Pattabi Seshadri

Distributed Energy (DE) is becoming a disruptive force in the U.S. power business. So far, DE's growth has relied on subsidies, lower costs and improvements in technology. As the industry matures, much of its future growth will be driven by business model innovations, such as leasing models, financing tools that lowers cost of capital and improved targeting and segmentation of customers. Utilities' primacy in the generation and delivery of electricity is under attack. To stay competitive… Show more

Distributed Energy (DE) is becoming a disruptive force in the U.S. power business. So far, DE's growth has relied on subsidies, lower costs and improvements in technology. As the industry matures, much of its future growth will be driven by business model innovations, such as leasing models, financing tools that lowers cost of capital and improved targeting and segmentation of customers. Utilities' primacy in the generation and delivery of electricity is under attack. To stay competitive, utilities must proactively respond to a future with more DE. Utilities have multiple advantages they can mobilize, but they must do so quickly. Show less

For retail energy companies, maximizing the efficiency of sales efforts, including customer service, can be essential to winning in today’s highly competitive, price-sensitive environment. Many organizations struggle with the challenge, however. This holds particularly true for the industry’s bigger companies. A recent benchmarking by The Boston Consulting Group (BCG) revealed that large retail-energy businesses often spend materially more than smaller companies to win and keep customers. Large… Show more

For retail energy companies, maximizing the efficiency of sales efforts, including customer service, can be essential to winning in today’s highly competitive, price-sensitive environment. Many organizations struggle with the challenge, however. This holds particularly true for the industry’s bigger companies. A recent benchmarking by The Boston Consulting Group (BCG) revealed that large retail-energy businesses often spend materially more than smaller companies to win and keep customers. Large companies also often fail to capture the scale-related advantages that their size should afford, forfeiting what could be a significant source of competitive advantage.
What are the keys to achieving best-in-class execution in retail energy sales—for large energy companies and smaller ones alike? Our study, which examined more than 30 companies across Australia, Europe, and the U.S., found commonalities among top practitioners. (See “Benchmarking Details.”) On a high level, companies with the most advantageous cost structures typically possess several key attributes: a simplified business model, a relatively narrow focus in terms of customer targeting and product offerings, streamlined business processes, a commitment to customer-service excellence, delayered organizations, and a leadership-driven culture that places a high value on simplification. These companies have, in essence, chosen to do less but do better—and are seeing measurable results in their top and bottom lines as a result. Show less

Around the world there is a growing focus on energy networks and operators’ responsibility for the planning, construction, and maintenance of grids and pipelines. Achieving operational excellence has become an imperative as a result of increasing investment as well as regulatory and customer pressures—all occurring in an economically constrained environment. Utilities are challenged to go beyond achieving savings on narrow functions to develop a holistic approach that achieves true… Show more

Around the world there is a growing focus on energy networks and operators’ responsibility for the planning, construction, and maintenance of grids and pipelines. Achieving operational excellence has become an imperative as a result of increasing investment as well as regulatory and customer pressures—all occurring in an economically constrained environment. Utilities are challenged to go beyond achieving savings on narrow functions to develop a holistic approach that achieves true excellence—both cost efficiency and quality improvement.

Investment dynamics are exerting new pressures on operators. In developed countries, key drivers include the replacement of aging infrastructure (much of which is more than 50 years old and increasingly subject to failure), the interconnection of regions and states, and the reinforcement necessary for the integration of renewable-power generation. In developing countries, the key driver is grid expansion to cope with the expected increase in per capita electricity consumption as a result of accelerating urbanization and industrialization.

In addition, the rise of smart-grid development has important ramifications for energy networks worldwide. NRG Expert estimates that global capital expenditures in power transmission and distribution will grow 5 percent anually in the coming years, reaching more than $220 billion by 2015.

Regulators continue to put pressure on network operators to reduce costs. Thus, it has become standard practice to incorporate efficiency factors in the regulation of energy networks. For example, over the past 15 years, most European countries have moved from cost-plus to performance-based regulation, which allows network operators to keep the profits made through reductions in operating costs—as long as they achieve or exceed the efficiency target. Achieving savings is becoming particularly hard in some countries where such regimes are well established and the low-hanging fruit has already been picked. Show less

The U.S. electric-power market is inching closer to a major shortfall in generating capacity. This is troublesome in itself but what is causing perhaps even more concern for both the industry and the country’s broader economy is the magnitude of uncertainty related to alternative ways to address the supply gap. This uncertainty may translate into taking too few or insufficiently concrete steps, and thus it has serious implications for the reliability of the nation’s power grid.

Although… Show more

The U.S. electric-power market is inching closer to a major shortfall in generating capacity. This is troublesome in itself but what is causing perhaps even more concern for both the industry and the country’s broader economy is the magnitude of uncertainty related to alternative ways to address the supply gap. This uncertainty may translate into taking too few or insufficiently concrete steps, and thus it has serious implications for the reliability of the nation’s power grid.

Although the U.S. economy was recently hit by a recession, the demand for electric power continues to grow. And the story is also complicated on the supply side: how will recent and future changes in technology and emissions regulations impact the competitive mix in electric-power generation sources?

A number of new and existing variables are clouding the future of the U.S. electric-power industry primarily by exacerbating the uncertainty about policy and the prices power companies will require to justify making big investments in new generation capacity. The advent of new technology and drilling methods has made the U.S. the world’s leading producer of natural gas, allowing gas to approach coal’s share of the country’s power-generation fuel mix. The U.S. Environmental Protection Agency, the states, and the courts continue to battle fiercely over rules for curbing power plant emissions of carbon dioxide, mercury, and other pollutants. The nuclear industry has been in a state of anxiety since Japan’s Fukushima nuclear accident in March 2011. And the renewable-energy business is feeling insecure as a result of waning federal-government support and crumbling power prices due to falling natural-gas prices. Show less

Smart meters hold considerable promise for utilities. They can drive down costs, increase transparency for customers, and enable flexible pricing. But they are destined to disappoint unless utilities can solve a fundamental challenge: engaging the customer. Much of the business case for smart meters hinges on convincing customers to genuinely change their energy usage—and this is far easier said than done. Utilities will need to mount a comprehensive communication and change-management campaign… Show more

Smart meters hold considerable promise for utilities. They can drive down costs, increase transparency for customers, and enable flexible pricing. But they are destined to disappoint unless utilities can solve a fundamental challenge: engaging the customer. Much of the business case for smart meters hinges on convincing customers to genuinely change their energy usage—and this is far easier said than done. Utilities will need to mount a comprehensive communication and change-management campaign if they hope to get the necessary buy-in.

Informed by proprietary consumer research, this essay looks at the current environment for smart-meter deployment and the specific imperative to gain customer buy-in. Show less

Merger and acquisition (M&A) activity in the U.S. electric-utility industry has increased over the past year and a half following the 2005 repeal of the Public Utility Holding Company Act (PUHCA). Several high-profile deals have been announced; some have been successful, and others, such as the Constellation–FPL Group and Exelon–PSEG (Public Service Enterprise Group) deals, became ensnared in the state regulatory process. The primary question is not whether M&A will continue but whether utility… Show more

Merger and acquisition (M&A) activity in the U.S. electric-utility industry has increased over the past year and a half following the 2005 repeal of the Public Utility Holding Company Act (PUHCA). Several high-profile deals have been announced; some have been successful, and others, such as the Constellation–FPL Group and Exelon–PSEG (Public Service Enterprise Group) deals, became ensnared in the state regulatory process. The primary question is not whether M&A will continue but whether utility executives are prepared to manage increasingly complex regulatory challenges.

The reality is that M&A activity is (and always has been) one of several tools available to utility CEOs to reshape their portfolios and meet their shareholders’ expectations for returns. Other equally important tools include operational improvement programs, investment in growth of the rate base, reshaping the rate structure, and pursuing focused, unregulated organic growth. Among those alternatives, M&A is the most potent, publicly visible, and often irreversible option that a CEO can deploy. However, M&A has too often been applied reflexively—much like the hammer that sees everything as a nail. Show less

Governments and industry have debated several options for managing used fuel in the 40 years during which nuclear power generation has spread across the industrial world. Countries using nuclear energy have adopted different strategies ― some pursuing a “recycling” strategy in which used nuclear fuel is treated and then reused as a component of new reactor fuel and some pursuing a “once-through” strategy in which untreated used fuel is stored, later to be emplaced in a permanent geological… Show more

Governments and industry have debated several options for managing used fuel in the 40 years during which nuclear power generation has spread across the industrial world. Countries using nuclear energy have adopted different strategies ― some pursuing a “recycling” strategy in which used nuclear fuel is treated and then reused as a component of new reactor fuel and some pursuing a “once-through” strategy in which untreated used fuel is stored, later to be emplaced in a permanent geological repository.

For the last 20 years, the U.S. have pursued development of a geologic repository for used fuel disposal ― the once-through strategy ― at Yucca Mountain in Nevada. The key benefits of that strategy are: a) capacity to handle all legacy used fuel (estimated at 54,000 metric tons in 2005, currently stored at nuclear power plants); b) capacity to handle additional used fuel discharged after a period of cooling and interim storage, provided that additional repository capacity is available; and c) no further need for handling or processing of used fuel after disposal which, to that extent, makes the once-through strategy a complete lifecycle solution.

DOE 2001 cost estimates for a U.S. repository that is capable of storing a total quantity of 83,800 tons of commercial used fuel indicate a lifecycle investment of about $46B[--DOE undiscounted life cycle cost estimates are reported to 2005 $ and netted of estimated cost to dispose of non-commercial
nuclear waste.--], not including costs for interim storage at power plants. Over the last decade, however, several factors have led to questions about the appropriateness of the once-through fuel cycle as an exclusive used fuel management strategy. Show less

New trends in economics, geopolitics, industry behavior, and technology are causing fundamental shifts in the energy landscape. For industry players, these shifts pose a significant threat and opportunity at the same time. Some players will be able to take advantage of these shifts, but many others will destroy value for investors and other stakeholders.

These new competitive forces are changing the balance of power between sellers and buyers and destabilizing established businesses.… Show more

New trends in economics, geopolitics, industry behavior, and technology are causing fundamental shifts in the energy landscape. For industry players, these shifts pose a significant threat and opportunity at the same time. Some players will be able to take advantage of these shifts, but many others will destroy value for investors and other stakeholders.

These new competitive forces are changing the balance of power between sellers and buyers and destabilizing established businesses. Succeeding in this volatile environment demands fresh insight and creativity, as well as new capabilities and new business skills. But change can be risky when the stakes are high.

Despite the risk, energy companies must continue to place their bets, making enormous long-term investments and necessary short-term commitments. Show less

The unprecedented bull market in technology, media, and telecommunications stocks has given way in recent months to a dramatic weakening in valuations. The speed of this decline took most industry executives by surprise. Early in 2000, capital was cheap and plentiful for new entrants who could claim boundless opportunity. Since then, however, private equity has largely dried up. At the same time, established players have been forced to launch restructuring plans in response to weakened credit… Show more

The unprecedented bull market in technology, media, and telecommunications stocks has given way in recent months to a dramatic weakening in valuations. The speed of this decline took most industry executives by surprise. Early in 2000, capital was cheap and plentiful for new entrants who could claim boundless opportunity. Since then, however, private equity has largely dried up. At the same time, established players have been forced to launch restructuring plans in response to weakened credit ratings, which in some cases were triggered by the soaring costs associated with next-generation mobile licenses.

Although much has changed in recent months, some things remain the same. In particular, two core trends in customer demand continue unabated: the spread of Internet protocol-based services (IP) and the expansion of mobile communications. Together they are transforming the telecommunications industry. As consumer demand for IP and mobile services explodes, virtually every business process from product development to sales and marketing to provisioning will require reworking. In addition, much of the existing network capacity will become redundant as more efficient technologies are adopted.

As the technology, media, and telecom industries evolve, which companies will emerge as winners? Until recently, there were two opposing sets of market participants, each with its own philosophy. Show less