Energy and Utilities

The long-term implications of COVID-19 from a business and societal standpoint are still being uncovered. As many countries begin re-opening and life slowly resumes, the world has now caught a glimpse of what is to come. We now know that every industry will face a series of challenges and opportunities as we continue to move forward. I teamed up with our experts at SAP to share our perspective on the future of the Utilities industry and the implications on the general public as lockdown measures are relaxed and we begin operating under the “new normal”.

Drop in Energy Consumption Resulting in Increased Investment in Technology

• Companies: The utilities industry has witnessed a rapid decline in energy usage resulting from a slowdown in commercial and industrial This is expected to continue through the recovery period as ongoing containment measures continue and a looming global recession keeps activity low.
  • Initial energy reduction estimates vary widely by country and lockdown protocols with PV Magazine reporting decreases of 3% in the US, 20% in Italy, 25% in France during the period immediately following lockdowns.
• Companies: A decrease in energy usage generally translates into bottom line erosion as a large proportion of utilities costs are fixed and scaling down operations can be challenging. To compensate, it is anticipated that utilities will increase investment in technologies that improve efficiency and reduce costs. This is expected to occur primarily in the areas of customer experience, spend management, asset management (especially as new projects are delayed and utilities aim to extend the useful life of assets), workforce management (primarily employee health and safety due to an inability to social distance) and outsourcing of technology-related infrastructure through a migration to cloud.
• Consumers: Initially, consumers that are impacted financially from the pandemic can expect a number of financial support options; customer assistance program, rate relief, reduced “turn off” policies, Subsequently, consumers can expect to benefit from the downstream implications of utilities investment in new technologies such as enhanced mobile and web access, regular communications, and personalized online experiences.

Reduced Ability to Invest in New Technology and Projects

• Companies: It is expected that recent reductions in energy consumption and the associated revenue decline will hinder utilities’ ability to invest in capital-intensive projects. This is further exacerbated by global supply chain disruptions which limit the flow of key equipment necessary for construction, particularly around renewables-related projects.
  • Morgan Stanley projects declines of 28% and 17% in U.S. solar photovoltaic installations in the third and fourth quarters of 2020, respectively.
• Consumers: Delaying projects that aim to increase energy efficiency will result in consumers indirectly absorbing the social and economic impact of carbonization. There may also be a delay in access to newer offerings including electric charging stations, smart home energy-related products, advanced billing measures, and other value-add services.

Economic Stimulus focused on De-Carbonization

• Companies: Through economic stimulus it is expected that governments in regions with aggressive de-carbonization targets will invest heavily into the areas of energy efficiency, leading to an emergence of subsidies, loan guarantees and cash grants.
  • It should be noted that in regions where de-carbonization is not a priority, particularly emerging nations which are instead focused on rapidly expanding electricity supply as cheaply as possible, the opposite may occur especially given recent decline in oil prices.
• Consumers: In developed markets and certain emerging nations, consumers will benefit from the many positives associated with clean energy and energy-related innovations. However, this is expected to occur in the long-term as it may take several years to compensate for the ongoing low levels of economic activity.

What Next?

There still remains a lot to explore and discuss as we attempt to navigate these unprecedented times. And although nothing is guaranteed, it is safe to say that Utilities that embrace change and adapt in the face of new challenges will succeed from a financial, operational, and innovative standpoint leading to a more productive and engaged society.