As the global energy industry wrestles with two seemingly contradictory requirements, the need to innovate and the need to economize, it is bound to see significant shakeups and innovations over time.

Against this backdrop, here are five trends that will shape the global energy and utility landscape in the remainder of 2018. They cover the growth of renewable energy technologies, Elon Musk’s push for battery storage solutions, self-powering communities and the role of new technologies like AI and robotics in meeting consumer expectations. Additionally, I will discuss some areas where Canada is either behind or on par with its global companions.

PREDICTION 1
Energy markets will be challenged by the rise of RenTechs

You may not know what RenTechs are yet, but they are having a disruptive effect on the energy industry.

RenTechs are “renewable energy technologies” that have entered the market. Technology companies are building or buying their own solar and wind farms to become 100-percent green. Major players like Google, Amazon, Apple, Walmart and other corporate giants are entering the market for a number of reasons. For example, to satisfy their energy needs, reduce their dependence on traditional energy suppliers, and even sell the surplus back to the grid. This is likely in response to factors such as green energy and climate change initiatives, or general cost savings. For instance, Apple recently announced its entire global operation, including offices and retail stores, is completely powered by renewable resources.

RenTech companies are poised to disrupt long-standing business models. Even though incumbent technologies have a stake in renewables, the impact of tech giants, corporate giants and startups will increasingly play a role in the energy-generation mix and ownership.

In Canada, RenTechs have been slower to emerge compared to other countries. This is because Canada already has a fair amount of green energy suppliers that major RenTechs can partner with. The motivation to move to a 100-percent green business model is therefore much less in Canada, though RenTechs will pop up in Canada over time.

PREDICTION 2
Consumers will consider self-powering communities over traditional utilities

Now that renewable energy is becoming more affordable, communities are starting to see the value of implementing community-owned and operated renewable generation facilities. These “prosumers”, or members of a self-powering community, are essentially RenTechs but on a residential level.

These self-powering communities can include physical communities such as cities, towns, or campuses, led by mayors, counselors or facility owners. Or they can include virtual communities, where members can trade energy and share their energy assets in a peer-to-peer network. One example is Sonnen Energy in Germany. In this peer-to-peer group, citizens with rooftop solar and battery storage can join a community and sell surplus energy to each other. Another example is Nottingham City Council, which set up a non-profit supplier using renewable energy to provide residents with the lowest cost power available. These self-powering communities demonstrate another reason traditional providers will see a decline in revenue and/or sales.

At the same time, traditional utilities can still participate in this market through certain channels. For example, they can partner with communities that do not want to own and manage the facilities but are still interested in renewable energy projects. Traditional energy suppliers can step in and be the Engineering, Procurement and Construction (EPC) company and operate it for the next 20 years.

Self-powering communities have also been slow to appear in Canada. Canada’s sparse demographics make it difficult and more expensive to power communities compared to places like coastal California, which has the critical mass needed to provide economies of scale. Startup companies that put solar panels in homes are indeed starting to emerge, but these companies are in the early stages and will have tough barriers to overcome, such as creating the necessary energy infrastructure, before they can scale up.

PREDICTION 3
Artificial Intelligence and robotics will start to restore consumer faith in utilities

A third prediction is that Artificial Intelligence and Robotic Process Automation (RPA) will play an important role in restoring consumers’ faith in utilities. This is an area that’s severely lacking, though research suggests AI and RPA are already having an impact. In the utility industry itself, there is a customer expectation gap of 71 percent, and the industry has the worst customer experience relative to the expectation of all industries. Three-quarters of utilities that have implemented AI, however, have seen a 10-percent improvement in sales, and 73 percent believe AI and RPA will change the customer experience. Further, 65 percent feel that it will both improve customer experience and reduce churn. I expect AI and RPA will continue to have a profound effect on utilities.

Canada is behind many parts of the world in enabling consumers with mobile applications and energy insights. This is because the country’s regulatory and policy frameworks have not nurtured a particularly innovative environment for utility companies. Since utilities have service territories with fixed customer bases, many aren’t in a rush to adapt to changing consumer preferences because they have not felt the risk of losing customers. But as competitors start to offer consumers an alternative to the traditional utility model, this will be an important investment for traditional utilities going forward.

PREDICTION 4
Elon Musk will prove battery technologies’ potential for energy storage

Elon Musk is a vocal advocate for battery technology. Recall the recent power outage in South Australia, when Musk publicly promised he would get the system installed and working within 100 days of contract signing or it would be free. The future of energy and utilities will continue to become tilted towards the use of batteries to store self-produced power, and I predict the costs will continue decreasing, on track to be below $190/kWh by 2020.

Further, significant projects are underway worldwide in which battery technologies are being implemented at the utility scale. In South Australia, power outages are frequent, due to the variable nature of renewable energy there. The region has a high percentage of renewables, and that can impact the grid adversely. This led to the decision to install 100 MW of battery capacity to make the grid harder and take the excess energy when the renewables are strong. Then, turning to the battery when needed.

Another region to watch out for is the storm-ravaged Caribbean, where Puerto Rico and some other islands must rebuild their energy infrastructure. There will be a higher percentage of renewable energy in the rebuild using battery technology. These types of projects will offer an opportunity for batteries to prove themselves.

Canada’s unpredictable climate and the variability of its renewable generation has led the country to be keenly focused on battery technology. Batteries will be an important feature for the future of Canada’s energy mix.

PREDICTION 5
Utilities transformation programs will accelerate and start to pay off

My final prediction is that 2018 will be the year that utilities’ transformation programs start to pay off. The job of the Chief Digital Officer (CDO) is to improve performance, reduce costs and transform operations. The CDO is a deciding factor in whether these programs accelerate. When a senior executive is perceived to take on the CDO role, the board of directors will be more aware of the need and put a plan into action. Importantly, there are also more resources forming for CDOs, such as peer-to-peer networks, and communities of like-minded CDOs to help with each other’s programs. These resources will continue to support and accelerate digital transformation.

There are both challenges and opportunities ahead for energy and utility companies as they tackle changing consumer preferences, alternatives to traditional utility models and technological advancements. It is the companies that are nimble and able to adapt that will surmount these challenges and lead the way to a cleaner, more prosperous future.