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Utility firms expect to change business model

Growing popularity of alternative distribution and community energy projects could revolutionise energy market

Solar panel

Alternative distribution and community energy projects could change the energy market

The vast majority of energy providers believe they will need to change their business models as distribution of energy changes due to community projects and other new ventures.

According to a survey carried out by PwC, which spoke to 53 executives of top energy companies in the UK, the growing popularity of alternative distribution and community projects, such as those where solar panels are fitted to roofs of local buildings, are threatening the way large energy companies operate.

New methods will bring about ‘significant changes’ 

The study of energy firms found that 94% believe the newer methods of distribution will bring about either complete transformations or at the very least large-scale alterations to business models between now and 2030.

Almost 60% said the increasing volume of distributed generation, whereby energy is produced by businesses, local communities, councils and individuals, will mean a high likelihood that businesses in the sector need to significantly change their operating models.

Utility companies must ‘seize the initiative’

Despite this threat to the way energy companies operate, the survey also found that the majority see this type of energy generation as an opportunity to adapt and grow for the future rather than a danger to their company.

Only 18% of those surveyed said it was a threat, compared to 82% who said it was an opportunity to move with the times and ensure they remain competitive.

Steven Jennings, UK power and utilities leader at PwC, said it gives companies the chance to move forward in an ever-changing market and remain ahead of the game.

“Power utility companies will need to respond to these changes to not be eclipsed by technological and market change, while strategies that identify the best revenue opportunities in a changed and, potentially transformed future market landscape, will be key to survival,” he said.

Costs and subsidies driving the market

The findings also stated that the falling costs associated with small and medium generation projects are driving their adoption, as well as eating into the profits that come from more traditional types of generation.

Moving forward, energy news site Business Green said the government is looking to help community generation realise its full potential by allowing any system up to 10MW to be eligible for the feed-in tariff subsidy scheme.

However, those surveyed by PwC said that energy efficiency and demand-side management, along with smart grid technology, could all have a similarly large benefit to the power market, if policy, technical and financial barriers are overcome.

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