Utilities will require new business models as decentralised energy markets grow.

The future direction for utilities, energy customers and governments is changing fast.  The energy sector is facing increased legislation and other policies be it on greenhouse gas reductions, security of supply or infrastructure renewal.  One area which challenges the current market structures is the greater use of decentralised energy: cogeneration (CHP), renewable energy and energy storage.  A number of key issues arise when considering the increased use of decentralised energy.

• Decentralised energy: threat or opportunity for utilities?
• Utility engagement with decentralised energy and electricity storage;
• Adapting business models and business structures for an increasing penetration of decentralised energy, including microgeneration, CHP and electricity storage.

Over the next twenty years the nature of electricity generation and supply, together with the engagement with customers by utilities is set to change dramatically.  The current prevailing business models and business practices were developed in a world where power flow was principally from power station to consumer.  However a variety of factors are appearing in the market that will radically change the status quo.  These include:

• Major growth in renewable energy electricity, both from large sites, such as wind-farms, but also from very small generators, including PV and micro-wind.
• Decarbonisation of the electricity sector in response to climate change objectives.
• The introduction of microgeneration on the customer side of the meter, such as micro-CHP, PV and micro-wind.
• The need for substantial use of electricity storage to offset investment in networks and to cope with the widespread use of renewables.

·         The widespread use of on-site generation and CHP in commercial and industrial sectors.

·         The use of the concept of virtual power plants.

By 2020 as much as 30% of vehicles sold in Europe could be plug-in hybrids and between 10 and 30% of households could have micro-generation in their homes.  This picture will require new business models and opens the market to competition from the most innovative utilities and non-utility players.

Challoch Energy provides two decades of experience of addressing these issues.