The New York Times: Edison International Starts Energy Consultancy
By Diane Cardwell, March 29th, 2016
ROSEMEAD, Calif. — Betting that the future of the power industry lies in selling far more than just energy, Edison International, parent to one of the nation’s largest electric utilities, is starting a business to offer energy consulting and management services to commercial and industrial customers.
The business, Edison Energy, was announced on Tuesday and is aimed at helping large organizations like Fortune 500 companies take advantage of evolving technologies, markets and incentives in areas including energy efficiency, renewables and storage.
It is among the first major forays of a utility into energy management services, and is one of the more ambitious examples of how power companies are adapting to customers’ interest in producing and controlling their own electricity and the growing competition from ventures offering them the ability to do it.
While many utilities have tried to stem the flow of customers to alternative service providers, especially the new breed of rooftop solar installers, others are beginning to try to grab a piece of that business for themselves, whether teaming up with companies like Sunrun, a leading residential installer, or providing rooftop arrays themselves.
“This industry has historically been the ultimate in, ‘You get it one way — our way — and at one price,’” Theodore F. Craver Jr., chief executive of Edison International, said in an interview on Thursday at his office here. “But as customers experience much more customization in other industries, they start to ask, ‘Why can’t I have that here?’”
The new business is set up to operate separately from Edison’s utility, Southern California Edison, which serves about five million customer accounts in a 50,000-square-mile area of central, coastal and southern California.
It will serve customers nationwide, executives said, and shows how changes in customer demand and expectations are beginning to force a shift in how the utility industry operates.
For instance, these days, Mr. Craver said, Southern California Edison buys roughly 85 percent of the electricity it sells to customers, owning the plants that produce only the balance of the power it provides.
“In time, energy will no longer be sold as a commodity, but instead delivered as a comprehensive service, in which companies get access to reliable, sustainable and affordable energy and energy management programs,” reads a position paper the company plans to release in conjunction with its announcement. “Through Edison Energy, we want to help create this market for what one might call Energy-as-a-Service.”
In partnership with ReD Associates, a consulting company that uses sociology and anthropology to examine changing markets, Edison spent more than a year studying corporate energy management to develop its strategy.
After surveying and meeting with executives and energy managers at more than 500 businesses, researchers found that although energy represents one of the single biggest costs — and one that is under increasing pressure from rising prices, price volatility and corporate sustainability goals — there is little agreement on or understanding of how best to take advantage of new systems and technologies.
Commercial and industrial customers are looking not only to cut costs but also to take concrete, visible actions to meet sustainability goals. They often lack the expertise needed to, say, negotiate contracts to buy energy from a wind farm, participate in demand response programs or navigate the hodgepodge of local and federal incentives and rules governing installing solar panels or storage equipment on their own, energy and business specialists say. ReD researchers found that though energy is on the agendas of many corporate leaders, managing it is considered a distraction.
“It’s not really core to their business,” said Allan J. Schurr, president of Edison Energy. “Even though they’ve sometimes built staffs to manage that category, it’s not the kind of investment they can continue to make to be best in class.”
At the same time, the electric industry has lagged in filling a perceived gap among companies seeking a credible energy services partner to help them navigate rapidly changing technologies, business models and regulatory policies.
“Just because you’re comfortable making investments in real estate doesn’t mean you’re comfortable making investments in energy within your assets,” said Louis Schotsky, who participated in the ReD research and is first vice president for investments at Equity Residential, a large apartment building owner. “It’s really, really hard to find people who can take a broad perspective on energy and come back to you with an even somewhat unbiased recommendation around what’s best for your property.”
Edison is hoping to fill that gap and, as part of the effort, has been acquiring other companies, including a rooftop solar installer and a business that helps large organizations buy clean energy. It plans to take advantage of its expertise in designing, building and managing electric systems, but to allow the new business, with a more entrepreneurial mandate and separate offices in Irvine, Calif., to be more nimble than the big electric company.
“When you have an industry that has a huge, capital-intensive infrastructure,” Mr. Craver said, referring to the power business, “it doesn’t turn on a dime.”
This article originally appeared in The New York Times.