Lecture at Caltech Resnick Sustainability Institute discussing emerging business opportunities for electric utilities based on customer adoption of distributed energy resources.

1. Customer Driven Business Model Evolution
Paul De Martini
October 1, 2012
© 2012, Newport Consulting Group

2. EEI Future Scenarios
60 industry experts agree on disrupted end state – question is pace and timing
Base Case: The transformation takes place, but the pace is
slower, since utilities have neither policy incentives nor strong
market demand.
Economic
Growth
Base Case
Rapid
Deployment
Policy
Influence
Policy Driven
Market
Driven
Market Driven: Progress is limited to areas the market can pull
forward without incentives, mandates or subsidies. Conditions are
chaotic, with policies, regulations and standards varying widely by
region.
Policy Driven: Federal and state legislation and regulation creates
powerful incentives and mandates. Utilities find themselves
pinched as policymakers push changes without providing the
money to pay for them.
Rapid Development: Most disruptive and unpredictable scenario.
The confusion of an Internet-style frenzy is counterbalanced
somewhat by standards and guidelines from policymakers and
regulators. Utilities have the most opportunities in this
scenario…but also the most risks.
Source: EEI Smart Technology Scenario Workshops

3. 5 Forces Driving Transformation
Signposts point to different experiences and pace of change across US
Rapid
Deployment
Policy Driven
Market
Driven
Base Case

4. Policy is Spurring DER Adoption
Combined with accelerating improvements in DER technology price &
performance are creating opportunities for electric system efficiencies
2011 US State Renewable Policy
Source: EIA
2010 US State EE Policy
Source: ACEEE
Over 80% of US population under the equivalent of EU’s 20/20/20 Plan
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5. DER will exceed Coal Gen Capacity by 2020
New economies of scale & potential network effects driving business opportunities
Solar PV system installed in US every 7 minutes in 2012
Source: SEIA/GTM Research

6. Customer Evolution
Linking Smart Grid with Web 2.0 Enables Customer Partnerships
Customer
In Control
Green Button
Customer
In Context
Customer
Collaboration
Customer
Co-creation
Zero Net Energy
6

7. Evolving Energy Ecosystem
Convergence of Four Key Networks

8. Central to Distributed Transition
Fundamental shift for industry business and operational paradigms
Distributed Gen
Energy Storage
Electric Network + Central Gen
Responsive Demand

9. Customer-Grid Evolution
Business opportunities exist on both sides of the evolution curve, but require new
methods to be successful – this isn’t déjà vu circa 1997 or DR aggregation or Texas

10. 3° of Value in Electric Industry
Opportunities are expanding beyond traditional value chain creating value
networks – need to look beyond the zero sum game of traditional value chain
10

11. 1° DER Values & Differentiated Services
27+ potential values, only a handful can be effectively monetized today

12. Market Facilitator: Energy eBay + PayPal
Opportunity to create distributed market platform with related market services to
enable millions of participants and billions of transactions

13. Customer Energy Solution: Salesforce.com
Focus on managing customer energy related processes to achieve
business/lifestyle integration

14. Conceptual View of Customer Energy Related
Transactions Occurring Today Across 3°

15. Business Model Framework
Business model decisions require deeper thinking than what spot on
the continuum looks interesting – platforms, control points, revenue
models & core capabilities are all critical elements

16. Telecom Lesson: BAU is not a good strategy
Telecom growth from new services – basic voice service losing money
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17. DER Growth will BAU is not a good strategy
Telecom Lesson:disrupt distribution model

18. www.newportcg.com