A recent Deloitte Insights report examining the landscape and hurdles to innovation for the energy sector revealed that retail providers are not responding to the threat of disruption with enough urgency.

The report, Widening the Lens: Big picture thinking on disruptive innovation in the retail power sector, underpinned by a focus group of 40 Deloitte power and utilities global specialists, identifies five blind spots in the sector globally.

Deloitte Australia Renewable Energy partner, John O’Brien, said utilities around the world face constant disruption, with evolving customer habits and expectations, and emerging technologies transforming markets at dizzying speeds.

As barriers-to-entry plummet and new business models emerge, retail power providers face an existential threat.

“Globally, and particularly in the Australian context, what we can see is the regulatory structure in the energy sector has failed to keep pace with this disruption,” Mr O’Brien said.

“Australia is not alone in this sense. Some retailers may feel hamstrung in their ability to effectively adapt to disruption since incentives may not be aligned with the widely recognised shift to decarbonisation, decentralisation and digitisation.”

If retail power providers are to survive and compete amid the turbulence, they must innovate.

Doblin, a Deloitte business, presents three ‘ambition levels’ for evaluating a company’s commitment to innovation: core, adjacent, and transformational.

Deloitte Global Power and Utilities leader, Felipe Requejo, said many retail power providers still focus on core operations — making established products and services better, rather than expanding into adjacent segments or businesses, or inventing brand-new products or services for markets that don’t exist yet.

“This narrow approach to innovation can cause retail power companies to overlook both risks and opportunities, leaving them open to potential disruption from new market entrants and new business models from existing competitors,” Mr Requejo said.

“To keep pace, retail power providers must focus more heavily on adjacent and transformational innovations, creating new business opportunities and expanding markets.”

According to the report, retail power companies remain vulnerable to five blind spots resulting from a narrow approach to innovation:

Cyber threats

While most retail power providers are aware of cyber threats, some may be underestimating what it takes to stay ahead of the risks. The threat landscape will become even more complicated as the retail power sector increasingly adopts smart technologies, leverages Internet of Things and digitises its back-office systems. As threats become more complicated, as should the pace of cybersecurity innovations.

Regulatory environment

In much of the world, the utility regulatory structure has not caught up with disruption in the sector. Retail power providers will increasingly need to see the regulatory environment as an opportunity for collaborative innovation.

Rapid development of battery storage technology

Rapid innovation in the battery storage technology space has led to business models that aggregate customer-sited storage to provide a range of services to utilities, grid operators and electricity customers — the so-called ‘Virtual Power Plants’.

Aggregation powered by artificial intelligence, blockchain, and predictive analytics could provide greater flexibility for utilities and developers, and greater choice for residential, commercial and industrial customers. It could also demand more effort and investment from retail power providers, who need to stay abreast of developments and figure out where to play in this space.

Ecosystem convergence

Electric vehicles straddle the automotive and the retail power sectors. Smart cities blend Internet of Things (IoT), microgrids, renewable power, self-driving vehicles, energy management and battery storage, among other technologies. As these ecosystems converge, what is the role of the power provider? A leader, integrator and innovator — or a pipes and wires provider?

Some retail power companies are testing the extent of ecosystem convergence through pilot projects. Some yet to enter this space and are likely missing an important opportunity to compete on a whole new playing field.

New market entrants

Technology is bringing new players and more competition into the value chain. By making it easier for companies to implement new business models, technology is inviting not only startups but also established players from adjacent industries to enter the retail power sector. Retail power providers will need to discover new ways of creating value to stand out from the crowd.

“Retail power companies have a choice — disrupt or be disrupted,” Mr Requejo said.

“By broadening their innovation strategies with the help of new technologies, organisations can avoid being blindsided while finding new ways to grow.”

Lauren ‘LJ’ Butler is the Assistant Editor of Utility magazine and has been part of the team at Monkey Media since 2018.

After completing a Bachelor of Media, Communications and Professional Writing at the University of Wollongong in 2014, and prior to writing about the utility sector, LJ worked as a Journalist and Sub Editor across the horticulture, hardware, power equipment, construction and accommodation industries with publishers such as Glenvale Publications, Multimedia Publishing and Bean Media Group.

©2024 Utility Magazine. All rights reserved


We're not around right now. But you can send us an email and we'll get back to you, asap.


Log in with your credentials

Forgot your details?