Disruptive technologies could lower future utility revenues by £4.6bn

Utility companies face a loss of up to £4.6 billion in the next 10 years due to improving energy efficiency and distributed generation reducing the load on the grid network, research by Accenture has shown.

Accenture undertook the research as part of its annual ‘Digitally Enabled Grid’ and performed extensive modelling under three scenarios. The most likely scenario could lead to losses of between £2.8 billion a year up to £4.6 billion in the UK in revenue for utility companies, according to the report.

Accenture said the load on the grid would reduce as technologies such as solar photovoltaics (PV), electricity storage, electrification of heating and transport, energy efficiency, energy conservation and demand response become possible without subsidies, leading to greater market penetration as technology costs fall and electricity prices increase. 

But the company also said that a mass migration of consumers away from the grid, a utilities ‘death spiral’, was unlikely as only one third of UK consumers are eligible for solar panels. Only 79 per cent of executives think it will be cost effective for consumers to go off grid without subsidies until 2030.

The research included a survey of global utilities executives that found the executives are increasingly concerned at the impact energy demand-disrupting technologies will have on revenue streams, up from 43 per cent last year to 61 per cent.

Accenture Smart Grid Services global managing director Valentin de Miguel said: “While the ‘death spiral’, as commonly defined, is a myth, the demand disruption caused by the growing adoption of energy demand-disrupting technologies is a very real threat to utilities’ business models and in addition to the financial pressure, this will cause significant operational challenges for utilities, increase technical stress on the grid and open the market to new competition for energy products and services.”

“In order to navigate through this demand disruption, utilities will need to fundamentally transform their business models, including the creation of distribution system operations services to manage a more complex and distributed grid. As part of this transformation, they should focus on engaging with regulators to secure the long-term viability of the distribution business. This includes the adoption of new tariff structures, opening up new markets and aligning subsidies; investing in grid optimisation, such as automation, sensing devices and real-time analytics; and developing new customer products and services.”