“The oil companies, just like the electric utility incumbents, have to figure out different ways to use their assets, capabilities and, most difficultly, cultures to compete in a very different market,” Amory B. Lovins said in a recent interview at his showcase green home in the mountains near Snowmass, Colorado. “This change in the market is coming at them at a speed they can scarcely imagine and much faster than their cultures will find it easy to cope with,” he added. Lovins is the chairman of Rocky Mountain Institute, an „independent think and do tank“ with the goal of creating a clean, prosperous, and secure energy future, as the professor pointed out. As the RMI’s chief scientist, Lovins has been researching, publishing and advising at the nexus of energy, resources, economy and the environment.
The rise of the energy insurgents
Anyone aspiring to comprehend current trends in global energy markets must reckon with the words and ideas of Amory B. Lovins. Over four decades, Lovins has established a reputation as perhaps the world’s foremost authority on energy efficiency and clean energy solutions.
In the wide-ranging interview, he tackled some of the most pressing and vexing challenges at play in global energy markets. For the electricity sector, the challenges are largely the work of increasingly affordable demand management practices and distributed energy resources that threaten business as usual in an industry that had not changed much in more than a century. The agile, aggressive competitors attempting to scale disruptive technologies – “insurgents,” as Lovins called them – have eroded advantages enjoyed by incumbent utilities.
“Insurgents” set the pace
Lovins has written extensively about such disruption in Europe’s utility market, noting that the large incumbent utilities were slow in responding to a shifting landscape. Can these utilities pivot fast enough to succeed in the new market? “Time will tell,” he said. “It’s certainly faster once you start. These are companies that have wonderful technical skills that we need, and I hope they can thrive in the new world. They supposed incumbents would set the pace of the transformation. That isn’t actually what happens. Insurgents set the pace.”
“If you’re an incumbent utility faced by this swarm of insurgents on the demand and supply sides,” he went on, “there are a number of ways you can respond. Ostrich is not a wise posture. Trying to tax, fight, or block the insurgents isn’t a very smart strategy either, partly because it annoys the customers so they will leave faster.”
So how should utility executives respond to the real and urgent threats to their business models? Lovins offered some advice: “You could buy the insurgents and offer their products as your own branded product. You could become an integrator of all technically qualified offerings. You could become a financier of the transition. You do, after all, have customer relationships, financial expertise, and large cash flows. There’s no particular reason you should own assets on only one side of the meter. There are other coopetition models that may also make sense and make money.”
Asked what the relationship between today’s incumbent electric utilities and customers will look like 10 or 20 years in the future, Lovins said, “Customers are figuring out that they can buy fewer electrons, use them more productively, and produce more of their own, and it’s a good idea to sell customers what they want before someone else does. All the rest is detail.”
A renaissance man
Lovins proved to be an especially accommodating host, making time for interviews, photos, and a home tour. He also revealed himself to be a renaissance man. Apart from his status as an energy policy expert, Lovins can add indoor horticulturist, self-taught linguist, calligrapher, and pianist to his resume. Over the course of an afternoon, Lovins proudly showed off the 58th crop of bananas grown in his living room greenhouse, wrote his name and nickname in Chinese calligraphy, and flawlessly performed Beethoven and Bartók on his grand piano.