100 years later – Demand for Energy is stalling, what is an energy utility to do?

In the US – demand for electric power is stagnating, this despite positive growth in GDP. With this knowledge in mind, utilities are starting to panic a bit – rightly so?

This chart from Bloomberg shows that growth in energy consumption is no longer directly tied to economic growth:

For more than 100 years after the invention of the light bulb in the 1870s electricity demand grew – and boosted profits for energy producers. Now many factors are coming together which are starting to make that business model a little less attractive.

The most obvious culprit is of course the move to more efficient appliances as well as the shift away from heavy industry. That coupled with the rise of renewables and personal power generation is creating what could be a perfect storm for utilities, who are beginning to have to adjust their business models to stay relevant in the new paradigm.

Adapt or die, the biggest question should be how to adapt the traditional business model in a way which:

1. maintains profitability in a rapidly changing world

2. is in alignment with climate goals

Different utilities are pursuing different strategies:

• Duke Energy is attempting to grow their business by upgrading the distribution grid to cope with wind and solar power.
• Xcel Energy Inc., is planning to spend $3.5 billion on building renewable plants in the next five years.

Another strategy could include helping customers to implement smart home IoT devices, which could help inform their customers of their energy usage but also improve the customer experience.

Energy monitoring on the customer level, is a growing industry – helping improve energy customer's relationships with their utilities. Since most of the time the biggest interaction that consumers have with their electricity provider is paying their bill (not exactly a positive experience) these kind of initiatives can help improve relations and ultimately grow the customer base.

Whatever happens, the traditional business model for utilities is at risk- it doesn’t have to completely disappear, but staying relevant in a changing world will require the right strategy to succeed.