The Smart Grid sector has an extensive number of conferences, symposiums, and webinars featuring presenters that offer all types of advice to utilities. A good speaker should offer provocative ideas that are positioned to be relevant to the audience. A good speaker gets everyone thinking – or at least those in the audience who are listening.
I’ve been thinking about one recent keynote presentation that focused on the value of branding for utilities. Branding is important for many companies. It helps establish an identity and a set of values such as quality, leadership in a particular field such as innovation or sustainability, and other tangible and intangible characteristics.
The speaker discussed the brands for companies like Apple, Coca-Cola, and Nike. Their brands are very well established and worth millions. For instance, Apple has a cool factor that is part of its brand, and people are willing to pay a premium for their products. Nike has tied its brand to athletic champions, imparting a value of sports excellence in its products. It makes sense – these companies sell products differentiated by design, functionality and/or price. They compete on factors that range from technology innovation, customer service and distribution strategies, and of course, their brands. The presenter urged utilities to think about their brands as part of their overall business strategies. But the examples given illustrated that this is really a comparison of apples and oranges.
Electricity is a service and more importantly, today’s business models make it a commodity. Utilities have a brand, most visibly identified by a corporate logo. Some utilities have successfully established intangible values like technology leadership as part of their brand, although these values may be more well-known within the utility sector than by that utility’s customers. For most consumers, electric utilities are simply the monopolies that deliver electricity. The electrons supplied by my local utility function the same as the electrons supplied by a neighboring utility.
The regulated monopoly business model makes it difficult to differentiate, much less brand electricity service. Even in deregulated utility markets in the USA, retailers compete on price – consumers are for the most part indifferent to brands. There are some differentiators though. Some consumers may select an electricity provider based on the quality of customer service, or the source of electricity – particularly if it is from renewables. However, even in these situations, all the competing retailers are still supplied by one set of wires – hence the natural monopoly of electricity distribution grids. Retailers can’t promise that their electricity coming over the wires is more reliable than their competitors’ electricity because they all get it from the same supplier across the same distribution grid.
Smart Grid innovations in technology, policy, and finance hold the promise to transform utilities from their existing business models. New transactive energy business models may provide opportunities for utilities to build brands that communicate important values to consumers. But until utilities are allowed and encouraged to evolve into transactive business models that provide services and products above and beyond today’s simple electricity delivery, money that could be spent on branding initiatives is much better focused in building resilient, (not just reliable) grids; investing in effective consumer education, engagement, and enlightenment campaigns; and investigating new roles as one of many participants in the future grid.