Kodak’s message for ESKOM – adapt or die?

A thread running through many of the African Utility Week discussions was: Faced with the twin revolutions of renewable energy and the `internet of things’, what will the energy utilities of tomorrow look like? Historically energy utilities in Africa have been challenged with not being able to provide an electricity service especially to rural areas where 40% of citizens do not have electricity. The second major challenge has been high levels of non –payment for electricity because of poor account management and an unreliable electricity service that dissatisfied customers objected to paying for. Now, energy utilities are faced new challenges! How to respond to the opportunities of renewable energy and the digital management of consumption using smart meters and the (so-called) internet of things?

Utility spokespeople describe renewable energy as having a disruptive relationship with traditional utilities and base load energy generation. The so- called disruption they refer to is more than the technical complexity of keeping the grid stable while feeding in electricity generated with the varying whims of sunlight and wind. A key concern is the disruption of the business model of big power utilities. And renewables do! They provide opportunities for customers and communities to go off grid or to become prosumers. (Prosumers are both producers and consumers of electricity.) Especially concerning to utilities is the reality that the consumers who are switching to renewables are also those who are able to afford higher electricity tariffs. This loss of kWh sales is likely to impact heavily on the ability of utilities to generate funds to provide a reliable service and to subsidize electricity to energy poor communities. The traditional energy utility model will need to adapt to a two way relationship with consumers.

Graphic Harvest art at AUW 2016

Graphic Harvest art at AUW 2016

Jenny Fletcher CEO of Ariya Capital in Kenya related how the demise of Kodak, probably the biggest international photography brand before the turn of the century, has lessons for many power utilities. (Ariya develops and invests in clean energy.) Before the digital era, Kodak pretty much dominated the home photography supply chain making money at every step from cameras to film and photo development. In 1989 two employees Steven Sasson and Robert Hills made the first digital camera for Kodak. Comfortable in their supply chain model, Kodak sold the patent without recognising that digital photography was the future. In 2012 Kodak filed for bankruptcy! will ESKOM see the Kodak parallels in their own business model? Right now they are holding on to an energy supply chain model while renewable energy technology and the digital management of energy demand is changing the game.

The push by a group of energy specialists for nuclear energy for Africa is a further example of a disconnect between the utilities and new market realities. The uptake of renewables fills more than just energy security needs. It provides business opportunities and energy resilience on a range of scales. Each drop in the price of renewable technologies and each improvement in efficiency ups the demand. The tipping point will be affordable storage systems / batteries which is expected within 5- 15 years. This is the same time required to build one centralized nuclear power station.

Managing new consumer needs and independent power producer partnerships requires a very different set of skills to the traditional technical bias of utilities. It also requires new legislation to open up the space for feed in technologies while setting safety standards as well as feed in tariffs that encourage private public partnerships. Government utilities are notoriously conservative possibly as a result of their mandate to provide reliable affordable electricity to all. However, utilities need to understand that the increasing affordability of Renewable Energy and the independence it offers has started an energy revolution that is here to stay.

What could a power utility that does not go the Kodak route look like?
– See electricity generation not as a silo but as an integral part of growing the economy around renewable energy revolution with associated technological skills development, new appropriate technologies and a wide range of distributed employment opportunities.
– Focus on the energy needs of the public with fees based on a range of services.
– Encourage Independent power producers to use the grid – except for remote rural solutions.
– Provide a platform for distributed electricity generation with service fee charges to cover the wheeling of electricity.
– Develop and manage community energy storage systems.
– Focus on managing and educating consumers about matching energy use with energy production and incentivize off peak consumption.
– Offer smart technology that also provides consumers with an energy management system.
– Support / provide charging stations for ebikes and cars.
– Support energy poor households and communities with subsidies linked to the uptake of energy efficient technologies.
– Counter service fee boycotts by developing co-owned energy services between communities & energy providers
– Etc – there will be more as the story of energy collaboration unfolds.

Kim Kruyshaar 28 May 2016

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