Utilities Could Lose $48B Annually from Grid Flight and Energy Efficiency

Dec. 8, 2014
Concern has heightened among utility executives about grid flight and energy efficiency. And new research indicates they have good reason to worry.

Concern has heightened among utility executives about grid flight and energy efficiency, and new research indicates they have good reason to worry.

Accenture is reporting today that energy efficiency and local energy could drive down utility revenue by as much as $48 billion a year in the United States and €61 billion a year in Europe by 2025. Such losses would occur under a ‘perfect storm,’ where subsidies are extended to the early 2020s, technology costs plummet more, electricity prices rise, and customers quicken their adoption of technology.

But even if just some of these storm clouds gather, a more likely scenario,  revenue losses of $18 billion a year in the U.S. and €39 billion in Europe, according to Valentin de Miguel, global managing director of Accenture Smart Grid Services.

This more likely loss would occur “because adoption of energy efficiency and distributed generation will become possible without subsidies, which will lead to greater market penetration as a result of shifting consumer sentiment, falling technology costs and a moderate rise in electricity prices, especially across Europe,” de Miguel said.

Accenture also released accompanying survey results that show utility executives growing increasingly concerned about the coming demand destruction. About 61 percent said that they expect significant or moderate revenue reductions compared with 43 percent last year.

The survey showed microgrids looming much larger in the  minds of utility executives…

The survey also showed microgrids looming much larger in the minds of utility executives this year. Only 30 percent last year said that microgrids would impact utility revenue. This year 51 percent saw microgrids reducing utility revenue by 2030.

Still, no death spiral

Falling solar prices, in particular, are driving more use of local energy. Solar PV is already at grid parity – the same or less than the cost of power purchased from the grid – in many U.S. states, Accenture said.

Meanwhile, solar will likely reach grid parity next year in Australia and most of European Union states, except less sunny ones like Sweden and Poland, or in Spain, where regulatory barriers exist to solar. Japan will reach parity in the next few years, followed by the rest of North America, except Canada and some U.S. states where electricity prices are low, according to Accenture.

However, Accenture does not foresee a utility death spiral, where customers migrate off the grid or use it only as backup, to such a great extent that the utility becomes financially crippled. A large number of consumers will still find grid power more economic, according to Accenture. And utility executives appeared to concur. More than three-quarters of utility executives said that it won’t be cost-effective for consumers to go off-grid without any subsidies until 2030 or beyond. Moreover, renters and those with shady roofs create limits to any mass flight to solar, according to Accenture.

A high percentage of utilities expect to see growing competition among new entrants, among them:

  • Data-related services (92 percent)
  • Distributed generation (87 percent)
  • Beyond-the-meter energy efficiency and demand response solutions (90 percent)
  • Plug-in electric vehicles and associated charging infrastructure (81 percent).

The research firm conducted telephone interviews with 85 utility smart grid executives across 20 countries between July and October 2014. The revenue findings emerged from a scenario model developed by Accenture to assess how distributed energy resources, energy efficiency, electrification of heating and transport, and energy conservation and demand response would impact the grid and business models.

An executive summary of the report is here.

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of EnergyChangemakers.com. She is co-founder and former editor of Microgrid Knowledge.