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What happens when the energy business model doesn’t work any more?

The electricity industry is facing up to exactly this question with the growing realisation that demand for their commodity has peaked, and no amount of marketing will make the public want to buy more – it’s just two expensive. What’s worse, the arrival of “socket parity” for solar PV for residential and commercial users threatens to reduce demand even further, leaving utilities with declining revenues even as they invest more in infrastructure.

The significance of this should not be underestimated. The utilities are presented with a terrible dilemma and are not too sure how to react, particularly with politicians from the nation’s mainstream parties trying to run up the escalator the wrong way. The most obvious strategy might be to gradually morph the business model from a commodity-based one to a service-based one, as is starting to happen in Europe. But as energy utilities have historically had one of the worst business-consumer relationships of any industry (this tends to be a global phenomenon, not just Australia) this is a massive cultural leap, and would take a CEO with leadership and vision to push through – or a realisation that a host of other service providers, from retailers, IT firms, solar technologies and other, would eat their lunch if they didn’t.

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