March 16, 2016

Utilities Warn of Rising Pressure on Electricity Reliability and Prices, Accenture Reports

Storage could create more disruption or provide a solution to sustainable and cost-effective electricity

MADRID; Mar. 16, 2016 – Almost half (45 percent) of utilities industry executives surveyed by Accenture worldwide, and 64 percent in Europe, reported that the traditional electricity distribution model is no longer fit-for-purpose. Unless the industry undergoes a digital, regulatory and business model transformation, utilities warn of increasing pressure on supply reliability and prices, according to Accenture’s Digitally Enabled Grid research, now in its third edition.

The proliferation of distributed generation has been a key challenge for utilities. Accenture’s survey of 85 industry executives across 18 countries found that more than half (56 percent) expect grid faults to increase by 2020 as a result of distributed renewable generation, such as residential solar photovoltaics (PV). In addition, improving economics could make electricity storage another key disruptor, with 32 percent of executives expecting it to cause an increase in grid faults, up from 14 percent in 2013.

Complementing the survey, Accenture conducted economic modelling to assess the potential impact of growing electricity storage on the grid network. It showed that the falling price of storage could strengthen the economics of residential PV deployment in places like Germany, where the price for selling renewable generation back to the grid is lower than the retail price, or places like California where the utility charges a premium for electricity consumption during periods of peak demand.

“As consumers invest in residential storage and are able to use stored electricity instead of purchasing it from the grid at times of peak demand and price, distribution businesses will face a decrease in demand and consumption on their network. This will impact the utilization of grid resources, putting revenues at risk,” said Stephanie Jamison, global managing director, Accenture Smart Grid Services. “However, we see utilities learning from their experience with PV, where they faced rapid growth in residential deployment without sufficient means to manage the effective integration of the new supply, and lagged in developing complementary services, like installation, maintenance and dispatch optimization, leaving the doors open to new competition. Utilities recognize that PV plus storage represents an existential threat to their businesses if they don’t get into the game early.”

While storage promises to fast-become a new battleground, with 66 percent of executives expecting competition in this area to rise in the next five years – up from 48 percent in 2013, utilities executives are not standing by. As many as 77 percent are already investing or plan to invest in storage solutions in the next 10 years.

“While storage could trigger an additional disruptive deployment of small-scale renewables, it also has the potential to improve grid operations. If deployed across the network, it could reduce grid faults caused by renewable electricity exports, where large amounts of excess distributed generation are dumped on the grid at times of low demand and high output,” continued Jamison. “What is more, our modelling showed that relatively small-scale network storage is enough to reduce exports to the grid from a typical residential PV system by 50 percent.”

In addition, investing in storage solutions could create new revenue opportunities for utilities, with almost half (47 percent) of the executives surveyed expecting moderate or significant revenue upside from these investments by 2030. In fact, in the next five years, almost half (49 percent) expect to be offering network-level storage services, and 30 percent are likely to be offering customer residential storage services, such as maintenance.

In order to reap storage deployment benefits, utilities need to transform the role of their distribution business. Yet most utilities are still at an early stage of this journey, with only 15 percent of utilities executives worldwide, and 29 percent in Europe, saying this transformation is already underway.

The current regulatory approach is the main roadblock, so tighter collaboration with policymakers is needed to enable this transformation. For example, executives believe that the top three regulatory changes required include new tariff and pricing models (84 percent), a greater role for distribution businesses in permitting and authorizing distributed energy resources connections (66 percent), and incentives for the deployment of innovative technologies on the network (64 percent) to develop a digitally enabled grid.

“We expect a fundamental shift of the market structure, which will include greater use of competitive markets, but utilities and distribution businesses need to push the boundaries, collaborate with regulators to innovate, and strategically invest in solutions that will support a more digital and distributed grid, providing new choices and value streams for customers,” concluded Jamison.

Methodology
Accenture’s annual Digitally Enabled Grid research evaluates the implications and opportunities of an increasingly digital grid. The 2016 research included interviews with 85 utilities executives across 18 countries between September 2015 and January 2016. The executives interviewed were those involved in the decision-making process for smart grid-related matters, with 65 percent representing integrated utilities and 35 percent standalone. The countries represented included Australia, Belgium, Canada, China (and Hong Kong), Denmark, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Spain, Thailand, the United Arab Emirates, the United Kingdom and the United States. Accenture also performed modelling to assess how storage and demand response could be used to support the management of the distribution grid.

About Accenture
Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 373,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

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Contacts:

Guy Cantwell
Accenture
+ 1 281 900 9089
guy.cantwell@accenture.com

Justyna Devraj
Accenture
+ 44 750 012 4567
justyna.devraj@accenture.com