Vandana Gombar: A new avatar for utilities

Giant companies are now becoming lean, mean and agile

The term "nimble utility" is no longer an oxymoron. Those giant companies which generate power - or transmit and distribute it - on the promise of a regulated return are now trying to house multiple "growth" businesses.

Italy's largest power generator, Enel, has offered to install fibre-optic broadband cables across the country using the right-of-way it has for the power network, which gives it a significant cost advantage. Its renewables subsidiary, Enel Green Power, is one of the most aggressive bidders for wind and solar plants in competitive auctions, especially in Latin America.

"This utility business is no longer a slow moving environment but a vibrant place where things can happen very fast," Enel's chief executive officer, Francesco Starace, told Bloomberg News earlier this month.

Cash-rich Fortum of Finland is building a global electric-vehicle charging business, which includes plans for partnership with companies who can process payments for the power through mobile phones. In April, the company acquired a Swedish software developer, Info24, which focuses on the so-called "internet of things". The storage capacity available in electric vehicles, if they are substantial in number, could be used for grid balancing, or even power trading.

Germany's RWE - which listed its renewables and grid business subsidiary, Innogy, earlier this month -has an electric-vehicle charging business spread across 17 countries. Companies like Vattenfall and EnBW are also active in this segment.

Some utilities are choosing to back promising new companies, along with other venture capital firms. Innogy and Engie are among the companies which backed a start-up developing building-integrated solar systems -Heliatek.

In Asia, Japan's Tokyo Electric Power Company (Tepco), has been experiencing high customer churn as all consumers were allowed to choose their power suppliers from April 1, 2016. Over one million of its 29 million customers have already opted for alternative suppliers, who offer bundled gas and electricity services, along with solar panels, internet and even insurance.

India's National Thermal Power Corporation (NTPC) is among the list of utilities exploring new business opportunities. It is expanding its solar target substantially from the current level of 25 gigawatts - 10 gigawatts of owned capacity and 15 gigawatts of procured capacity - and planning to start, and quickly expand, wind power generation. It is also exploring the option of building electric vehicle infrastructure sector in what is clearly a nascent market for such vehicles. "We are looking at different business models and new opportunities like charging stations. Our cost of funding is still much more competitive than others, at 7.48 per cent, so we should be able to get higher returns," NTPC Chairman Gurdeep Singh told Bloomberg New Energy Finance in an interview earlier last month.

NTPC will have to contend with many of these international utilities as they attempt to set up and expand operations in the Indian market. Additionally, there is the phenomenon of the larger users of power securing clean energy supply directly from independent power producers, or generating their own power using panels on their rooftops. It seems utilities have no option but to be nimble to cope with competition, and to grow.

UTILITY - INDIA ACTIVITY

• Fortum, Finland: SOLAR
   
• EDF, France: WIND, SOLAR
  Partnered with SITAC Group for wind in Feb 2016; parted ways with ACME Solar recently
   
• Engie, France: SOLAR
  Bought 95% stake in Solairedirect in July 2015
   
• Enel, Italy: WIND Bought 60% of Bharat Light and Power last year
   
• Statkraft, Norway: SOLAR Joint venture Statkraft BLP Solar Solutions set up last year
   
• TNB, Malaysia: THERMAL, SOLAR Conditionally bought 30% of GMR Energy in May 2016
   
• CLP, Hong Kong: COAL, GAS, WIND
   
• SembCorp, Singapore: COAL, SOLAR, WIND Partly owns Green Infra

Source: Bloomberg New Energy Finance, news reports

The author is editor, Global Policy, for Bloomberg New Energy Finance; vgombar@bloomberg.net