Now, it’s energy’s turn, as utilities struggle with falling demand and lower prices – as well as a push on the part of regulators for new, innovative ideas, such as smart grids, energy efficiency, and home energy production. In Europe and North America, utilities have been cutting costs to maintain profit margins, but there’s only so far cost-cutting can go.
To date, tactics to boost utilities’ fortunes have included selling home appliances for lighting and temperature control. British Gas was a first mover in this business, launching a separate unit in 2007 and acquiring companies with expertise in solar cells, smart meters, and heat pumps. But most utilities have limited competitive advantage over traditional retailers and digital players in this area. If they cannot ensure product quality and maintenance, the new business could damage their reputation and increase operating costs.
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THE NEW SMART-HOME DEVICE BUSINESS MODEL FOR UTILITIES
Some utilities in the US are working with global players to expand their reach into smart-home services
Smart-home services in the US Market
Source: Oliver Wyman analysis
Sandro Melis is a Milan-based partner in Oliver Wyman’s Energy practice, Angelo Rosiello is a Milan-based principal in Oliver Wyman’s Energy practice, and Arun Mani is a Houston-based partner in Oliver Wyman’s Energy practice.