Opportunity amidst disruption

How energy transformation is shaping Canada's utilities sector

96%

of Canadian utility executives expect significant disruption to occur as a result of energy transformation.

43%

of Canadian utility executives believe current business models won't be sustainable with energy transformation.

39%

of Canadian energy consumers most trust their utility provider for information about energy consumption.

57%

of Canadian utility executives agree their regulator is holding their company back.

The impact of energy transformation

The utilities sector in Canada and around the world is experiencing a profound transformation unlike anything seen before in terms of scale, scope and speed. For Canadian utility companies, this transformation is impacting long-held business models—and compelling executives to chart a new path forward in a shifting and uncertain landscape.

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Opportunity amidst disruption: Highlights

Our report identifies four transformational forces driving this rapid and relentless wave of change: technology, customer engagement, policy and innovation. Canadian power and utility companies will need to embrace new technologies to help drive innovation, use data to better understand their customers and work with regulators to adapt to constant policy changes. Are Canada’s utility executives up to the task? We believe they are. Watch our power and utilities experts take a deeper look at the results of our two national surveys (one of utility executives, one of energy consumers) and further explore the four key drivers of energy transformation to better understand how they each impact Canada’s energy sector.

 

Explore the key findings

Transformation is already happening

Three quarters of Canadian utility executives expect to see some transformation of their energy market over both the short-term, to 2020 (73%), and long-term, by 2040. (75%). Notably, 18% of executives feel their market will undergo dramatic changes in the short term, which may reflect the impact of recent policy changes at both the federal and provincial levels. Ontario and Alberta respondents were more likely to foresee dramatic changes in their local energy markets over the long term.

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The energy trilemma: Sustainability takes the lead

Canadian utility executives rate the strength of their province’s positioning in the trilemma

There is an ever-shifting tension in energy markets between three key elements: security and reliability of energy supply, the need for clean and sustainable sources of energy, and keeping energy affordable. Canadian utility executives believe that in the short-term (2020), security of supply is the top priority in their province—reflecting, perhaps, that as markets shift to renewables, there is an immediate need to ensure customers have the energy they need at all times. Over the long-term (2040), the vast majority of executives expect that delivering cleaner, more sustainable energy will take precedence.

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Subsidies and conservation initiatives seen as major policy drivers of energy transformation today

Which of the following initiatives play a major role in energy transformation in the province in which your company operates?

Nearly three quarters (71%) of Canadian utility executives believe that government policy and regulatory changes will impact their companies the most at this point in time—and they’re quick to identify the policy initiatives that are playing a major role. Sixty-six percent of executives say renewable energy subsidies are a key initiative driving transformation; 48% cite measures and programs promoting energy conservation; and 39% point to subsidies and grants for smart grid, storage and other new technologies.

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The rise of distributed generation in Canada

Distributed generation is the technology expected to have the greatest impact on energy markets across Canada, cited by 93% of executives. As solar technology becomes increasingly affordable and effective—and as efficient energy storage becomes a reality—more business and residential customers are expected to opt to self-generate some or all of their energy. It’s a shift that could significantly reduce power demand and revenue, while creating a far more connected and complex energy grid.

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Electric vehicles, storage top of mind for distributors

What type of impact do you expect each of the following distribution/retail technologies to have on your market?

Executives from energy retailing and distribution companies see electric vehicles playing an especially pivotal role in a transformed energy market: 93% feel electric vehicle adoption will have a major impact on their business by 2040, compared to only 36% who see this trend having a significant impact between now and 2020. And they aren’t the only technology expected to have a large impact on energy retailing and distribution over the next 25 years. Eighty-six percent of Canadian utility executives expect smart grid technology, smart metering, new energy efficiency technologies and energy storage to play a significant role in reshaping this part of the energy sector over the next two-plus decades.

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Canada sees more potential in storage than global counterparts

Major/moderate impact of storage technology on energy transformation in the long term

Canadian utility executives believe energy storage is more viable, compared to their global counterparts. Eighty-six percent believe new storage technologies will play a role in transforming energy markets over the short term, compared to 44% of energy executives globally. Over the long term, 82% of Canadian executives see energy storage as a key component of a transformed energy sector, while only 47% of their global peers agree. Why do Canadians see energy storage as such a viable game-changer? It may be because our long experience with hydroelectric generation—where dams create literal reservoirs of stored energy—has given us a unique perspective into how storage can be used to improve the reliability of our energy supply.

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From asset-centric to customer-centric

Utilities are beginning to shift away from the asset-centric perspective that has dominated their thinking virtually since inception and have begun placing their customers at the heart of their business strategy. Almost all (93%) of the executives we surveyed say customer experience is important to their business, and their companies are engaged in a variety of engagement activities. However, there may be a disconnect between this belief and the 21% that feel customer experience is a major component of energy transformation; it may be that many companies underestimate the real importance of customer engagement in the energy market to come and have been lulled into a false sense of security by the current lack of competition.

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Trust and transparency are valuable assets

Canadian energy consumers indicated which organization they trust the most to inform them about managing their energy consumption

Canadian energy consumers believe local utility providers are the most trustworthy source of information about their energy use—above governments and governmental organizations, environmental associations, and academic or scientific bodies. Four out of 10 Canadian energy consumer respondents (39%) most trust their local energy provider or utility to inform them about actions they can take to manage or optimize their energy consumption. The strong level of trust Canadian energy providers enjoy is a tremendous asset, one that can serve as the platform through which to get strategic messages across or, potentially sell new products or services as the market evolves, ultimately paving the way for new revenues streams for companies.

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Improving consumers’ energy literacy could pay dividends

The majority of Canadian energy consumers say they understand their energy bills to some degree (86%), but there’s much room for improvement. Only 35% of consumers feel they understand their bills completely. That figure rises to 44% in Quebec and falls to only 18% in Alberta, where a complex energy market results in equally complex energy bills. Energy providers that help their customers understand their energy costs could also serve to reframe the conversation with a greater focus on the value of the products and services they receive. This could, in turn, lay the groundwork for future conversations and sales down the road—if energy companies can create enough opportunities for engaging their customers.

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In a transforming energy market, reacting isn’t enough

Canadian energy executives feel a number of market models could eventually evolve to take the place of what’s currently in place— ranging from “green command and control” to ultra-distributed generation with highly decentralized, local energy systems and regional “super grids.” Little wonder that 43% of Canadian energy executives say that existing business models aren’t sustainable in a transforming energy market, although they also believe that change will be gradual.

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Keeping an eye on new competitors

Percentage of utility executive respondents reporting high/moderate competitive threat from outside the sector

Canadian utility executives don’t appear to be especially worried about new competitors. Only 14% of executives feel competition from existing or emerging players will have the most impact on their companies over the short-term—and that drops to 11% over the long-term. Despite signs that technology giants and others are getting involved in the energy sector, Canadian executives are most concerned with domestic competitors: 55% believe that utilities based in their province or elsewhere in Canada pose the primary competitive threat. In contrast, global utility executives are far more likely than Canadians to view powerful retailing or technology brands as significant competitors in the years to come.

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Affordability as a policy focus

Canadian utility executives indicate which objectives should be a priority for their province’s energy policy?

Seventy-one percent of Canadian utility executives believe government policy and regulation has played a major role in driving energy transformation in recent years—much higher than the 52% of their global counterparts that feel the same way. It’s likely that Canadians’ perspective is shaped by recent moves by Canada’s federal government and the Ontario and Alberta governments to accelerate the move away from fossil fuels in order to meet global climate change targets. Canadian utility executives are also quite clear on where policymakers should focus their attention in years to come: 82% believe their provincial governments should prioritize making—or keeping—energy affordable.

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Does today’s regulatory model hinder innovation?

Federal and provincial governments have taken many steps to evolve Canada’s energy markets by creating subsidies, grants and other incentives to promote renewables, energy efficient technologies and more. Unfortunately, many utility executives believe regulators are inadvertently getting in the way of more rapid innovation. While two-thirds of respondents (68%) believe their company’s business model is evolving with the pace of energy transformation, more than half (57%) say regulators are holding their company back. The reason may be a disconnect between government policymakers’ aspirations and the mandate and tools available to energy regulators themselves.

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What themes do we see?

Technology: Technological advances coupled with the consumerization of energy is driving rapid, significant transformation in utility companies across Canada, revolutionizing energy markets and disrupting business models in the process

Customer: Utility companies that can develop a solid understanding of their customers’ needs and preferences—and deliver an outstanding customer experience across every point of contact—stand to realize a powerful advantage in the competitive market to come

Policy: Governments and regulators play a significant role in shaping the future of the country’s energy sector. The connection between policy and energy transformation is certainly foremost on the minds of energy executives.

Innovation: To remain competitive, profitable and successful, utility companies across Canada need to embrace change, new ideas and new processes throughout their business.

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Innovation

To remain competitive, profitable and successful, energy companies across Canada need to embrace change, new ideas and new processes throughout their business.

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Technology

New technologies are changing how utility companies in Canada and worldwide generate, transmit and distribute power and gas—and enabling their customers to generate and store power themselves.

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Policy

Government and regulatory policy is forcing energy companies to continually adapt as legislators and regulators push for greener, more efficient and more flexible energy markets in their jurisdictions.

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Customer

Utilities that can develop a solid understanding of their customers’ needs and preferences—and deliver an outstanding customer experience across every point of contact—stand to realize a powerful advantage in the competitive market to come.

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Regional viewpoints

How is energy transformation impacting the different Canadian regions?

Ontario

Brian Poth, Partner, PwC

National Power & Utilities Leader

Alberta

Helen Bremner, Partner, Strategy&

Energy & Utilities

 

Quebec

Nochane Rousseau, Partner, PwC

Energy & Utilities Leader, Quebec

 

 

Related content

A different energy future

Where energy transformation is leading us

Contact us

Brian Poth
Partner, National Industry Leader, Power and Utilities
Tel: +1 416 687 8522
Email

Helen Bremner
Partner, Strategy&, Energy & Utilities
Tel: +1 403 509 7404
Email

Nochane Rousseau
Quebec Energy, Utilities & Mining Leader and Perspective North Initiative
Tel: +1 514 205-5199 
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Arun Gupta
Western Canada Finance Effectiveness Leader
Tel: +1 403 509 7585
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Ken Goodwin
Partner, National Deals Leader, Power & Utilities
Tel: +1 416 814 5760
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Eric Clarke
Partner, National Assurance Leader, Power & Utilities
Tel: +1 416 687 8801
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Matthew Wetmore
Partner – Canadian Energy, Utilities, Mining & Industrial Products Leader
Tel: +1 403 509 7483
Email

Lana Paton
National Managing Partner, Tax
Tel: +1 416 869 8700
Email

Contact us

Brian Poth
Partner, National Industry Leader, Power and Utilities
Tel: +1 416 687 8522
Email

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