Source/author : Accenture
Read article: https://accntu.re/2BS1eax
- Accenture’s report explores how leveraging digital technologies can help create value and growth for the future distribution business.
- Find value trapped within the core business by optimizing processes for next-level efficient operations.
- Make targeted investments to grow the core business in the near term, while developing the business models that will maintain long-term growth.
- Scale up new business models around new services beyond traditional business boundaries to create new revenue streams.
From business pressure to growth engine
The recent years have been tough for many distribution businesses. A combination of regulatory pressure, disruptive energy technologies, increasingly complex operations, shifting consumer dynamics and weak demand—particularly in higher-income markets—has squeezed profits and stymied earnings growth.
The rise in distributed renewables is not only impacting total electricity demand, but also requires massive investments in new connections and grid reinforcement. Traditional distribution efforts are also shifting as distributed energy resources (DER) proliferate, changing demand profiles including total demand reduction or stagnation, but without a commensurate decline in peak demand. Growing customer expectations mean distribution businesses must actively manage participation, such as in demand response, and provide network access to prosumers. Mass adoption of electric vehicles (EVs) is poised to alter demand growth and put pressure on grid stability. Meanwhile, technology is now being built into every asset, operation and interaction, transforming businesses into intelligent enterprises with on-demand insight.
94% Utility executives surveyed who believe distributed earnings growth will be severely pressured until 2025.
97% Utility executives surveyed who believe distribution earnings are expected to grow beyond 2025.
Transform the core business
To optimize core processes and unlock trapped value within current operations, driving cost optimization, distributors should embrace leading-edge, digitally enabled solutions. Investments in asset optimization and Industry X.0, smart infrastructures, as well as a connected workforce, will be important.
Drive capital and operating efficiency
Expand Industry X.O and intelligent asset planning and management initiatives.
Increase network efficiency and profitability
Enhance smart infrastructure and optimize new flexibility and incentive mechanisms.
Optimize asset maintenance and availability
Enhance field workforce productivity and safety through connected worker solutions.
Grow the core business
Distribution companies should make selective investments to grow revenues and profits within their core business. We see four main areas for growth:
- Expansion and reinforcement of grids to support demand growth and new grid connected assets such as storage, electric vehicles and microgrids
- Replacement and reinforcement of assets to maintain and improve reliability and quality
- Extension of core engineering and field services to third parties where competition is being introduced e.g., connections, vegetation management and network design
- Inorganic growth through acquisition of distribution companies
59% Utility executives surveyed who see new revenue potential from provision of field workforce contracting services.
98% Utility executives who agree performance-based regulation will be the dominant model by 2025 for most distribution businesses.
Scale the new
Unlocking investment capacity by transforming and growing the core business will enable distribution businesses to pursue opportunities at scale beyond their traditional boundaries.
The precise nature of those opportunities, and the new services they capitalize on, will vary significantly by geography, reflecting the relative maturity of the market in question as well as socioeconomic context. Working effectively with regulators will be particularly important, as new commercial models will need to support and incentivize expansion into new services.
Distribution businesses have an opportunity to serve as a data/transactional clearinghouse at the center of new markets and ecosystems.