German utilities prepare for future energy sector dominated by Apple and Google
After revolutionizing sectors such as music and retail, high tech has now set its sights on energy and European utilities are worried, according to Reuters.
European utilities, such as E.ON and RWE, are already in some trouble due to the German policies of shutting down nuclear energy and phasing out coal and gas-fired generation. As if that were not enough, “RWE sees it as only a matter of time before large technology groups start eroding market share in power, where customers would jump at the opportunity to cut their bills and increase efficiency,” writes Reuters.
McKinsey consultancy group reports that new businesses, including renewables, could generate $26 billion euros in additional profits for the European power sector by 2020. Most of that will go to new market entrants, with current utilities pocketing around 15 percent. These utilities are not worried about each other.
“In the future, we'll be competing in a whole different arena, in which technology firms will play a greater role. That's the playground we have to prepare for,” said Thomas Birr, head of strategy at RWE, Germany’s second-biggest utility, speaking to Reuters.
One of the last remaining assets that European utilities have, are the cherished customer relationships they maintain. In light of high tech’s moves into the energy sector, these relationships are vulnerable. In an attempt to counter, utilities are throwing money at technology projects left and right.
High tech sees its biggest opportunity to capitalize on the energy sector in the “smart home,” which utilities have been unable to tap. This explains why last year Google bought Next, a smart thermostat maker hoping to set the standard for how household devices link to each other and electricity grids.
[Related: Germany Hits Renewable Energy Use Milestone]
The apps that customers will need to interact with their smart phones will usually be installed on smartphones with the imprint of Google or Apple.
Reuters reports that RWE and E.ON are also looking into energy storage. They have stiff competition there too now that Tesla has unveiled Tesla Energy, storage systems and batteries for homes and companies.
Back in the U.S. Google and Apple are investing in solar energy projects. Once the technology develops in America, it’s only a matter of time before it reaches Germany.
“’For the first time in 120 years, consumers have a choice about where they go for their power,’ said Alex Laskey, president and founder of U.S.-based Opower, whose flashy billing software tracks how much power is consumed by households, when and at what costs,” reported Reuters.
The German utilities are not going quietly into the night. E.ON has invested in Opower in the hopes that it will benefit from any technological advancements that may change the industry down the pike.
In addition to Opower, it has also bought into QBotix, based in California, “which builds robots that travel on rails through solar parks and adjust panels so that they constantly get most of the sunshine, saving costs by up to a fifth,” wrote Reuters.
In spite of these acquisitions the state of the German energy market in the future is a big mystery. German utilities have been hit very hard by Germany’s recent environmental policies, designed to deal with climate change and the future scarcity of oil.
Read the latest edition of Energy Digital
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.