Engaging the new energy consumer Everything changes except people Tom Rowlands-Rees June 04, 2018 Utilities are eying growth downstream and in renewables Selected company strategic commitments Upstream gas and Generation Europe U.S. Edison First Southern Australia Business Centrica EDF Enel ENGIE EON Innogy AEP Duke Int. Exelon Energy NextEra Co. AGL Dispatchable generation Growth Spin/carve out Maintain Maintain Renewables Not active Growth Growth Growth Growth Growth Growth Growth Maintain Oil & gas upstream Maintain Not active Spin/carve out Not active Not active Not active Not active Growth Maintain Maintain Not active Growth Growth Growth Gas midstream 1 Maintain Growth Maintain Growth Maintain Not active Not active Growth Not active Maintain Not active Growth Growth Maintain Not active Not active Midstream Spin/carve Transmission Not active Not active Maintain Not active Not active Not active Growth Growth Growth Growth Growth Growth Not active out Spin/carve Energy trading Maintain Maintain Growth Not active Maintain Maintain Maintain Maintain Maintain Maintain Maintain Maintain out Distribution Not active Maintain Growth Maintain Growth Growth Growth Growth Growth Growth Growth Growth Growth Not active Retail Growth Growth Growth Growth Growth Growth Growth Maintain Maintain Growth Maintain Maintain Maintain Growth Downstream Residential services Business services Growth Exploring Growth Growth Growth Growth Maintain Maintain Not active Exploring Not active Maintain Maintain Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth Maintain Growth Growth Growth Battery storage Growth Exploring Growth Growth Growth Growth Growth Growth Growth Growth Not active Growth Growth Growth EV charging infrastructure Not active Exploring Growth Growth Growth Growth Not active Exploring Growth Exploring Not active Exploring Exploring Exploring Spin/carve out Not active Maintain Exploring Growth 1 June 04, 2018 1
Residential consumers Carrots, sticks, snowballs and irons 2 June 04, 2018 Utilities are expanding their offerings to residential consumers Utility Connected home Home EV charge point Residential solar and/or storage Home repair services Green tariff Telecoms bundling Peer-to-peer trading Centrica Yes Discontinued Yes Yes Not active Discontinued Not active EON Mixed (some active, some discontinued) Yes Mixed (some active, some discontinued) New boilers and insulation only Yes Discontinued Not active EDF Yes Yes Yes Yes Yes Not active Not active EDP Yes Yes Yes Yes Not active Not active Not active EnBW Through innovation arm Yes Yes Not active Not active Not active Not active Enel Yes Yes Not active Not active Not active Not active Not active Engie Yes Yes Yes Yes Yes Not active Not active Fortum Under development Yes Yes Not active Yes Not active Under development Iberdrola Yes Yes Yes Yes Yes Not active Not active Innogy Yes Yes Mixed (some active, some discontinued) Yes Yes Yes Through partnerships SSE Yes Not active Not active Yes Not active Yes Not active Vattenfall Yes Yes Yes New electrical installations only Yes Yes Yes Verbund Yes Yes Yes Not active Yes Not active Not active 3 June 04, 2018 2
The consumer subconscious Do I want this thing? 4 June 04, 2018 The consumer subconscious The carrot Do I want this thing? How will getting it make my life better? 5 June 04, 2018 3
The consumer subconscious The carrot Do I want this thing? How will getting it make my life better? How will not getting it make my life worse? 6 June 04, 2018 The consumer subconscious The carrot Do I want this thing? How will getting it make my life better? How will not getting it make my life worse? What is everyone else doing? 7 June 04, 2018 4
The iron 8 June 04, 2018 The consumer subconscious The carrot Do I want this thing? How will getting it make my life better? How will not getting it make my life worse? What is everyone else doing? 9 June 04, 2018 5
The stick versus the carrot Prospect theory Perceived gains 40 30 20 Perceived value: +20 Losses 0 Gains -40-30 -20-0 20 30 40 - Perceived value: -32-20 -30-40 Perceived losses June 04, 2018 The stick versus the carrot Critical peak reduction trials Peak reduction 40% 35% 30% 25% 20% 15% % 5% 0% 0 2 4 6 8 12 14 16 Critical peak rebate Peak price ratio 11 June 04, 2018 6
Prospect theory Critical peak reduction trials Peak reduction 40% 35% 30% 25% 20% 15% % 5% 0% 0 2 4 6 8 12 14 16 Critical peak rebate Critical peak pricing Peak price ratio 12 June 04, 2018 What does adoption look like? A brief history of snowballs Household adoption (%) 0 Iron 90 80 70 60 50 40 30 20 0 1900 19 1920 1930 1940 1950 1960 1970 1980 1990 2000 20 2020 New York Times, Bloomberg New Energy Finance 13 June 04, 2018 7
What does adoption look like? A brief history of snowballs Household adoption (%) 0 Iron 90 80 70 60 50 40 30 20 0 1900 19 1920 1930 1940 1950 1960 1970 1980 1990 2000 20 2020 New York Times, Bloomberg New Energy Finance 14 June 04, 2018 What does adoption look like? A brief history of snowballs Household adoption (%) 0 Iron 90 80 70 60 50 40 30 20 0 1900 19 1920 1930 1940 1950 1960 1970 1980 1990 2000 20 2020 New York Times, Bloomberg New Energy Finance 15 June 04, 2018 8
What does adoption look like? A brief history of snowballs Household adoption (%) 0 Iron 90 80 70 60 50 40 30 20 0 1900 19 1920 1930 1940 1950 1960 1970 1980 1990 2000 20 2020 New York Times, Bloomberg New Energy Finance 16 June 04, 2018 Percentage of population with residential PV installations by zip code, 2017 Is the clustering of rooftop solar adoption in California due to: Social behaviour? or Economic factors? Source: Bloomberg New Energy Finance, California Solar Initiative 17 June 04, 2018 9
Uptake of rooftop solar among California households % of households 1 0.1 0.01 '02 '03 '04 '05 '06 '07 '08 '09 ' '11 '12 '13 '14 '15 '16 '17 California Solar Initiative, Bloomberg New Energy Finance 18 June 04, 2018 Uptake of rooftop solar in California zipcodes of differing wealth % of households 1 0.1 0.01 '02 '03 '04 '05 '06 '07 '08 '09 ' '11 '12 '13 '14 '15 '16 '17 >$0k California Solar Initiative, Inland Revenue Service, Bloomberg New Energy Finance 19 June 04, 2018
Uptake of rooftop solar in California zipcodes of differing wealth % of households 1 0.1 0.01 '02 '03 '04 '05 '06 '07 '08 '09 ' '11 '12 '13 '14 '15 '16 '17 $75-0k >$0k California Solar Initiative, Inland Revenue Service, Bloomberg New Energy Finance 20 June 04, 2018 Uptake of rooftop solar in California zipcodes of differing wealth % of households 1 0.1 0.01 '02 '03 '04 '05 '06 '07 '08 '09 ' '11 '12 '13 '14 '15 '16 '17 $50-75k $75-0k >$0k California Solar Initiative, Inland Revenue Service, Bloomberg New Energy Finance 21 June 04, 2018 11
Uptake of rooftop solar in California zipcodes of differing wealth % of households 1 0.1 0.01 '02 '03 '04 '05 '06 '07 '08 '09 $25-50k ' '11 '12 $50-75k '13 '14 $75-0k '15 '16 '17 >$0k California Solar Initiative, Inland Revenue Service, Bloomberg New Energy Finance 22 June 04, 2018 Uptake of rooftop solar in California zipcodes of differing wealth % of households 1 0.1 0.01 '02 '03 '04 '05 <$25k '06 '07 $25-50k '08 '09 ' $50-75k '11 '12 '13 $75-0k '14 '15 '16 '17 >$0k California Solar Initiative, Inland Revenue Service, Bloomberg New Energy Finance 23 June 04, 2018 12
Residential consumers, recap Do I want this thing? How will not getting it make my life worse? The carrot How will getting it make my life better? What is everyone else doing? Consumers are strongly motivated by: Wanting to avoid loss What their peers are doing Adoption rates of new technologies are increasing as media is exposing consumers to a broader social influence than just their neighbours. Economic factors are more likely to be a reason not to do something than a reason to do something. Given the above, the visibility of energy technologies can have a strong influence on their adoption. A successful strategy will engage consumers through their peer groups, rather than directly. 24 June 04, 2018 Commercial and industrial customers The growth of services 25 June 04, 2018 13
Offerings to C&I customers Bloomberg New Energy Finance 26 June 04, 2018 Activity by company type and region 27 June 04, 2018 14
Stakeholders among C&I consumers C-Suite Finance Procurement Sustainability Operations Facilities Deciding on overall business strategy and coordinating the different units to achieve these goals. Buy-in at the top level is important to direct and motivate the various departments. Tracks company finances; revenue, costs, capital allocation and liabilities. Projects often require large capital outlay and there are different financing options, which the finance department will need to assess. Manages the contracting of services, including energy, for an organization, often engaging retailers through brokers. Energy-as-aservice is a fundamental change in energy delivery. Manages the environmental impact of an organization s operations and ensures regulatory compliance. Necessary to evaluate how any work contributes to the company s sustainability goals and meets compliance. Responsible for the day-to-day operation of the company s primary business. It is important to understand how some products may have an impact on a business s operations, e.g. demand response. Maintains and services the systems, hardware and software, that support the business s operations. These new energy offerings are integrated directly into the facility, potentially changing system processes. Bloomberg New Energy Finance 28 June 04, 2018 As offerings become more complex, finance must keep pace Debt Efficiency On-site gen Renewable On-site gen Conventional Demand response Microgrid Storage Lease Service agreement Shared benefit Bloomberg New Energy Finance 29 June 04, 2018 15
Commercial and industrial customers recap C-Suite Finance Procurement Sustainability Operations Energy companies are developing increasingly integrated offerings for their C&I customers While there may be benefits for the customers, the complexity of engaging with them is increasing There is no silver bullet for financing, but there is scope to simplify the customer experience with the right framework Facilities Bloomberg New Energy Finance 30 June 04, 2018 Copyright and disclaimer This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may be photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any way without prior consent of Bloomberg New Energy Finance. The information contained in this publication is derived from carefully selected sources we believe are reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New Energy Finance, Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates ("Bloomberg"). The opinions presented are subject to change without notice. Bloomberg accepts no responsibility for any liability arising from use of this document or its contents. Nothing herein shall constitute or be construed as an offering of financial instruments, or as investment advice or recommendations by Bloomberg of an investment strategy or whether or not to "buy," "sell" or "hold" an investment. 31 June 04, 2018 16
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