Production and Retail

Power and utilities markets in a state of change; utilities forced to adapt

The energy market is in a state of change and will profoundly disrupt the traditional utility business model.

The expansion of renewables, decentralized energy resources, and carbon policies, pressuring price levels in the wholesale markets as an increasing share of production is produced by intermittent, non-base load energy sources such as solar and PV. Emergence of this zero marginal cost electricity generation is disrupting the utility value chain and shifting value downstream and “behind the meter” to energy service markets like decentralized generation and storage, smart homes, eTransport and energy management.

New technology in the power sector, like new storage battery options and smartphone-based thermostat apps, is advancing at a remarkable pace in response to a surprising increase in customer demands. It is thus making increasing sense to integrate these into innovations into offered services.

As a result, traditional utility companies are beginning to rethink their product and service strategies and develop innovative new products. However, they are not alone and are facing a limited window of opportunity. The market for energy services and integrated solutions is already highly competitive after the arrival of non-utility digital companies (Apple, Google) to provide energy services to businesses and customers. Over time, as the array of new technologies expands, additional non-utility companies are expected to enter the market including technology providers, telcos and start-ups. Unique M&A or partnering opportunities for larger established utility players may arise, where utilities may be able to leverage their trusted relationships with customers to offer innovative products and services.

We expect the push into emerging energy services to affect more than just individual companies. It will reshape the power and utility landscape, and will favor utilities that grow beyond their traditional business models to build a market-based technology and services portfolio. As power utilities make this move, the industry will change around them, in ways that are still hard to predict, partly because technology is still evolving. Now that customers are interested and see these changes as beneficial, they are ready for a new relationship with energy providers. The primary obstacle for utilities is their own ability, whether in marshaling their capital, establishing productive partnerships, choosing effective technologies, or bringing to scale the capabilities needed to thrive in this new world in the long-term.

We offer a wide range of services to guide industry participants through this dynamic market landscape, including; our services can be structured across our four global platforms.

Capability-driven strategy

We use our core and exclusive capability-driven strategy platform to help clients develop a clear and coherent strategy supported by a system of differentiating capabilities, and sell products and services that thrive within that system.

Fit for Growth

Our Fit for Growth methodology starts by articulating a clear and compelling cost agenda from the front line to the back office. It then builds lean and resilient processes, systems, operations, and organization structures, which culminates in the institutionalization of capabilities that keep resources flowing to "good" costs and away from "bad" costs. This results in an adaptable, high-performance culture which offers an accelerated path to sustained growth.

Digital

When utilities look to generate added value throughout the value chain and improve customer experience, they almost always look to digital. The digital evolution offers utilities the opportunity to create new value pools and business opportunities, improve operations and quality, and create better and more attractive customer interaction. At the same time it is critical to ensure new systems and data flows are safe and secure. Our digital practice has the required capabilities, experience and industry relationships to support our clients on this journey.

Deals

In an active M&A environment, it is essential to find an appropriate structure for investment or divestiture. We introduce a structured approach to deals by applying three key success factors. Firstly, we approach deals with a strong strategic rationale. Secondly, we excel at executing the deal itself, taking into consideration market dynamics and conducting business-wide due diligence into costs, revenue, systems, talent, tax and compliance. And, thirdly, we are specialists in capturing value within transactions. When all three of these elements are combined, companies are able to execute deals seamlessly, capture synergies during integration, realize benefits from divestitures, and deliver value to stakeholders in the short- and long-term. PwC Strategy& has considerable experience in the energy sector.