The power sector is on the cusp of transformation. Given the rise in cost-effective renewable energy, decentralization of energy production, and improvements in energy storage, smart metering and other digital technologies may revolutionize the way power is generated and consumed.
Industry incumbents will need to reshape their businesses to seize the opportunities and also meet the emerging challenges. The opportunities include energy storage, smart cities and buildings, data monetization, and new ways of buying and selling power, all of which blur the lines between utilities and technology companies. We refer to these trends collectively as “smart power”.
The Smart Power Revolution: Opportunities and Challenges, a report by Baker McKenzie in collaboration with Clean Energy Pipeline, surveyed over 200 senior corporate executives, developers, investors, banks and service providers worldwide to discuss key issues for business.
- Investment in smart power is rising. More than 40% of the energy companies surveyed said smart power is now a core part of their business, while 37% have established at least one business line related to smart power. Among financial investors, 65% said they have financed at least one smart power project in the last year.
- Energy storage tops the list. In our survey, 62% of businesses said they plan on investing in energy storage technology in the next 18 months, followed by renewable energy projects (58%). Financial investors are also showing great interest in energy storage, with 93% of respondents stating they consider these projects to be viable financing opportunities.
- Smart buildings and smart cities are gathering attention. Over 50% of building owners and occupiers are focusing on installing energy efficient systems such as LED lighting. A much smaller number are pursuing large-scale smart power initiatives, such as on-site generation (17%), installing smart meters (8%), and adopting demand-side response (6%).
- Energy data monetization is hindered in part by privacy and data usage restrictions. Although many energy companies are using data analytics to improve the efficiency of their operations, only 6% of respondents said they have sold the information they collect about household energy consumption to third parties.
- The rise of “Tech-utility” is blurring the line between utilities and technology companies. The utilities who embrace smart power will likely blur the line between utilities and technology companies, with 75% of respondents stating that utilities will increasingly become more like technology companies.
- Unfit and outdated regulatory regimes are hurdles to smart power advancement. In our survey, 77% of respondents said legal and regulatory frameworks are inadequate to address the coming smart power changes, while 91% believe governments and regulators are not well-prepared for advancements in smart power technology.