Global power utility business models face disruptive change

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  • 94% predict complete transformation of, or important changes, to the power utility business model.
  • Over half (57%) say there is a high or very high likelihood that distributed generation will force utilities to significantly change their business models.  
  • But, despite this, 82% see distributed power generation as an ‘opportunity’ versus only 18% rating it as a ‘threat’.

Moscow – 17 October 2013 – Disruptive forces - distributed power generation, technology changes, and a new breed of customer -mean that the traditional power utilities business model which has endured for decades is under threat, according to PwC’s 13th PwC Annual Power and Utilities Survey.

In Europe, the move towards renewable and distributed power generation has advanced the furthest. But it is having challenging market consequences. Gas storage levels have fallen close to critical reserve levels, blackout risks are increasing and subsidies are pushing up the costs for customers.

The survey finds that many in the industry expect the existing power utility model in their market to transform or even be unrecognisable in the period between now and 2030. The growth of distributed generation and its threat to the power utility model depends on technological developments and costs. In Europe for example, its rise has been subsidy-driven while cost barriers remain in the way of it being truly market-driven.

Norbert Schwieters, global power and utilities leader, PwC, said:

"Decentralised generation is already eating into revenues and partly marginalising conventional generation. Ultimately it could shrink the role of unwary power utility companies to operators of back-up infrastructure.
Efficiency savings and performance improvements can only buy power utility companies’ a short amount of time. In Europe, where the changes are most advanced, companies are facing unprecedented pressures."

Tatiana Sirotinskaya, PwC Russia power and utilities leader:

"Power utility companies in Russia are also affected by the development of distributed generation, which is playing more of an important role in their strategies. However, because of the specific technological and economic conditions in Russia's electricity sector, this trend has only just started to appear. Russia can look at the experience of Europe in this regard."

If barriers can be overcome, distributed generation could set the scene for widespread industry transformation –with energy efficiency, falling solar prices, demand-side management and smart grid technology, heading up the list of developments that those surveyed believe will have the biggest impact on their power markets.

Norbert Schwieters, global power and utilities leader, PwC, said:

"The impact of changing economics of solar power, as well the potential of energy efficiency and other demand-side management innovations, are reflected in the industry’s views on technological developments."

New sources of fossil fuel will also have a major impact on the power market, with shale gas and tight oil changing the economics of the energy landscape.

Perhaps unsurprisingly, the impact of shale gas is scored highest by those surveyed the Americas – with the US well advanced down this road, South America is also set to be a major producing region. Meanwhile, almost one in four (38%) of those surveyed in Europe believe it will have a high impact and industry opinion is far from ruling out the possibility that a new abundant energy era might open up.

Norbert Schwieters, global power and utilities leader, said:

"Power utility companies will need to respond to these changes to not be eclipsed by technological and market change, while strategies that identify the best revenue opportunities in changed and, potentially transformed future market landscape, will be key to survival."

Note to the Editor:

  1. The 13th PwC Annual Power and Utilities Survey is based on research conducted between March and July 2013 with senior executives from 53 utility companies in 35 countries across Europe, the Americas, Asia Pacific, Middle East and Africa. The Europe survey includes Russia.
    Full version of the survey in English is available here.
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