This article was written by Alexandre Metz, Project Manager | Strategy | Energy Sector at Navigant.
The energy industry is experiencing a profound transformation as the sector moves towards a more intelligent, more distributed, and cleaner use of electricity. Utilities’ traditional business models are being challenged by disruptive firms offering new services which leverage more advanced technology. These new energy services can be grouped into 6 platforms: Distributed Energy Resources (DER) Integration, Electric Mobility, Internet of Things, Smart Cities, Transactive Energy, and Telecommunications Networks (See Figure above).
I analysed the level of activity of the eight major European energy utilities, and grouped their strategic announcements into these six new energy platforms. Further information can be found in an earlier post. Utility announcements were grouped into three categories: partnerships, investments (differentiated between minority-stake investments and majority-stake acquisitions), and acquisitions.
- European utilities have reinforced their strategic interest in new energy platforms
Most European utilities have reinforced their relative positioning in new energy platform activity over the course of 2015-2017 (see Figure 1). Italy-based Enel has become the most active of the selected European utilities.
- The utility’s most significant announcements in 2017 include partnerships with carmakers (Audi, Groupe PSA, Nissan) and electric utilities (Dubai Electricity and Water Authority, Rosseti, Saudi Electricity Company),
- and acquisitions of battery storage management system provider Demand Energy, demand response service provider EnerNOC and electric vehicle charging platform provider eMotorWerks.
France-based Engie and UK-based Centrica have been focusing on acquisitions.
- In 2015-2017, Engie has led six major acquisition of companies offering new energy platforms. Deals concluded in 2017 include EVBox, an electric vehicle charging infrastructure developer, Fenix, a connected solar PV solution provider in Africa, and Icomera, a Wi-Fi network provider for public transport.
- Centrica has been steadily acquiring a similar number of digital players. The utility recently took control of REstore, a
demand response service provider in Western Europe, and Rokitt, a data discovery and analytics provider based on the US East Coast.
Other utilities, including E.ON, Innogy, and Total, have led strategic investments and partnerships. Partnerships are usually signed at the group level, while investments are led by the utility’s corporate venture capital arm, respectively called: E.ON Strategic Co-Investments, Innogy Venture Capital (formerly, RWE New Ventures), and Total Energy Ventures. Total Energy Ventures added eight new energy platform companies to its investment portfolio in 2015-2017. The latest additions include: France-based Xee, a connected vehicle platform providing predictive maintenance, pay-as-you-drive insurance, and real-time marketing solutions; and Spain-based OnTruck, a road freight shipping platform optimising truck utilisation.
EDF has recently established an in-house venture capital arm, which complements independently-managed venture capital fund Electranova Capital, via which EDF holds an indirect stake in start-ups. One can therefore expect more investment activity by EDF from 2018 onwards.
- Regional differences in new energy platform activity persist between North America and Europe
From a geographical distribution perspective, major differences can be drawn between North America and Europe (see Figure 2).
The activity in North America mostly consists of investments and acquisitions.
- California leads the way within the region, attracting nearly two thirds of all partnerships, investments, and acquisitions announced in 2015-2017
- Additionally, European utilities have been strengthening their presence in the state..
Most of the activity in Europe relates to partnerships. The geographical proximity partially explains this trend, as European utilities typically test new energy services in their core market before expanding to other geographies.
- Some new energy platforms have benefited from an increased focus by European utilities
DER Integration and Electric Mobility remain the leading new energy platforms and they have experienced an increased level of activity throughout 2015-2017 (see Figure 3). Most of the selected European utilities have announced several key partnerships, investments, and acquisitions in these two platforms. A 50% increase in the number of announcements was recorded between 2015 and 2017. Internet of Things, Transactive Energy, and Telecommunications Networks have remained steadily active, with the most active utilities being Centrica, Engie, E.ON, and Innogy. Fewer announcements were made in Smart Cities in 2017 vs. the previous two years, and most originated from Enel and Engie which remain pioneers in the platform serving municipalities and local communities.
Lastly, the number and size of acquisitions have been increasing.
- The largest deals announced in 2017 are EnerNOC’s acquisition by Enel for $250 million and REstore’s acquisition by Centrica for €70 million ($80 million)..
The race to new energy platform services has intensified among European utilities. Players building a balanced portfolio across several new energy platforms and multiple geographies are more likely to succeed in a fast-moving industry. Some of the utilities covered in this analysis appear to be further along, while others are still defining their strategic priorities. 2017 was a highly active year for new energy platforms – 2018 will be a year to watch.
Alex Metz is an energy consultant specialising in corporate and business strategy for electric utilities. He helps clients develop digital business models leveraging new energy platforms, such as distributed energy resources integration, electric mobility, and transactive energy. He has six years of energy sector experience acquired in Western Europe, California, and South Africa. He currently works for management consultancy Navigant, based in Los Angeles. Previously he worked for strategy consultancy Oliver Wyman, the solar division of Total, and electric utility EDF. He holds an MSc in Sustainable Energy from Imperial College London (United Kingdom) and a MEng Grande Ecole from Ecole Polytechnique (France).
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- Derek Jones, Director at Navigant Consulting Inc.
- Lisa Rivalin, Data Science Project Manager at Engie Axima
- Christophe Defert, Vice-President at Centrica Innovation Ventures
- Edouard Bulteau, Investment Manager at Total Energy Ventures