Written by :
Manager, Bain & Company
Partner, Bain & Company
Case Team Leader, Bain & Company
Partner, Head of Utilities & Alternative Energy practice (Americas), Bain & Company
The electricity industry is in the midst of a transformation, as technology and innovation disrupt traditional models from generation to beyond the meter.
Three trends in particular are converging. First, electrification is taking place across large sectors of the economy such as transportation and residential heating. Second, decentralization of resources has increased, spurred by the sharp decrease in costs as well as by public support for distributed energy resources (DERs) like distributed generation, distributed storage, energy efficiency and demand response. Third, digitalization of the system is mounting, both before the meter with smart metering and digital network infrastructure, and beyond the meter with the advent of the Internet of Things and a surge of power-consuming connected devices.
Together, these trends at the “edge” of the electricity grid pave the way for an energy system where traditional boundaries among producers, distributors and consumers are blurred – and the complexity of system governance intensifies.
What’s the payoff? This smarter, more decentralized yet more connected electricity system has the potential to increase reliability, security, environmental sustainability and asset utilization, and create new opportunities for services and business.
What consumers want and expect from their energy providers has also evolved rapidly. A sizeable portion of today’s consumers (both residential and commercial) is increasingly focusing on reduced carbon emissions, increased choice, and higher reliability and security. While consumers may articulate a desire for these attributes and an appetite to engage in their energy usage, most of the grid-edge technologies are still in the very early stages of adoption, and even this early adoption requires a meaningful push from subsidies or regulation. In the past half century, reaching mass adoption for innovative products (penetration above 50%) has decreased to about 15 to 20 years and has relied on “rational adopters” who focus on cost and convenience.
Given this, how can adoption of these new grid edge technologies be accelerated in the coming years and done in a cost-effective way that meets what consumers describe as their new set of needs? The challenge for policy-makers, regulators and the private sector is to help make these technologies more economical and convenient, and thereby capitalize on consumer preferences and enable the transformation of the system.
To accelerate adoption, a combination of “push” from regulatory and policy action and a “pull” from private innovation, marketing and product development will be needed. For the vision of a grid edge to fully materialize, there needs to be a substantial effort made to overcome four key challenges in consumer engagement, regulation, infrastructure and business models.