Jan Vrins - Navigating the Energy Transition: Building a Competitive Advantage

/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED1
NAVIGATING THE
ENERGY TRANSITION
Jan Vrins
Global Energy
Practice Leader
BUILDING A COMPETITIVE ADVANTAGE
OCTOBER 2017

/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED2 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED2
INTRODUCTION NAVIGANT

✓ 50 largest electric and gas utilities
✓ 20 largest independent power generators
✓ 20 largest gas distribution and pipeline companies
✓ Leading oil & gas companies
✓ International, federal, and state government organizations
✓ Multiple new energy market entrants and investors
✓ With over 600 consultants globally we are one of the
largest energy management consulting teams
✓ Consultants average 15 years of experience
✓ 60% have an advanced degree
✓ More than half have an engineering degree
✓ Among Top 10 in Vault’s 2016 Best Consulting
Firms for Energy
✓ Named "Best Advisory – Renewable Energy" in 9th
and 10th Annual Environmental Finance and
Carbon Finance Market Surveys
CLIENTS
TEAM
NAME
WECOLLABORATEWITHCLIENTSTOHELPTHEMTHRIVEINARAPIDLYCHANGINGENVIRONMENT.
+
NAVIGANT’S ENERGY PRACTICE

PROVIDES A WIDE RANGE OF SOLUTION OFFERINGS AND CAPABILITIES
Market
Intelligence
• Research
• Benchmarking
• Data Services
• Market Modelling
• Regulatory Support
• Risk Management, Compliance & Security
• Litigation Support
• Strategy, Planning & Implementation
• Holistic Low Carbon Energy Strategy
• Low Carbon Policy & Implementation
• Financing the Energy Transformation
• DER Strategy & Implementation
• Innovation and R&D Management
• Technology Advisory
• Due Diligence and M&A Support
• Technology/Appliance Standards,
Codes & Testing
• Data Management & Analytics
• Customer Engagement
• Evaluation, Measurement & Verification
• Program Design & Implementation
• Market Adoption & Potential Studies
• End-User Energy Management
• Industrial Energy Strategy & Implementation
• Corporate Climate & Sustainability Services
• Low Carbon Cities Master Plans &
Implementation Strategies
• Urban Energy Infrastructure Strategies &
Implementation
• Integrated Resource Management
• Project Development &Transaction Support
• Grid Planning & Operations
• Grid Modernization
• Smart Market Design
• Offshore Wind
• Performance Excellence
• Resource Procurement

Technologies
Strategy
Implementation
• Distributed generation
• Demand Side Management
• Energy Storage
• Electrification of Transportation
• Building Automation (residential/C&I)
• Information & communication technologies
• Flexibility / demand response
• M&A / Growth / Go-to-market
• New energy products and services
• Customer Engagement
• DER / Renewables
• R&D / Innovation
• Grid Modernization/Technology
• Sustainability and Climate Risk (SBT)
• Strategy Implementation
• Renewable procurement and auctioning
• DER products / services implementation
• Grid Modernization
• Compliance and Security
SOME EXAMPLES OF RECENT PROJECTS
Client Recent Projects
Global Energy Company Smart Cities strategy and roadmap
US Vertically-integrated Utility DER market assessment and strategy
UK DNO DSO strategy
Canadian Electricity Distributor Strategic merger and due diligence support
European Energy Company Transactive Energy Market Assessment
US Utility New Energy Products and Services
European Energy Company DER Acquisition Support North-America
Middle East Utility R&D Centre strategy/implementation roadmap
US Utility
Technology innovation Roadmap and
Implementation
US Vertically-integrated Utility DER Architecture Design
Global Manufacturer Connected Home Strategy
US Vertically-integrated Utility Micro-grid Strategy and Roadmap
US Vertically-integrated Utility EV Integration Architecture and Design
US NY Utilities Renewable Strategy

ENERGY TRANSITION AT A TIPPING POINT
THREE FORCES UPENDING THE STATUS QUO
Technology
Innovation
Regulation and
Policy
Market
Demand
Multiple megatrends underpin utility
industry transformation:
1. Greater customer choice and demand for
more (sustainable) energy options
2. Increased policies and regulations to
reduce carbon emissions
3. Shifting power-generating sources
4. Search for shareholder value: new
ventures and increased M&A
5. Regionalization of energy
6. Merging of mega industries around growth
opportunities
7. Replacement of old infrastructure and
transition toward an increasingly clean,
decentralized and intelligent grid
architecture: the Energy Cloud
Disruption is a prevailing and un-
compromising threat to our industry.

THE ENERGY CLOUD
TOWARD A CLEAN, DECENTRALIZED, INTELLIGENT & MOBILE GRID
PAST: Traditional Power Grid
Central, One-Way Power System
©2016 Navigant Consulting, Inc. All rights reserved.
1 Navigating the Energy Transformation: Building a Competitive Advantage for Energy Cloud 2.0 (white paper)
Source: Navigant
TODAY: The Energy Cloud
Distributed, Cleaner, Two-Way Power Flows

ENERGY CLOUD SCENARIOS
BUSINESS AS USUAL
(Current)
GRID REFORM
(Emerging)
ENERGY CLOUD
(Future)
• Revenue reaches $3.6 trillion
by 2030 (5% CAGR)
• Revenue allocation across
value chain remains mostly
unchanged
• Traditional forms of baseload
generation lead (i.e., nuclear,
natural gas replacing some
coal, moderate uptake of utility-
scale renewables and DER
penetration)
• Smart grid digitization efforts
focused mostly on improving
utility efficiency
• Incumbent utilities control a
sizeable percentage of the
value chain
• Between $1-1.5 trillion in
additional annual revenue by
2030 globally
• Revenue allocation across the
value chain shifts toward the
edge of the grid
• Highly distributed, networked,
and dynamic grid facilitated by
transactive energy
• Utility-scale renewables and
distributed energy resources
account for 50%-100% of
generation
• Energy value chain controlled by
network orchestrators and
prosumers.
THE OPPORTUNITY:
The Energy Cloud has
the potential to
generate more than
$3 trillion in
cumulative revenue
growth globally
through 2030 for the
utility industry.

VALUE SHIFTS TO T&D, RETAIL AND BEHIND-THE-METER (BTM)
ENERGY CLOUD SCENARIOS (EUROPE AND GLOBAL)
Business As Usual
(Conservative)
GRID REFORM
(Moderate)
ENERGY CLOUD
(Aggressive)
$745bn
(global: 4.7tr)
$825bn
(global: 5tr)
$1.0tr
(global: 6tr)
Generation
Transmission &
Distribution
Retail and
BTM
Value
2030

IMPLICATIONS FOR ENERGY COMPANIES
FACING THE COMPETITION AT THE EDGE OF THE GRID
(Source: Navigant)
Tech Telecom Oil&Gas Retail Manufacturer Security DER Auto
Disruptors are cash heavy and thriving in-house R&D engines…
Disruptors are cash heavy, thriving in-house R&D engines, own the customers relationships…

ENERGY CLOUD SCENARIO’S
DER GROWTH ACCELERATING IN EUROPE
(Source: Navigant Research)
Annual Installed DER Power Capacity Additions
by DER Technology, Europe: 2015-2024
-
20,000
40,000
60,000
80,000
100,000
120,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
MW
Distributed Generation
Distributed Energy Storage
Microgrids
EV Charging Load
DR
Energy Efficiency Savings
Observations
• DER deployments
will reach ~40 GW
this year in Europe.
• DER is expected to
grow 6 times faster
than new central
station generation in
the next 10 years
(648 GW vs. 105
GW)

IMPACTS ON ENERGY COMPANIES
UNDERSTANDING THE IMPACTS OF THE ENERGY CLOUD

STAY IN OR CHANGE THE GAME
WE SEE TWO NEW EMERGING STRATEGIC PATHWAYS
Stay in the game
Change the game
Energy as a Service
“EaaS”
Platform
orchestration
• Move from asset owner to services
• Integration of several technologies
• Bundled devices
• Enable collaboration and transactions
• New economy trading on platforms
• Dynamic services
• New revenue streams and business
models
?

1. STAY IN THE GAME
STRATEGIC PATHWAY : ENERGY-AS-A-SERVICE
Supply Services
• Solar, Wind, Bioenergy
• CHP, Fuel cell, H2
• Backup generation
• Storage, Microgrids
Demand Services
• Energy efficiency
(lighting, HVAC etc.)
• Building optimization
and commissioning
• Demand response
Energy Optimization
Services
• Energy monitoring &
load management
• Waste/water/energy
nexus
• Robotics / AI / ML
Today
2030
$63B
$221BIntegrated
Deployments
Bold & Digital
Moves
Source: Navigant, global figures
EaaS
Applications
Industry
Evolution
and Growth
Point
Solutions

2. CHANGE THE GAME – ENERGY CLOUD PLATFORMS
UNLOCKING NEW AND ADDITIONAL VALUE
ENERGY
CLOUD
PLATFORM
Products &
Services
Applications
Comm. and
Data
Technology
Data &
Analytics
Infrastructure
(Physical & Data)
Customers
(needs/value
proposition)
What is an EC platform ?
• Connect customers and partners
• Reduce cost of value creation
• Economies of scale
• Not a traditional business model
Enable scalable disruptive energy
technologies
Unlock multiple new energy services
and revenue opportunities, dynamic
pricing
IT/OT convergence, data-analytics
on steroids
Customers will determine how value
is created, quantified, and distributed
Energy cloud platforms - value created
Business Model Scale Factor Profit Margin
Asset Builder 1.5x 27.9%
Service Provider 2.5x 47.1%
Technology Creator 4.7x 61.6%
Network Orchestrator 5.8x 69.5%

FROM INNOVATION TO ORCHESTRATION – SEVERAL EVOLVING PLATFORMS
Why Energy Cloud platforms?
✓ Margins on individual technologies will erode even faster going forward (e.g. rooftop solar, storage)
✓ Difficult to scale and build a sustainable business around individual (siloed) technologies
✓ Need for orchestration, to unlock full value out of these platforms and technology ecosystems
iDER
Building2Grid (B2G)
Transportation2Grid (T2G)
Internet of Energy / Things (IoE)
Transactive Energy
Neural Grid
Smart Cities

By 2025...
• DER will grow 3-5x
faster globally than
central station
generation giving rise to
virtual power plants
(VPP) and other
aggregation networks
iDER
• Residential and
commercial customers
will invest more than
$50 billion in behind-
the-meter integrated
energy assets to take
advantage of B2G
opportunities
BUILDING2GRID
• Electric vehicles will be
the single largest
addition of energy
demand to the grid
globally, exceeding 200
TWh
TRANSPORTATION
2GRID
• Annual global revenue
from IoT devices will
grow 4x generating
nearly $750 billion in
cumulative revenue
INTERNET OF
ENERGY
• Global revenue from TE
software used in VPPs
expected to exceed
$5 billion
TRANSACTIVE
ENERGY
• Global utilities will invest
more than $700
billion upgrading their
information technology,
communications
networking and
automation capabilities
NEURAL GRID
• The smart city
technology market will
be worth more than
$600 billion with
annual revenues
growing almost 2.5x
SMART CITIES
…and orchestrators
will be the fastest growing
and most profitable
business model category
across the utility value
chain by leveraging assets
and customer networks
ENERGY CLOUD
ORCHESTRATOR
Source: Navigant
ENERGY CLOUD PLATFORMS AT A GLANCE

2. CHANGE THE GAME - ENERGY CLOUD PLATFORMS
TRANSPORTATION EXAMPLE
• Real-time energy balancing
• Peak-shaving load shift
• Distribution peak capacity support
• TOU energy management
• Power quality
• Backup power
• Supply firming
• Frequency regulation
+ Car sharing services, fleet management
Capture grid related value streams on top of load growth and fleet management services.
Example
Customer-focused vehicle-to-grid system.
Enable drivers and energy users to operate
as individual energy hubs with the ability to
use, store, and return excess energy to the
grid. First trials in Denmark, followed by
Germany and the UK.
If all UK vehicles were electric, the virtual
storage facility would be the equivalent of 370
GW of capacity - enough to power the UK,
Germany, and France.
.
with
Value streams

2. CHANGE THE GAME - ENERGY CLOUD PLATFORMS
TRANSACTIVE ENERGY EXAMPLE
Local community energy platform - Enabling customers to Choose Local Green Power
Value streams Example
• Prosumers – additional revenue ,
better than feed-in-tariff
• Consumers - choose local
renewable sources as their
suppliers
• Network operators:
• Reduce grid defection, e.g. by
allowing end-users to participate in
green power without installing it
• Stay relevant, prepared, and
engaged during the massive grid
transformation
• Get valuable blockchain
deployment experience
• Matched energy production and consumption among
renewable power prosumers and end-users
• An edge-centric technology
• Guaranteed transmission savings are passed along to
participants

MOVING FORWARD
KEY TAKE AWAYS – PLAY OFFENSE AND DEFENSE
Need to pursue two parallel tracks
Business model
evolution will be key
to survival
Network Orchestrator
business model
emerges in energy
and beyond
First track – Play Defense
Second track – Play Offense
Competitors are
active, bold and
digital
• More scalable, integrated, and cost-effective
services to optimize the current business
• Ensure core business remains resilient while
freeing up resources (human and financial)
to invest
• Departure from well-worn norms of strategic
planning
• Focus on lucrative, high-growth
opportunities around Energy Cloud
platforms and orchestration
• Cultural change + Regulatory & market
change

HOW CAN WE HELP
✓ Strategy Planning and Execution Support
✓ Energy Cloud Playbook
✓ iDER assessment and strategy
✓ Technology Assessment and Roadmapping of EC Platforms
✓ Investment Strategy, Analysis, and Decision Support
✓ Business Case Analysis to Support Investment Decision and
Regulatory Approval
✓ Performance Excellence, Business Process & Redesign, Program
Planning and Implementation Planning
✓ Data Analytics: Customer and Operations
✓ Value Realization and Verification
Navigant can assist in a number of areas:

/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED22navigant.com
CONTACT
JAN VRINS
Global Energy Practice Leader
305-341-7839
jan.vrins@navigant.com
Linked-In:
https://www.linkedin.com/in/janvrinsnavigant
Twitter:
@Jan_Vrins
TAKE CONTROL OF
YOUR FUTURE
North America
Europe
July 1, 2016
NAVIGATING THE
ENERGY
TRANSFORMATION
August 24, 2016
STATE & FUTURE
OF THE POWER
INDUSTRY
July 5, 2016
ENERGY CLOUD
PLAYBOOK
PUF – July Issue
RELEVANT
THOUGHT
LEADERSHIP

Jan Vrins - Navigating the Energy Transition: Building a Competitive Advantage

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Jan Vrins - Navigating the Energy Transition: Building a Competitive Advantage