Utilities x.0: energy companies prepare for a reboot

What will Europe’s utilities sector look like in 2030? Our research sheds light on a smarter, decentralized market that will place the customer at the heart of the business model. The inaugural BearingPoint Smart Utilities Index shows the competencies utilities need to address the dramatic overhaul facing the sector by 2030.

A day in the life: how utilities companies will use data to improve the management of energy supply/demand

Meet Gerhard. Gerhard wakes and checks his messages: there is an opt-in offer from his energy provider due to a system peak event that morning. Gerhard checks the status of his smart house console, to make sure all appliances and scheduled activities are using minimal power at the time of the peak.

At the same time he checks his residential energy storage device. It is fully charged from his roof-top solar system after several days of good weather. His electric car is also fully charged, having taken advantage of low nightly rates. 


Gerhard’s systems have analyzed weather forecasts and his personal needs – heating, lighting, appliance use and driving routes – and recommend that he sells back one third of the power in his storage units during the peak incident at a preferential sale rate offered by his energy supplier.

At lunch Gerhard reviews his local energy newsletter, noting that his next door neighbour won a weekly supply efficiency contest using an alternative supplier with more flexible options. After analyzing the savings he could make based on his own usage patterns, he switches to his neighbour’s supplier with a single click using an energy comparison app on his smartphone.


He then clicks through to information about the latest energy-saving devices. Reviews are read and simulations are run to see how quickly their initial costs would be paid off due to efficiency gains. He logs the results ready for that evening’s Neighbourhood Energy Management Association meeting, where attendees will be reviewing upgrades to the community micro-grid.



• Utilities firms are at a watershed: faced with continued market fragmentation across an increasingly smart supply network, it is no longer enough to rely on an incumbent position. New competencies are required to plan for a smarter and decentralized 2030 landscape.
• From our research conducted with IDC Energy Insights, we know that a gap is increasing between the best in class utilities players and the industry average.
• Based on the emerging models of micro-grid operators, energy data aggregators and demand response managers, we identify principles utilities companies can take in order to stay ahead of what could prove to be a turbulent future market.


Today’s utility market landscape

We define the utilities segment as covering energy generation, transmission and delivery, production and distribution of water (and the treatment of waste water), collection/treatment, and recovery of waste – that is, the management of resources. Although this paper predominantly focuses on energy, many of its conclusions also apply to other subindustries, such as water and waste. Against a financial background that is still challenging, three factors are conspiring to drive changes across this complex and fastevolving landscape:


  • Technology change is resulting in new ways of generating and distributing power, as well as offering enhanced visibility through data. This can be a blessing and a curse, comments Dr Martin Everts, Head, Energy Economics, Axpo, one of the largest utilities in Switzerland: ‘Traditional energy providers are confronted with an overwhelming amount of data and a multitude of stakeholders that use various IT systems. “How should the company manage the plethora of necessary IT systems and the massive data volume?” and “What can the company learn from the data?” are key questions we need to ask ourselves today and not tomorrow.’
  • Market deregulation and increased customer centricity are driving corporate change. ‘Since market liberalization, we spend significantly more time trying to understand the customer than before. As a former monopolist, this behaviour was not in our DNA,’ says Dr Stephanie Engels, Head, Corporate Development, EWZ: a Swiss utility and distribution system operator (DSO). ‘With increasing competition, we need to be more customercentric and we also realise how much we learn from our customers through studies and workshops.’
  • The pan-national and regulatory environment causes continued uncertainty. Recent events in Ukraine have highlighted how difficult it can be to predict and manage supply. Meanwhile, government decisions – such as the phasing out of nuclear power in Switzerland and Germany and decisions taken after Fukushima in 2011 – and continued efforts to impose pan-European regulation, such as offering ‘green’ subsidies, have significant bearing on the overall market.



As they look to respond to these challenges, utility firms find themselves hampered by an array of complex reasons. The sheer size, scale and complexity of electricity distribution, challenges of working with old and unreliable infrastructure, social history, the burden of public services, the enormous capital costs and associated financial flows all add to the overall challenge. Whilst they look to innovation for answers, margin structures around existing business models mean that there is not much money to splash around.

While today’s market leaders are keen to maintain their status as major players for resource management and delivery, a number of start-ups in the sector are bringing the fight to the traditional incumbents using state-of-the-art technologies and the latest business models and cost structures, including:


  • Organizations with an information and communication technologies (ICT) background, each generation of which brings its own competences to the market – for example, IBM and Cisco are now turning their attention to smart grids and broader infrastructure
  • Start-up organizations developing niche products or services, from software monitoring solutions to new equipment types
  • Search engine and marketplace organizations, which play an increasing role in B2B and retail customer service delivery, illustrated by Google’s recent acquisition of Nest.(i)


There will be significant and continued growth by acquisition, making the competitive landscape even more complex. The recent acquisition of ‘smart’ thermostat company Nest (at a cost of USD 3.2 billion for the three-year-old start-up with over 200 employees(ii)) revealed Google’s hand as a challenger. This example illustrates dynamism in the marketplace; similar cases are emerging all the time.

While existing utilities may currently ‘own’ a relatively captive market compared to other industries, challenges of consolidation, fragmentation and innovation mean that not every organization can win. Data ownership is becoming a significant source of competitive advantage; traditional providers risk being replaced by their historic clients, such as municipalities and industrial customers, by having a third party capturing the management of data. In many cases, not knowing what is coming means utilities are not acting at all.

Please note that in this report we focus primarily on changing market dynamics. We do not directly cover the parallel, regulatory progress that is taking place across and within European countries, which is also having an influence on the utilities landscape.

Introducing the BearingPoint Smart Utilities Index

The first edition of the BearingPoint Smart Utilities Index was devised from a survey conducted with IDC Energy Insights of 40 utilities firms from France, Germany, Italy and the United Kingdom in January 2014. BearingPoint’s experience of best practices in the European and US utilities landscapes was used as the basis of the index, later backed up by qualitative interviews with utilities leaders from the above countries, plus Ireland, Switzerland and the USA to build the final version. In the remainder of this section we look at how organizations currently fare across the five competencies of the index.

Even as existing business models crumble, different situations and a wide variance in contextual factors across Europe and the rest of the world make it difficult for any organization to adopt a systematic approach. Utility firms are confronted by open questions such as:


  • What are the core competencies and activities required of future European utility organizations?
  • How quickly must utility firms integrate digital capabilities into their existing service portfolios?
  • How far should firms go in terms of integrating all kinds of energy production and distribution?
  •  Should downstream service delivery be tightly or loosely coupled with upstream production?
  •  What structural and organizational changes are required for organizations wanting to lead the pack?



How can companies answer these questions? Based on extensive research and our experience of working with clients, we have identified five different competencies that, taken together, dictate a utility firm’s ability to respond to the changing market landscape:

  • Big data and the data business model – the ability of an organization to store, analyze and derive value from very large volumes of data in real time (e.g. measured in terabytes per month)
  • Virtual and flexible system – the capacity to coordinate production capabilities with energy demand in a flexible way, including intermittent and decentralized energy sources
  • Micro-grids and nano-grids – the ability to define and operate energy solutions at a local level, which can self-optimize through the effective use of sensors and other instrumentation
  • Horizontal and open organization – the capacity to operate in a decentralized way that is open to external partners and other stakeholders
  • Customer engagement and confidence – the capacity to engage customers in how the latter optimise their energy consumption


Big data and the data business model

While big data – the analysis of large volumes of data to generate business value – is currently a hot discussion topic across utility firms, its actual use is limited. The foundations are there – existing technology investments already enable the storage, collation and analysis of various types of data. Indeed, 92% of organizations we surveyed indicate they are using complex predictive models, within which:

  •  45% include unstructured data in complex predictive models
  •  53% are analysing third-party data, such as weather forecasts or energy-intensive equipment usage – this number increases to 80% in Italy 
  • 40% include geospatial data, a figure which increases to 70% in Germany


All the same, utility firms are still not maximizing the benefits of data analytics, which is mainly used for operational aspects:


  • To reinforce knowledge concerning operational process (58% of respondents), customer behavior (50%), or consumption (48%)
  • To optimize asset operations, such as fleet optimization, fault prevention, workforce management and scheduling (55% of respondents) or customer operations (48%)


Few utilities use big data to personalize services: only 28% use them to personalize tariff plans and 33% to propose personalized services.

The firms we spoke to recognize that this situation has to change: as we can see in figure 3, they clearly see the impact of big
data on their business model.





Virtual and flexible system

The commoditization of traditional services – provision of gas, power, water and so on – has driven utility firms towards
efficiency. As companies have increasingly focused on more standardized, low-value maintenance tasks, they have left more fine-tuned management of assets to third parties. The result has been that utility companies have been losing control of strategic resource management, with a consequent direct impact on margins.

In response, organizations recognize they need to deliver higher levels of service, based on open, flexible systems that can link into a wide variety of generation and transmission resources.


  • 45% of respondents think that by 2025 virtual production will represent 5% or more of their total production


In the future, we may see ‘virtual’ power plants competing with traditional power generation – indeed, this is already the case with the competition between megawatt and ‘negawatt’ (a theoretical unit of ‘energy saved’) providers in markets that are not ‘energy-only’(iii). In the USA, for example, demand response management (DRM) providers such as EnerNOC and Comverge are offering alternatives to direct generation (iv) – we look at DRM in more detail below.

Micro-grids and nano-grids

Micro-grids, and still smaller nano-grids, offer SME energy producers and consumers more direct control over locally generated energy. An important driver is the increased decentralization of energy storage, says Dr Walter Steinmann, Director, Swiss Federal Office of Energy: ‘When building a house today, for ten to twenty thousand Euros one can incorporate electricity storage under the house. Not only can customer consumption be optimized, but it is also possible to set up an agreement for the local provider to use the storage. Such storage can lead to producer–consumers meeting 80 90% of their own consumption needs, instead of 40–50%.’


Based on our research, while 25% of utilities currently offer services for microgrid or nano-grids management, only Italian and German respondents were seeing direct revenues coming from such services. The most significant source of service revenues is coming from smart buildings, followed by smart cities and local communities, respectively.



Horizontal and open organization

Given that the complex and quickly changing nature of the future landscape, the ability of any organization to establish new relationships and modify existing ones will become paramount. While most European utilities have come from a historically nationalized or semimonopolistic incumbent position, they nonetheless recognize the need to develop broader industry partnerships and open the organization to more collaborative working practices with a range of stakeholders.

How are organizations delivering on this aspiration? The view from our research reflects a work in progress.

In other words, while the will is in place, much work still needs to be done for utility organizations to become able to respond to new partnership opportunities and to derive business value from them.


Particular effort needs to be put into engagement with newer types of organization, such as digital players and start-ups.



Customer engagement and confidence

As we see in figure 5, utilities are keen to develop deeper relationships with their customers (in turn responding to increasing expectations of engagement from customer groups), using a variety of channels:


  • 45% are using customer forums and social networks
  • 36% are using financial rebates, C2C communities and networks of ambassadors
  • Only 18% of respondents said they were not currently engaging with customers in such ways


This represents a wide variety of scenarios for utility firms to (re-)engage with their customers. In the Netherlands, for example, the utility company Essent launched a challenge to the broader community to develop new mobile apps using data available from smart meters. (v) The opportunity is also growing for utility firms to offer customized service plans and influence customer behavior, particularly around energy efficiency. However, only 45% of respondents said they were doing so in the B2C space – this number falls to 27% for B2B customers.




The gap between the best in class and the average

In summary, how do today’s utilities stack up? According to our Smart Index findings, best-in-class organizations are able to differentiate themselves across two axes, namely:

  • an ability to engage successfully with customers
  • a horizontal and open organization


Each engenders a spirit and practice of relationship building, based on looking outside the organization for answers – a very different perspective from the introspective nature of traditional utilities. The new breed of challengers are natively customer oriented, and therefore do not have to weigh up whether or not to engage with customers and partners to innovate and grow – they are already doing it.

Less of a gap exists between best-in-class and average utilities providers in terms of other axes, incorporating the ability to leverage big data, flexible business models and use of micro- or nano-grids. At this time, traditional utilities are advancing at the same pace as start-up challengers, meaning that the same opportunities to build competitive advantage present themselves for each group.



New models for operation, aggregation and management

Based on the BearingPoint Smart Utilities Index model, what is the optimal mix of capabilities for future organizations? The transition towards decentralized energy generation and distribution, coupled with the revolution in smart and digital technologies, is catalyzing the creation of multiple provider types with specific competencies. As well as traditional generation infrastructure providers (offering services to help local producers build and run their energy infrastructure), we have identified a number of emerging business models that will characterize the utilities players of the future.


  • Micro-grid operators, running local generation infrastructure
  •  Energy data aggregators, collating the picture of supply and demand
  •  Demand response managers, orchestrating energy delivery


The transition to these new models yields new opportunities for organizations looking to position themselves in the future utility marketplace.

Micro-grid operators (MGO)

Micro-grid operators will not own generation capacities but will work alongside local and independent energy producers – such as real-estate owners or local authorities responsible for energyproducing buildings, farmers producing bio-methane, and so on – to harness the power that these sources generate. As these producers are not energy experts, MGOs will oversee local production from a technical and operational point of view, offering advice and assistance where necessary.

At least initially, the main customers of MGOs will be producer–consumers – that is, consumers who also produce energy. MGOs will help these producer– consumers to optimize their energy systems, taking into account their generation capacity for each energy type and their own needs, for example in terms of peak energy requirements and daily usage. As independent producers and producer– consumers grow in number, so will the MGOs.

Which competencies should MGOs develop?

Given that MGO revenues will come mainly from selling expertise and services, they will need to develop the capacity and know-how to design and build custom solutions for producer–consumers and independent producers. This means understanding the technologies involved in micro- and nano-grid generation, keeping up to date with advancements as these areas evolve.

In addition, MGOs will need a high level of flexibility to respond to both technology and market changes, in order to help their customers optimize their own production systems, whilst taking into account the state of the larger energy distribution

Energy data aggregators

As the number of energy-connected devices (generation and metering) and energy-consuming equipment in homes and business premises grows, so does the need to monitor local distribution equipment. A key role of the energy data aggregator (EDA) is to provide a clear overview of the local distribution network, which will require both a general understanding of customer usage patterns, as well as specific customer utilization needs, such as heavy use of computer equipment or domestic appliances.

As a result, EDAs are important digital players, anticipating user actions and accurately predicting the energy consumption of each customer compared to the overall market by the collation and analysis of all available information. This can be sold as a data service to:


  • Energy providers, to enable core generation and production to be tuned
  •  Energy retailers, which can benefit from such information to feed development of products such as personalised pricing models, demandbased products and advisory services
  •  Equipment manufacturers, in terms of usage models and use of sensors to enable predictive maintenance and repair


Which competencies should EDAs develop?

A primary element of the EDA skill set is data analytics, in terms of data-science expertise and an understanding of the technologies required to collate, analyze and act on the large quantities of data that are generated and used. EDAs will also need to act in a horizontal and open manner, as their role will involve extensive partnerships, not least across a wide variety of data creators, equipment companies and smart-building technology vendors.


Demand response managers

The energy grid continues to fragment and decentralize: there are increasing tensions between demand and supply management. There are also governmental regulatory pressures to decrease energy consumption. These factors mean that the role of managing demand at local, regional and pan-national levels becomes increasingly important. As such, demand response management (DRM) services – the ability to offer customized energy usage pricing, based on a customer’s requirements and abilities to conserve, store and generate energy – present the best opportunity in the overall future energy market.

Demand response managers can, for example, propose ‘peak-time agreements’, where customers are given advance warning of the need to reduce power usage. Customers can be incentivized to use energy at certain times of day through creative rate structures and pricing, or even through a real-time pricing assessment – messages such as ‘Energy is cheap right now, you can charge the car’ may become commonplace. Demand response managers may also offer direct-load control services to customers for power-intensive devices (such as heating, ventilation or airconditioning equipment); for example, turning them off for short periods to reduce energy usage when demand is high.

Whereas traditional revenues have come from sales, grid generation and the trading of energy as a commodity, future DRM
 will come from ‘real-time supply/ demand coordination’, for example, measured in terms of the value of negawatts (non consumed watts).

Which competencies should DRMs develop?

As they provide the link between supply and demand, DRMs will need a clear overview of the dynamics of the energy market as a whole, as well as understanding precise customer usage patterns, to enable the creation of products and services closely adapted to customer consumption habits. This bridging role will require strong competencies in big data analytics
and product/ service design.

As well as requiring partnerships with suppliers and EDAs, DRMs will also need strong customer-experience management competencies, for example to enable the enrolment and engagement of customers in energy efficiency programs.


Ten years from now utilities will have become quite different businesses than they are today. New models will define internal structures and external relationships, offering new ways to create value in a mature and highly commoditised market. Existing players will have to move fast, however, as new, potentially more agile entrants are already positioning themselves to take advantage.

Given that all parties have an equal chance of gaining the market share that is available on the table right now, what can traditional organisations do to orient themselves better? We believe such firms should start by concentrating on the consumer perspective – rather than seeing new competitors, technologies and operating models as a threat, the question to be asked is, ‘How can we reach out and connect better with our customer base?’ To help towards this goal, we make the following five recommendations:


‘The rapidly growing number of decentralized energy suppliers won’t lead to the disappearance of centralized energy suppliers, as they will still be needed. Therefore, a healthy balance between centralized and decentralized producers must be found. The unavoidable consequence is that large centralized energy producers must resize, readjust and adapt to the upcoming market changes.’ - Dr Martin Everts, Head, Energy Economics, Axpo, Switzerland


  • Develop systems able to manage different energy flows (physical and statistical) with different time frames, to enable real-time optimization of delivery
  •  Given that launching of new services will accelerate, develop new innovation processes such as ‘test and learn’; look at short-cycle product development and other new working practices



‘The bulk of transactions that are finalised over different time periods with different clients in an increasingly volatile market require an efficient management of those transactions. For instance, if we finalise a five-year contract with a client, a three-year contract on a power exchange to auction my power day ahead, and a one-hour intraday (or even a 15-minute intraday) to buy it back. So different time frames, different strategies, which require several internal competences, that if played right, the company can be very successful.’ - Senior Manager, energy provider


  • Experiment with complex predictive models using existing datasets, for operational use and service personalization
  • Brainstorm potential use cases for making the most of real-time analysis of large data volumes, through both organization-wide and targeted projects
  • Run pilot studies with the latest generation of