In generation, for example, flexibility and lean operations will be more important than plant availability-a shift that will call for an entirely different corporate culture. But even traditional segments will require new approaches. This is certainly true for emerging opportunities such as decentralized solutions, which call for digital expertise and an intense customer focus. As the profit pools change, so will the sources of competitive advantage-and success will demand new capabilities. Our study of European utilities suggests that utility executives must rethink every aspect of their business. Meanwhile, new segments, such as decentralized energy solutions, will capture a growing share of industry profits.
The commodity retail business of selling power to businesses and consumers, for instance, will become less profitable as lean and mean digital players undercut established companies with lower prices and improve the customer experience through digital tools. And the impact of the shifts will intensify over time. For example, in power generation, once a major source of earnings, profits are eroding. As a result, the profit pools for utilities will shift dramatically. Among the most significant are stagnating demand, the shift from conventional to renewable energy, and the growing popularity of distributed power, which allows users to generate energy on their premises. Powerful forces are fundamentally altering the utility industry in Europe and many other regions. Today, virtually every aspect of that story is being rewritten. And investors looking for predictability made utilities a key component of their portfolios.
VERTICALLY INTEGRATED POWER UTILITY HOW TO
How to by BCG: Turn Insights into Actionįor decades, the story in the European utility industry has been the same: Large, vertically integrated utilities invested in and managed hard assets such as power generation plants and electric grids, earning stable returns.Technology, Media, and Telecommunications.
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