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Utilities and Energy Services Firms: Friends or Foes?

Linda Hardesty

German utilityEnergy services firms are eating utilities’ lunch in Europe, according to Reuters.

Global consulting firm Bain & Company estimates that in Germany, the four biggest electric utilities will lose about $3.3 billion by 2020 – about a third of their annual operating profits from generation – due to shifts in consumer spending. The spending isn’t going away, it’s just going toward independent energy generation sources and energy efficiency.

However, it’s not all bad news for European utilities, according to consulting firm McKinsey, which points out that despite conventional generation profits sagging, utilities are earning more from utility-scale renewables, new energy services and smart grids. And there are opportunities with other new energy services, including combined heat and power (CHP) systems, battery storage, electric vehicle charging stations and demand response services.

This is where the future lies for utilities, according to the European utilities association Eurelectric, which is encouraging its members to acquire firms that offer these services or create partnerships with them.

But utilities can be slow to change, and while they analyze why their profits are dwindling, entire new industries are springing up, reports Reuters. The news organization cites McGraw-Hill Construction data showing that in the US, the energy-efficient building market grew from $10 billion in 2005 to $85 billion in 2012, and might reach $248 billion by 2016.

There are some signs of tension between utilities and newer energy firms in the US as well. Recently, a blog on The Energy Collective postulated that Pacific Gas and Electric (PG&E), which serves most of northern California, is being threatened by independent solar installations because of price competition and the utility’s inability to respond to a changed competitive landscape.

Photo Credit: Dirk_Vorderstraße’s Flickr Photostream



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