An energy transition is changing the value proposition of the traditional utility business model, as Stephen Comello described to the Bits & Watts Community Forum last November.
Comello identifies “four Ds” behind the energy transition currently taking place: decentralization, decarbonization, digitalization, and deregulation. In the face of these changes, utilities must update existing products and services and potentially offer new ones. As part of a long-term case study on models of such “capability development”, Comello is tracking their evolution by observing the efforts of 10 utilities from around the world that have created the Free Electrons program. Free Electrons is a platform where utilities annually select a cohort of start-ups in order to leverage each other’s complementarities to identify and deploy new technologies and business models. Beyond the specific solutions being pursued, he is interested in the extent to which the process itself is enabling the capability to innovate within utility companies.
Gathering in a cozy corner of the Shriram Tea Room, attendees of the Community Forum were curious to know more about the structure of Free Electrons, the kinds of start-ups that are of interest to the utilities, and what kinds of barriers exist in this kind of “open innovation” setting. Comello shared his insights into how these companies are experimenting with new ideas, including creating innovation teams, linking innovation team/start-up efforts to the existing business, and attempting to overcome organizational, technical, and strategic frictions that accompany the prospect of change.
In terms of specific capabilities, Comello noted the high interest that utilities have in data capture and analytics solutions, applied to operational excellence. Such solutions enhance the ability for utilities to, for example, find and repair faults, inspect system components and perform preventative maintenance. He noted that this may be a useful way for utilities to learn new tools, remarking: “The data sciences are a suite of general-purpose technologies that utilities are learning to use effectively in the applications they know best, namely asset management. This will give them the experience to more effectively explore these technologies in a revenue generating context, which is ultimately where they will have to go.”
To learn more about Stephen Comello’s work, see https://www.gsb.stanford.edu/contact/stephen-d-comello.
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