by Strategy&, part of the PwC network

Reinventing Energy

The energy sector is undergoing huge transformation, Adrian Del Maestro, Director at Strategy& outlines how our dreams of a cleaner, greener, more efficient world will be driven by the consumer but can only be achieved by governments, businesses and society working together, whilst, Roberto Bocca, Head of Energy and Materials at the World Economic Forum observes how some smaller countries are well on the path to delivering more sustainable and affordable energy systems while other larger countries still have a long way to go to accelerate the clean energy solutions of the future.

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by Strategy&, part of the PwC network
Why oil and gas companies are transforming business models to sell services into your home

Imagine a world in which there is a fridge-sized energy storage battery in the basement of your home, solar panels on your roof and an electric vehicle smart charger installed on your driveway – all connected to a device controlling the appliances in your home.

Now imagine the type of company most likely to be providing this as a seamless service. That company may not be the utility company that currently provides you with your electricity and gas. It may actually be a large oil and gas company with operations all the way from drilling on an offshore oil rig to selling petrol at the pump.

This is not as far-fetched as it may sound.  As demand for some of their core hydrocarbon-based products are tapering off, oil and gas companies are grappling with how to adapt their businesses to a lower carbon world.

As a result oil and gas companies are diversifying into renewable sources of power, electric vehicle charging solutions - and even electricity retail, bringing them into direct competition with the utility companies that have long been providing energy services into people’s homes.

This will transform the market into one in which traditional utility companies and legacy oil and gas companies are competing to provide these services.

“This will be less about just selling kilowatt hours of power – a commodity - and more about the provision of services, particularly for household energy,” says Adrian Del Maestro, Director of Research in the Energy, Utilities and Resources practice at Strategy&, PwC’s strategy consulting house.

Last year saw two big signs of this new world taking shape:  French oil major Total announced plans to buy Direct Energie in a €1.4bn deal, continuing its expansion into the residential power market, while Royal Dutch Shell has acquired UK power supplier First Utility – recently rebranded Shell Energy - giving it access to retail electricity consumers for the first time.

The power and utilities sector has not been immune from these forces either. In the UK, the growth of renewables, energy storage and digital solutions for energy efficiency have combined to move the electricity generation and distribution model from one that is centralised, to one that involves distributed generation systems producing power closer to the consumer.

New developments such as micro grids - small technological ecosystems that can supplement or replace a central power grid – and local generation and storage, all create opportunities to engage with customers, right into their homes.

In addition to weakening demand for some core hydrocarbon products, two other factors are driving this change: activist investor and consumer pressure for environmentally-responsible energy sourcing; and new technologies.

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