electric vehicle only sign

by Simon Vardy, Managing Director, Accenture Australia Utilities Strategy Practice

With electric vehicles, utilities have the perfect innovation to help reinvent their business models in a changing energy climate.

With the record earnings announcements of the listed utility companies in Australia recently, it may come as a shock to many that for some years now, utilities have been desperately looking for ways to reinvent themselves.

The headwind is facing the sector, and unless utilities find a viable alternative to their traditional revenue streams, they will find themselves fighting with each other and regulators over a static and ever declining revenue base. This is true for all companies across the utilities value chain, from generators, transmission and distribution to retail.

Apart from the effects of adverse regulation, highlighted recently by the ACCC, the biggest issue is declining or static electricity demand, and disruption from new entrants and substitutes such as solar and battery power.

Utilities need to find a way to “pivot wisely” – that is, transforming their core business, while at the same time scaling up new lines of business that may eventually supersede traditional revenue streams. Critically though, it is also about embarking on this transformation while the old business can still fund it.

Perhaps a lot of the answer is about getting back to basics and asking the question, “What will actually grow demand”?

Two areas that will significantly increase electricity demand in this country, besides a major upturn in manufacturing activity, are bitcoin mining going viral and electric vehicles (EVs).

Bitcoin mining aside, EVs have the promise of offering increased generation load, new high power connections, greater infrastructure utilisation in off-peak times, and new products, services and innovations.

So just what is the status of electric vehicles in Australia compared with the rest of the world? Sales have just passed the four million mark globally. Yet in this country, normally a fast technology adopter, we are well under-represented, with just 2400 electric vehicles sold in 2017. The reasons for this are varied, from lack of choice and high price points, to concerns over distance
required before charging.

However, attitudes are changing, and there are signs of upswings in demand. Concerns have moved on from “range anxiety” to “infrastructure anxiety”, with owners worried about whether the free charging station at the local shopping centre is available, or if there is a long queue.

As more vehicle manufacturers announce new models to be released in Australia, there at last appears to be an ever growing supply base covering the spectrum of transport needs (by late 2019 Australia should have at least ten different models available from Nissan, Hyundai, Ford and Tesla).

Australia even has a homegrown, globally successful smart charging station manufacturer based in Brisbane – Tritium. One of its products, the ultra fast 350kW charger, offers to finish charging an electric vehicle in under four minutes.

EVs are forecast to grow to five per cent of total car sales by 2022, which is when the uptake curve is predicted to really take off. The price parity with our current fossil fuel vehicles will be about 2024-2028, which means the next four to five years will determine which EV service providers (including utilities) will catch the wave and which will be left struggling to catch up.

Four to five years may seem like a long time, but it’s well within the normal corporate planning horizon and payback time for most consumer infrastructure investments.

So, what should utilities do to encourage electric vehicle take-up in Australia? Accenture suggests there are six categories of intervention:

  • ‘Coopetition’ between Australian utilities may be helpful. This is the act of collaboration between competing companies in the exploration of knowledge or new market developments. For instance, Samsung Electronics and Sony collaborated in 2004 for the development and manufacturing of flat-screen LCD panels.
  • Combine other energy offers and bundles to reduce operating costs for a range of energy consumption or lifestyle options, for example, low emissions home and transport.
  • Highlight the cachet and appeal of electric vehicles – make them the iPod of the 2020s and appeal to higher net worth and early adopter market segments.
  • Offer innovative financing options to reduce upfront costs and spread the costs over the life of the vehicle (combine with behavioural economics to promote the low running costs).
  • Join with car and charging station manufacturers to wrap-up bundled offers and link your brand to the outcome, for example, “under ten-minute fast charge in all locations powered by XYZ”.
  • Finally, lobby governments to adopt similar measures to other high adoption localities like California. This could mean adopting vehicle emission standards, reducing purchase costs like the luxury vehicle tax and fund touring route charging infrastructure.

It’s a pernicious problem that faces Australian utilities. Electric vehicles are a definite part of the solution, but should the rate of uptake prove too slow and prolonged, then utilities will have no choice but to explore revenue streams that will be even harder to exploit.

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