March 18, 2015
A disruptive innovation is one that helps create a new market by improving a product in an unforeseen manner, thereby “disrupting” the existing market. Today’s disruptive technologies—from solar photovoltaics (PV) and battery storage to fuel cells and wind turbines—are transforming the electric utility industry, according to a report released by the Edison Electric Institute.
New innovations and technologies are, in turn, causing disruptive behavioral challenges. For example, as the price of photovoltaics (PV) declines, more people are installing solar on their homes, which reduces the load and results in a loss of revenue for utility companies. The impact of this disruption remains unclear. Change, however, is inevitable. “The utility industry must be prepared to address these challenges in a way that will benefit customers, long-term economic growth, and investors,” writes Peter Kind of Energy Infrastructure Advocates who prepared the EEI report. “Ultimately, all stakeholders must embrace change in technology and business models in order to maintain a viable utility industry.”
While disruptive forces may reduce a utility’s profits initially, new market innovations don’t foreshadow the extinction of the traditional electric industry. Gregory Aliff, leader of Deloitte’s Energy and Natural Resources Management, offers the following insight:
“Disruptive innovation, by its very nature, gives birth to new business models. These models will require electricity companies to redefine their value propositions to create a win-win for producers and customers alike. …The question isn’t if thriving in the new environment is possible, but rather if it is plausible: Do today’s electric-sector participants have the capacity and the will to transition to new business models in order to participate in the coming transformation?” For full article.