Are global companies weighing a future without utilities?
<p>At a GreenBiz webcast this week, execs from J&J, Microsoft and Walmart discussed on the future of renewables and utilities.</p>
This week, I facilitated a GreenBiz webcast called "Surviving the Utility Revolution." We put this program together specifically for the utility industry, allowing it to hear directly from our panelists — Brian Janous of Microsoft, Jed Richardson of Johnson & Johnson and David Ozment of Walmart — about how their high-energy-consuming companies imagine procuring and using energy in the future.
Carbon reduction is a mandate at many of America's largest companies. Eighty-six percent of our country's largest companies publish sustainability reports, and you can bet "reducing environmental impact" is a goal in every single one of them.
Most companies are working to hit their carbon reduction goals via energy efficiency and renewables. That has huge implications for the utility industry, which should expect its load to contract significantly as a result of these efforts over the next 20 years.
At all the major sustainability conferences, companies are outlining the ways they're working to reduce their conventional energy consumption — yet utility people are almost never in attendance at those conferences. They're all attending utility industry conferences instead and comparing notes with each other, which keeps them insulated from the customer perspective.
The panel yielded a number of takeaways.
Of the 700-plus people registered, only about 100 were from the energy industry (traditional utilities, municipalities, renewable energy companies and consultants), even though this event specifically was designed for a utility audience. I'm not sure what to make of that. Was it that our marketing effort, which went out to utilities specifically, wasn't compelling enough? Or that the industry isn't as concerned about what the future holds as I am?
The remaining registrants largely represented other high-energy-consuming organizations. They directed a long list of pointed questions at Microsoft and J&J, such as, how do you measure your carbon footprint and how did you set your energy efficiency goals? That tells me many other companies are actively looking to figure out the right metrics related to energy consumption reduction so they can judge success or failure. And that's one more reason to believe that utilities can expect to see load contraction continue.
All three panelists gave examples of energy efficiency and renewable energy projects they've already completed. Although many in the utility industry will scoff at the EE and RE goals of some big companies and say "it doesn't pencil out," the reality is that companies are doing it. And every panelist said he's not willing to pay a premium. So somehow they've figured out how to do the projects they've done without paying more than their current utility rate.
Although I couldn't get any panelists to say this directly, it's clear they'll continue pursuing EE and RE and they'll partner with whatever organizations come to the table with the best deal. If that happens to be a utility, great. If not, great. They're agnostic, and although they all said nice things about how much they'd like to work with their utilities, my sense is that if utilities don't figure out how to offer projects that make financial sense, these companies will go their own way and figure it out with other parties.
It was also clear they're interested in potential partners coming to them. Yes, Microsoft may decide it wants to do a renewable project and send out an RFP looking for help, but it's also looking for new ideas/models and wants third parties to bring those. Walmart's Ozment gave a good example of a utility coming to it with an outdoor LED lighting program that worked for everyone. Walmart didn't ask, the utility offered, and it happened. It sounds as if utilities need to be making more overtures like this.
The business model needs to change — now. All panelists said this explicitly. Microsoft's Janous said that the company is "rethinking ownership models and want(s) to work with utilities at the megawatt scale to figure out new models that can work at the kilowatt scale." Ozment said, "Services from utilities need to change. We want clean, reliable, cost-effective options, we want third-party financing and we want the ability to buy output from a renewable project that's delivered directly to our stores."
Opportunity vs. tragedy? Based on questions from the audience, it seems as if those outside of the energy space see utilities in an impossible quandary. How can you offer what these big companies want without giving up a lot of load and control? How can you create a new business model when you're in scramble mode trying to fend off competition from other energy providers? Ozment suggested utilities look at this as an opportunity instead of as a "death spiral." He encouraged the industry to get some quick wins under its belt (such as the LED example, I presume) while working with regulators over the long haul to seriously redesign rates that reflect where the world's heading.
I think he's right that now is a time of great opportunity — for utilities and others in the energy products and services business. After the webcast, someone in my office said, "I think somebody's going to have to tell utilities exactly what to do." The panelists did an excellent job of that. The question is, will the utility industry listen?
If you missed the webcast, you can register to view/listen to it for free.
Top image of meter by MPIX via Shutterstock. This article first appeared at Shelton Insights.