have benefited greatly in not only reducing their cost on infrastructure but have been able to reap greater revenues as well.   In fact, some of the corporates wish to continue this practice for the future as well (some have even closed a few branches).  Secondly, WFH has also benefited the employees in saving not only their cost on transport but more importantly, provided better times with the family which they couldn’t afford attending the office.  Touching upon the final point of advantages to the customer – the customer enjoys a choice of service providers now for a clean and sustained electricity supply (in a way reversal from the role of receiver to the ‘Demand’).

CONCLUSION:  

Power utility therefore is likely to witness a sea change in the coming years.  These carefully planned strategies would perhaps take them forward not only this decade but may spill over to the next one as well.