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‘Paradigm Shift’ Propels Edison Energy to Capture Corporate Energy Clientele

March 31, 2016 By Ken Silverstein

DER2The changing energy template is like a game of musical chairs: when the music stops, the players need to have a place to sit or they are out of the game. The same is true now that the electricity suppliers are compelled to become full-service energy consultants — or those who can help their major clients navigate the market place.

What once was a system whereby utilities generated power from centrally located plants and transmitted that energy over the wires to their customers at a given price is withering. Not only do big companies want greater controls over the energy that they consume and the prices that they pay but they also want to implement more onsite, or distributed energy, whereby they can power their own facilities through such things as rooftop solar panels by using localized microgrids.

“We see this more as opportunity than a threat,” says Ted Craver, chief executive officer of Edison International, which held a conference in Irvine, Calif. on Tuesday to unveil its new competitive business unit Edison Energy that would provide such services.

“We see an explosion of distributed energy resources, as opposed to central generation,” Craver adds. In the case of Edison, it says that the billions it is spending on upgrades goes predominately to its networks — that it only owns about 15 percent of the generation that its customers consume. The other 85 percent is purchased on the open market, meaning that the company is ideally suited to consult with its major customers about how to reduce their energy consumption.

To that end, Edison Energy hired ReD Associates to dig into how much corporate energy managers know about their energy purchases and energy consumption and whether they had the support of their corporate c-suite when it comes to tackling those issues — especially important as companies try to meet their sustainability goals, all in the context of the Obama administration’s Clean Power Plan and the recently-concluded global climate talks in Paris, COP21.

The research indicated that companies are concerned about managing costs and volatility, demonstrated by a finding that 25 percent of companies surveyed do not have an accurate overview of their total energy spend. In addition, the study found that only 6 percent of all companies believe they have captured all the energy opportunities available to them. In sum, energy managers have too many choices and they are in dire need of experts to help guide them.

“What we found was a market at a tipping point,” says the ReD study. “For many organizations, energy represents one of the single biggest line items in their cost basis — easily hundreds of millions, if not billions, for a company in the Fortune 500 — and there is an added threat of rising prices and increasing price volatility.

“Meanwhile, the potential for significant savings on energy is growing rapidly … Energy is now on the corporate agenda — an emerging headache for the C-suite executives who would rather focus on their core business and area of expertise,” the paper adds.

Certainly, disruptive technologies such as rooftop solar panels, microgrids and energy storage are a threat to the traditional utility business model. If more and more players enter the space once dominated by incumbent utilities, it will invariably eat into their revenues. The energy conglomerates thus have two basic choices: either get into the game or wait-and-see what eventually happens and try to find a spot once the smoke clears.

As such, some utilities are getting aggressive and refusing to cede their client relationships and goodwill to technology start-ups while other legacy providers are moving more cautiously. Edison International is the former here. That’s why it bought in 2013 SoCore Energy that is in the commercial PV development business. It also purchased ENERActive Solutions, an energy efficiency company that works with major companies with worldwide operations. And, it acquired Delta Energy Services, which does data analytics, and Altenex, which helps companies buy renewables at the wholesale level.

“What’s ready for prime time?” ask Allan Schur, president of Edison Energy, as he helped lead off the conference. That’s Edison’s mission, he adds — to help corporate clients develop clear, enterprise-wide energy strategies to achieve their goals, whether they be focused on sustainability, reliability or cost.

With that, a panel of experts — moderated by this reporter on behalf of Energy Manager Today — assembled to flesh out the chief objectives of major companies and what technologies are now available to help them. Generally speaking, the panelists concluded that it is the customers who are driving the trend toward distributed energy resources while the utilities and others are responding to that need. The technologies to facilitate the changes have been ongoing. Policy makers, meanwhile, are falling in line.

“The enabling technology has been around a while,” says Mike Bates, global energy director for Intel Corp. “It didn’t spur the growth we see today. Customer choice did.”

And that’s what has inspired Edison Energy to get into the game — to grab a chair before the music stops. Others will invariably stake their ground too, all as the market place tries to sort itself out. It’s not known how it will all settle. But it is known that energy economics and technologies are rapidly evolving — resulting in what UC Irvine scholar Scott Samuelsen labels as a fundamental “paradigm shift” designed to meet customer expectations in a world bent on sustainability.

 

Ken Silverstein is editor-in-chief of Business Sector Media, publisher of Environmental Leader and Energy Manager Today.

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