European Utilities Have Increased Their Activity in New Energy Platforms: Part 3

The energy industry is experiencing a profound transformation as the sector moves towards the more intelligent, more distributed, and cleaner use of electricity. Utilities’ traditional business models are being challenged by disruptive firms offering new services leveraging new technologies. In the first post of this blog series, I described how European utilities have reinforced their strategic interest in new energy platforms. In the second post, I showed that regional differences in new energy platform activity persist between North America and Europe. In this post, I argue that some of the new energy platforms have been highly active recently as European utilities strive to build their portfolio of digital services.

DER Integration and Electric Mobility Are Still Leading

Distributed Energy Resources (DER) Integration and Electric Mobility remain the leading new energy platforms, and they experienced increased levels of activity throughout 2015-2017.

(Source: Guidehouse, Inc.)

Most of the selected European utilities have announced key partnerships, investments, and acquisitions in these two platforms. A 50% increase in the number of announcements was recorded between 2015 and 2017. Activity in the Internet of Things, Transactive Energy, and Telecommunications Networks platforms has been steady, with the most active utilities being Centrica, ENGIE, E.ON, and Innogy. Fewer announcements were made in Smart Cities in 2017 versus the previous 2 years. Most originated from Enel and ENGIE, which remain pioneers in the platform serving municipalities and local communities.

Activity Types Are Shifting

There has been a shift in the activity type by platform. The Electric Mobility platform once consisted almost entirely of partnerships. Utilities would typically sign agreements with car makers and EV supply equipment providers to develop bundled offerings and run pilot programs. In 2017, several investments and acquisitions were announced: Total invested in Xee and OnTruck, ENGIE acquired EVBox, and Enel acquired eMotorWerks. This is representative of a platform getting more mature as utilities better understand where the value lies and which companies are the key acquisition targets. The activity in this platform has also intensified because the prospect of electricity as the major transportation fuel is becoming clearer. Several major car makers have announced aggressive plans to electrify their vehicle offerings, providing more evidence that the mobility sector is changing rapidly.

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). Both companies had established leading positions in the demand response (DR) markets: EnerNOC in the US and part of Asia Pacific, and REstore in Europe. These deals epitomise the DER Integration platform reaching a critical maturity state. After several years of market consolidation among DR players, some large utilities are buying their way in by acquiring the leading, established players.

The Race Is Intensifying

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. While numerous products and services developed by the new energy platform companies seem promising, not all of them will be successful. Utilities need to strategically select the players that have the most agile talent and can quickly react to market changes and evolving customer needs. Some of the new technologies are prone to disrupt the energy industry. Incumbent utilities should watch market signals and adjust their portfolio of partnerships, investments, and acquisitions accordingly. 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.