The industry faces a complex challenge: managing a revenue downturn while meeting the demands of its technology-conscious consumers.
Everywhere in the industrialized world, the electric power and utilities sector finds itself pulled to economize and pushed to innovate — two goals that might seem to conflict, but that are actually in harmony. The pull comes from a prolonged downturn in consumer energy revenue on both sides of the Atlantic. End-use electricity consumption declined in 22 out of 28 E.U. countries between 2005 and 2014, according to Eurostat. In the U.S., the Energy Information Administration (EIA) reports that the electricity sales growth rate since 2002 has hovered around 1 percent or less per year, and demand has declined in five of those years. That’s a steep drop from growth rates that were well above 2 percent for much of the 1980s and 1990s. The rise in demand for electricity has been consistently lower than general economic growth in recent years.
Revenue growth is almost certain to continue slowing, and, according to the EIA, there may be two more years of decline during the next decade. This outlook reflects clear macro-level trends. The EIA cited a range of causes for the downturn: “Older equipment was replaced with newer, more efficient stock, [and] efficiency standards were implemented and technology change occurred, particularly in lighting and other appliances. The demographic and economic factors driving this trend included slowing population growth and a shifting economy toward less energy-intensive industries.”
Offsetting these trends, however, is a surge in demand for new power and utilities offerings — a surge so strong that the industry hasn’t yet caught up to it. Innovations in power-sector technology, such as new storage battery options and smartphone-based thermostat apps, are advancing at a pace that has surprised developers and adopters alike. Customers are asking for these products. To meet that demand, industry leaders are integrating those innovations into their operations and infrastructure as rapidly as they can.
If your company is in the power and utilities sector, the challenge you face is to close the demand gap and provide value for customers profitably. Do so, and you can expect a future of growth and customer loyalty. Fail, and you may risk being eclipsed by upstart competitors.