What role does digital transformation play in the energy industry? In what ways can digital transformation help established companies meet their operational challenges? What are the key benefits that leading companies can drive out of digital transformation? These are some of the questions that Colette Lewiner, a worldwide Energy expert, Jean-Luc Pugnet, Total’s Account Managing Director at Fujitsu, and myself addressed in a recent conversation.
1/ Introducing Colette Lewiner
Colette Lewiner is a worldwide Energy expert with more than 40 years of experience and deep knowledge from industrial operations and IT consulting. She is a graduate of the French Ecole Normale Supérieure and spent most of her professional career in management roles in large international groups. With a remarkable career path as a high-level manager, she is an Advisor to the Chairman of Capgemini on topics related to “Energy and Utilities” since 2012. Former CEO of SGN (nuclear Engineering Company), Colette Lewiner is a non-Executive Director of Nexans (a leading infrastructure company, since 2004), of Bouygues (an industrial diversified group with construction and telecom & medias, since 2010), of Colas (world leader in road construction, Bouygues subsidiary, since 2011), of Eurotunnel (Channel tunnel infrastructure operator, since 2011), of EDF (the largest European electrical utility, since 2014), and of Ingenico (the global leader in seamless payment, since 2015).
In addition, Colette Lewiner received the Commander of the National Order of the Legion of Honor decoration in 2010. The French President Nicolas Sarkozy in person presented her to the insignia on March 17th, 2010. In his speech, President Sarkozy underlined her contribution to:
- the French energy industry,
- the nuclear energy industry, and
- the French international affairs.
2/ Promising ideas that still need to find a scalable business model
The energy App?
A number of energy companies believe that consumers might be interested in getting a consolidated view of their energy consumption. This may be provided in the form of smart-phone applications. The prediction: consumers would flock to their smart phones to examine how their energy consumption changes in time. But it turns out that, after an initial period, consumers become less interested in such data despite the fact that energy leaders tried to enrich their application with other data (including weather reports).
The energy Uber?
Also, a number of companies have tried to emulate Uber’s model in the energy industry. Indeed, Uber met with considerable success by:
- improving the customer experience
- broadening the number of suppliers that could deliver a taxi like service
- offering fixed and low prices
For one to succeed in the energy industry, a similar value proposition would be necessary. But offering fixed and low energy prices seems difficult considering that wholesale spot electricity prices are subject to much variability. For example, in California, prices can be multiplied by a factor of 100. In addition, no single energy Uber has emerged because, in “terms of energy customers don’t just want a commodity—they want added value” (The European Energy Markets Observatory, 18th edition p. 84 download your copy here)
Cities that turn Smart?
Smart cities are also considered to be a very promising market. But key players are still struggling to find the right business model. Turning a city “smart” means involving many stakeholders in various fields: transportation, energy, water, waste management, civil engineering, telecommunications. “VINCI Group, with its brands, VINCI Energies and VINCI Facilities, or Bouygues for example seem willing to capitalize on synergies between their subsidiaries to become smart city key players (offering everything from smart construction to network administration and analytics).” (The European Energy Markets Observatory, p. 82).
The Smart City market promises to be huge. But it’s still unclear as to who might be willing to pay for the value that smart cities are able to produce.
So, the energy Uber, Smart Cities and the energy platform are examples of ideas that seem promising. They still need to find a scalable business model for energy.
3/ The energy industry is changing its production model
Consumers are becoming “prosumers”
At this point, Colette Lewiner shared a more global view of the energy market. Energy production is moving from centralized production to decentralized production. Examples of consumers having solar roofs, solar panels and wind turbines in their gardens is evidence that consumers are becoming “prosumers”. They are now able to produce part of their own energy without having to get it from the grid. “In 2014, in Germany, around 6 million customers used electricity they produced themselves for part of their needs.” (The European Energy Markets Observatory, p. 15). In addition, integrating data emitting equipment is allowing end consumers to produce, store and manage their own energy.” (The European Energy Markets Observatory, p. 46)
Centralized energy production remains critical to guarantee access to energy, despite changing seasons
But this new decentralized energy is still facing a hurdle: the price of energy storage remains high. In addition, renewable energy, while being zero emission, is not schedulable. So, in Europe, consumers will have to rely on the grid if they want to get a reliable source of energy at a lower price anytime of the day all year round.
Managing the energy grid remains challenging
In the last 10 years, there’s been a steady increase in energy consumption which is partly due to the increasing number of electronic devices such as computers, smart phones and tablets. In the very near future, as electric cars take off, the grid will have to support stronger demand. According to ADEME (“Agence de l’environnement et de la maîtrise des énergies”), a small electric car requires 25 kWh for 100 km. By multiplying the distance covered in a year (15,000 Km) by the number of cars in France (38 million), some ecologists believe that turning 100% electric cars will require an additional 10 to 15 nuclear plants in France. Plus, car drivers usually want to charge up their battery as fast as possible which exerts even more pressure on existing infrastructure.
In short :
- Promising ideas such as the energy App, energy Uber and cities that turn Smart, still need to find a scalable business model
- The energy industry is changing its production model : it’s going from centralized to decentralized production
The post A strategic overview on the Energy industry, with Colette Lewiner appeared first on The Innovation and Strategy Blog.