‘Utilities are the most susceptible to future disruption’ says Accenture boss

More than half of the companies listed among the Fortune 500 in 2000 are already gone or no longer ranked.

How can that happen in only two decades? Bad bets on derivatives? Bad widgets? Bad luck?

None of the above, for the most part. It’s digital, friend, that is the breaking point between success and failure these days, or so Mattias Alonso, Accenure’s senior global utility lead, pointed out during the company’s International Utilities and Energy Conference this week at Half Moon Bay south of San Francisco.

It’s not robots or droids taking over the world, but the ones and zeroes. They may inform everything eventually, good, bad or indifferent

Speaking in the beautiful Ritz-Carlton atop the short cliffs of the Pacific coastline just south of San Francisco, Alonso and numerous top industry leaders gave their takes on where the utility industry is headed. Short answer: it might be a steep curve up or down.

“Utilities are the most susceptible to future disruption,” Alonso said. “History shows that disruption shifts are underestimated.”

On the energy front, consider that solar energy costs have fallen more than 90 percent over the past decade, while installed capacity is up more than 10-fold. Large-scale energy storage investment could top $500 billion by 2050, while companies like Google, Amazon, Microsoft and even the U.S. Department of Defense have contracted for more than 5 GW in long-term clean energy PPAs.

Utilities are not ignorant of this and many are changing. Which way to go and how fast are the questions keeping executives up at night. But they know the time is now.

“We are reaching critical mass,” Alonso pointed out

The long-term certainty about uncertainty extends well beyond Accenture’s big thinkers. Utilities scattered across the North American continent are betting billions on the future of renewables, digital transformation of the power system, as well as microgrids and other decentralized and decarbonizing tools.

Anne Pramaggiore (pictured) , senior vice president of Exelon and CEO of company’s massive utility division, stressed that the power grid is key to everything, including the economy and our sense of national well-being. She also believes that carbon-free is the way to go, but there are several ways to get there.

“We think nuclear is hugely important,” Pramaggiore said, noting it’s not a carbon emitter and can provide a baseload backup to renewables in the interim.Anne Pramaggiore

Exelon has more than a dozen nuclear generation stations producing close to 4,200 MW at capacity, the largest such fleet in the U.S. While it’s a long-term commitment of the company, Pramaggiore also contended it’s a national security issue in the end.

“We want to keep our nuclear,” she said. “We won’t want to concede our expertise in the nuclear arena to the rest of the world.”

Exelon is a big believer in a carbon-free future but the lack of any political momentum for such a movement in Washington D.C. does not help. The Trump Administration has pulled the U.S. out of the official Paris Accord, yet companies, including utilities such as Exelon’s units, are moving forward with resource planning that focuses big on clean energy.

“We lack a formal national consensus on the issue, no question, but I think there’s an informal consensus,” Pramaggiore said, noting studies which show about two-thirds of Americans are concerned about climate change.

“The challenge is a lack of national policyࢀ¦where there are 50 different statesࢀ¦ with different models,” added. “It’s happening, but it’s not cohesive.”

Meanwhile, revolutionary change is happening in unlikely circles. Accenture’s Alonso talked about how traditional fossil energy companies such as Shell and Total are buying utilities, while automakers such as Volkswagen and BMW are getting into the battery and charging infrastructure businesses.

“These are the new competitors,” Alonso said.

And many utilities are embracing disruptive technologies via new venture capital arms. National Grid. Exelon’s Constellation Technology Ventures and others are investing in new ideas hoping to find that profitable diversification pathway.

Too often, though, utility companies are only investing about one percent of revenues into innovation, while other sectors and regions of the world total 4 percent, the Accenture leader noted. He advised utilities, no matter which way they go technology-wise, to always move forward with customers as the pillar of constructive moves.

And pivot wisely.

“Innovation is clearly important but you have to do it in the right way,” Alonso said. “There’s massive opportunities but recognize we have a lot of work to do to be successful.”
Rod Walton is content director for Power Engineering and POWERGEN International happening Nov. 19-21 in New Orleans. He can be reached at 918-831-9177 and rod.walton@clarionevents.com

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