Utility 4.0: Transformation from Being a Utility to Being a Digital Energy Services Company

By Oliver D. Doleski

Against the background that traditional business models of the energy industry are becoming obsolete in the face of digitization and decentralization, Oliver D. Doleski describes the epoch-making process of change from a monopoly supply company to a digital energy service company. The compact book not limited to the pure description of the transformation process. Rather, it also offers the reader a concise overview of profitable fields of activity of digital energy service companies (Utility 4.0) as well as an application-oriented method for realizing new business ideas in the digital energy world of tomorrow. The book closes with an intuitively understandable guide to the practical implementation of digital transformation in the energy industry.

• Language: English
• Publisher: tredition
• Release date: May 5, 2024
• ISBN: 9783384206923

Oliver D. Doleski

Oliver D. Doleski is a well-known editor throughout the energy industry. After studying economics at the University of Munich and various management positions in the public sector as well as in consulting and service companies, he worked successfully for many years as an independent management consultant active across different industries. Today, he is intensively involved in the topics of digital transformation, Internet of Things (IoT) and smart cities, especially in the energy sector and the process industry. His research focuses on business model development (Integrat-ed Business Model iOcTen) and Digital Decarbonization of energy systems. With the neologism “Utility 4.0”, Oliver D. Doleski estab-lished already in 2016 a concise term for the transition from the analog to the digital energy industry. As a member of energy in-dustry initiatives, he is actively shaping the transformation of the energy industry. As an editor and author, he contributes the exper-tise he has gained in corporate practice and research to numerous industry-wide recognized publications and textbooks.

Book preview

1 The Year 2030: A Future without Energy Utilities

May you live in interesting times! This well-known expression – also referred to as the Chinese curse – has also applied to the German energy industry in particular for some years now. After all, utilities are living through truly interesting times these days. The increasing decentralization of energy supply and the socially desired priority of renewable energies in Germany are increasingly jeopardizing the economic operation of conventional power plants. Thanks to liberalization, new companies from sectors that were originally distant from energy are entering the supply market. End-consumers become self-confident customers who are taking their electricity supply into their own hands and whose loyalty to their supplier is visibly waning. Initiatives to increase energy efficiency on the one hand and a shrinking population in the long term on the other, lead to a noticeable decrease in absolute demand for electricity and gas. While sales margins are eroding, the investments in infrastructure required in the course of the energy transition have to be financed at the same time. And last but not least, new technologies, the megatrend of digitalization, progressing interconnectedness and increased sales requirements are immensely increasing the complexity of the operating processes and systems of today's power supply companies.

The business model of reliably plannable, centralized power generation with subsequent distribution, which has been tried and tested for decades and is extremely stable, is coming under increasing pressure. In energy industry publications and discussion forums, the specter of a widespread die-off of utilities by the year 2030 is sometimes raised. For example, in his 2014 book The Zero Marginal Cost Society, the US sociologist and futurologist Jeremy Rifkin, referring to developments in information and communication technology (ICT), even puts forward the provocative thesis that, in view of the enormous advances in productivity in all fields of technology, energy will even be available at cost price in the future.1 From the point of view of today's energy companies, regional suppliers and municipal utilities, this is a threatening vision of the future, since in an energy market structured in this way, any economic commitment would be obsolete according to today's understanding.

The good news for utilities is that the energy supply at zero marginal cost assumed by Rifkin is unlikely to become reality in its pure form. It is true that the cost price of renewable energies and decentralized energy generation will continue to fall compared to today. Nevertheless, a comprehensive, stable energy supply exclusively at fixed costs cannot be assumed in the foreseeable future. Of course, the sun does not write a bill and is available free of charge. A circumstance that could point to a trend towards zero marginal cost economics in the energy sector. However, a comprehensive infrastructure for the economic use of regenerative energy sources on a large scale will still be needed in the future. After all, sun and wind must be captured, converted into the usable energy form of electricity, temporarily stored and transported via electricity grids. This incurs both fixed and variable costs as a result of the system. Also, not every commercial or household customer is in a position to produce energy decentrally themselves due to various restrictions such as shortage of space, protection of historical monuments or regulatory requirements. Accordingly, these consumers are dependent on the supply of electricity from more or less central supply facilities, the maintenance of which is regularly associated with expense. Furthermore, as long as renewable energies do not deliver their output steadily at all times, the energy sector must maintain and, not least, finance additional storage and parallel back-up systems based on conventional electricity generation. The maintenance of these backup systems gives rise not only to the costs of plant operation but also to variable costs for the procurement of fossil fuels, among other things. Against the backdrop of this exemplary list of energy generation costs, the conclusion from today's perspective is that a zero marginal cost energy economy is likely to remain a utopia beyond 2030.

So, thanks to the absence of a zero marginal cost energy economy assumed here, can established utilities retreat into the comfort zone of classic electricity and gas supply business models with peace of mind? Certainly not, if they do not want to lead a barely adequate niche existence with a permanently decreasing number of existing customers in the years to come. The generation of electricity from coal, oil, gas and uranium, which has been successful for decades, is becoming less and less important. This is not primarily because these energy sources are running out in the short term – at least discoveries of new deposits coupled with improved exploration and extraction techniques seem to be shifting their availability further and further into the future – but because more and more consumers have developed a desire to generate energy sustainably. Regardless of the question of the actual availability of fossil raw materials, there is a growing consensus worldwide,