EnergyBiz - January/February 2008 - (Page 51) of as a largely uniform block of ratepayers. As the degree of control shifts from the utility to consumers, energy technologies will move away from the traditional centralized, one-way model to a more dynamic and distributed one. New industry structures will emerge, creating new opportunities and challenging existing ones. Figure 2 utility industry Models 2007-2017 oPerations transforMation hiGh centralizeD anD one-Way DistriButeD anD DynaMic Some combination of grid and network technology evolves to enable shared responsibility, but consumers either cannot exert much control or elect not to and the balance of benefits favors the utility ParticiPatory netWork A wide variety of grid and network technology evolve to enable shared responsibility, and consumers’ strong interest in specific goals creates new markets (virtual and physical) and new product demands, which balances benefits more equally between the consumers and utilities Passive Persistence (PP) Traditional utility market structures dominate, and consumers either accept or prefer the traditional supplier-user relationship constraineD choice (cc) Consumers take firm steps to move toward more control, but are limited to certain “levers” (technologies, behaviors, or choices in providers) by regulatory and/or technological constraints loW loW DeGree of consuMer control sourCe: iBm insTiTuTe for Business value (iBv) analysis hiGh Consumers: no longer JusT Passive raTePayers Our analysis of the consumer survey responses showed that two characteristics, in combination, define sharp demarcations in behavior: Ô Personal initiative: willingness to make decisions and take action based on specific goals, such as cost control, reliability, convenience and climate change impacts Disposable income: financial ability to support energyrelated goals; in early adoption phases, only those with sufficient resources will be able to implement new technologies and buy more expensive products. Ô across more than one (particularly if a company operates in different geographies). Also, moves across boundaries will tend to be evolutionary and dependent on local conditions. Where consumers are not as eager to assume control of decision-making – or regulators do not allow them freedom to do so – companies will be most likely to move from traditional models through a state of Operations Transformation before fully enabling Participatory Networks. Where this path dominates, utilities will need to build business cases around cost savings and environmental benefits to deploy new technologies. In a high-cost, carbon-constrained environment, however, this should be an easier sell to regulators and investors than in the past. Where consumer demand for control grows faster than new technologies can be deployed (particularly in heavily regulated rate of return environments), Constrained Choice will dominate. Utilities will be pressured to meet demand for control in creative – and sometimes untested – ways. Regulators may need to be more flexible in viewing these investments than they might be for traditional utility capital investments. Whichever path takes shape, we anticipate steady progression toward a Participatory Network, a technology ecosystem comprising a wide variety of intelligent network-connected devices, distributed generation, and consumer energy management tools. Although the precise timeframe for reaching this end-state is unknown, our research suggests a few major milestones. Within five years, the percentage of the utilities that will be generating at least 10 percent of their power from renewable sources should double and we believe sufficient supplier choice will allow meaningful consumer switching to emerge in most major competitive markets. Also, based on both consumer and utility responses, we expect dramatic expansion of utility demand management initiatives and electric power generation by consumers. The resulT: CusTomer foCus as a ComPeTiTive aDvanTage Different combinations of these characteristics lead to four distinct consumer profiles, as outlined in Figure 1 . Each consumer segment has specific needs and wants. Utilities need different strategies and offerings for each. However, before utilities can begin tailoring approaches to particular segments, most will need to invest in tools and capabilities for collecting and analyzing consumer data, particularly as huge quantities of real time data and new information streams emerge from deployment of advanced sensing, metering, and communications technologies. inDusTry moDels: TowarDs a ParTiCiPaTory neTwork Leveraging the new technology ecosystem will help utilities harness innovation to meet key objectives: Ô Ô Preparing for more active, engaged consumers Capitalizing on new sources of realtime consumer and operational information, and deciding which role(s) to play in the industry’s evolving value chain Better understanding and serving an increasingly heterogeneous customer base. Ô We believe the combination of technology evolution and shifts in the balance of the relationship between the utilities and consumers will give rise to four industry models, as shown in Figure 2 . Though each one is distinct and requires different capabilities, the industry as a whole – in the near term – will be an amalgam of all four, and companies may sit The utility industry is fast approaching a tipping point beyond which consumers can, and increasingly will, demand equal footing with their providers. Utilities that are prepared to share responsibility with residential and small commercial customers and help them meet their specific energy goals will have a significant competitive advantage. For more information about IBM’s new utility consumer survey, read the full paper at www.ibm.com/energy/plugin ThOughT LE aDErship – spOnsOrED By iBM gLOBaL BusinEss sErvicEs www.energycentral.com E n E rgyB i z 51 http://www.ibm.com/energy/plugin http://www.energycentral.com
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