Traditional utilities risk obsolescence in the face of more nimble competition, according to Limejump CEO Erik Nygard. He thinks they may not have much time to pivot their business models.
Nygard describes Limejump as neither a demand-side response aggregator nor energy supplier but a “next generation utility”. The firm holds a supply licence but doesn’t yet supply much of its industrial and commercial customer base with power. Within the next 18 months however, that is the plan.
In the meantime, it pays I&C firms as well as universities and schools in return for selling the flexibility in their energy consumption into various demand-side and balancing markets. It also buys and trades power from distributed generators and harnesses their flexibility to ramp up or down to make money from those markets.
Large utilities are also involved in balancing services, but Nygard thinks they may struggle to adapt quickly enough to the customer-led model.
“They are trying to find ways to integrate this into their business models and looking at ways to give better value to their customers. They are all looking at it,” he told The Energyst.
“The problem they will face is whether they have the ability to adapt and scale to the market changes. You never want to underestimate anybody, but on the large utility scale, their real option will be to acquire businesses to get there. Getting there themselves is going to be a ten or fifteen year type game,” he added.
“If they wait that long, in my extreme personal opinion, a lot of them will just fall by the wayside.”
On the flip side, most of the big suppliers own relationships with hundreds of thousands of business customers. They also potentially have the data to see which customers are capable of harnessing flexibility.
“That is true – and a number of them are making steps in the right direction. At the Power Responsive [National Grid’s demand-side response platform] event in June a lot of the big suppliers had stands. So you know the people inside those organisations are looking at it,” said Nygard.
“They have the drive and the will to try and do it – but that is not going to be their problem. Their problem is actually going to be to deliver innovation through to the products that they offer.”
“If they can do it, then we would have significant competition coming at us. But I’m just not that concerned about that in the next 5-10 years.”
While other aggregators may disagree, Nygard thinks that demand response firms will ultimately have to acquire energy supply licences in order to access all facets of the market and maximise revenues for customers.
“Personally I think they will have to, or they would need to start providing far more sophisticated platforms that they can lease or rent to the big utilities,” he said.
“But that is a major technology shift versus where those aggregators are at today.”
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The report coincides with a conference on demand-side response we are running in London on 8 September. There are a few free tickets left for end-user businesses that could provide balancing services. Find out more here.