Digitalization, Disruption, Decentralization: Welcome to the new normal for the energy industry

Decentralization is transforming the energy industry in ways we’ve never seen before, and there are more changes coming.

Consider how electricity now comes not only from distant power plants but increasingly from facilities close to home, if not on the home. Think about how we now generate electricity using renewable resources, with ever increasing points of power generation, storage, management and grid connection all working together seamlessly. Individual consumers and businesses are becoming buyers and sellers within the grid, a status that’s changing the energy landscape.

Many factors are driving this transformation. Entire industries, not to mention product lines, are merging and converging, environmental issues continue to stay front and center, and consumption patterns keep evolving. It’s not as if the energy market was ever simple, but the complexity of this operating environment requires companies to shed old ways of doing things and look for new alternatives.

In this dynamic and distributed market, it’s all about innovation and efficiency. This requires the embrace of new technologies, standards and partners. Among the changes: 

• Residential and commercial deployments are rapidly growing in key renewables markets, including the U.S., China, Australia and Europe.
• Technology evolution and growing cloud-based infrastructure is driving the rise of ‘smart’ IoT products, further enabling the distributed generation model.
• The emergence of storage is reducing concerns about power generation/consumption linearity
• Utilities are monitoring, and often absorbing, new entrants and their business models to develop defensive strategies and exploit disruptive innovations. They are increasingly ready to share their greatest assets in order to develop joint projects with different players.
• Decentralized energy is driving new levels of scalability and changing revenue structures. 
• Data-driven intelligence is becoming each company’s most powerful differentiator: information and insight is critical to future growth and relevance. 

In sum, we see how decentralization and digitalization are changing the ecosystem. Digitalization is key to managing the rising complexity.

Energy Solutions Providers: Transformation and Innovation

So where and how do energy solutions original equipment providers fit into this new world? Of course they need to deliver high-reliability, smart power products that propel decentralization.  But what’s the best way to do that? Here are five critical guideposts consider.

Transformation is critical: It’s not a choice anymore. Forward-looking organizations are already retooling their business models, repositioning hardware as more of an enabler than a core component to deliver digitally enabled products, services, infrastructures and supply chains that competitors can’t immediately match.

Accelerate innovation: Few solution providers have the R&D resources needed to support a constant pipeline. Forming strategic partnerships (even with occasional rivals) throughout the value chain will shrink product development cycles, particularly in critical areas such as high-reliability applications for renewable energy.

Plan to be challenged: Bloomberg recently reported that investments in digital electricity infrastructure grew 20% year over year to $52 billion in 2017. This will help spread innovation throughout the industry—good news for upstarts and a wake-up call for incumbents. 

Put quality, reliability and cost efficiency hand-in-hand: Customers want (and expect) more for less: high-quality products at lower cost with long term reliability. Organizations must maintain harmony between quality and productivity; technical and engineering expertise cannot come at the expense of market and reliability requirements, or vice versa. 

Foster flexibility across the organization: Solution providers must remain sufficiently agile to capture emerging opportunities or mitigate fast-moving risks. Product development cycles need to compress to avoid commoditization.

The Celestica Perspective: A Strategic Partnership

We get it. At Celestica, we see the pressures and the pain points, along with the imperatives and the opportunities. And we believe that the only way to thrive in the decentralized energy ecosystem with innovation and custom IP is to engage partners who understand not only the renewable energy market but also bring perspectives from other markets. 

That’s what we do. In the process, we help our partners navigate complexity, identifying core versus non-core elements in the value stream. This enhances supply chain strategies that maximize the value of assets, and refine the focus on agile growth. We help customers implement these transformational supply chain strategies, from product design and engineering to manufacturing and after-market services.

Example: One company turned to Celestica when it needed to scale production of its solar module-level power electronics quickly and cost-effectively to meet growing demand. It also needed to meet reliability and warranty requirements to ensure that the product was suitably ruggedized for harsh outdoor environments.

Celestica worked with the customer to quickly set up a custom automated production line in our South China facility. Through our expertise in advanced automation, lean production practices, value engineering, test services and ruggedized electronics assembly we were able to successfully deliver the cost, productivity and reliability advantage that our customer needed to win in its market. 

Outcome: We tripled their capacity and saved the company millions. We also collaborated with the customer’s product development teams to optimize existing and next-gen design, ensuring their products were market-ready. Today, the customer considers Celestica a strategic partner that addresses the complete product lifecycle and allows them to redeploy key assets and resources for future growth.

That’s really a template for the future. In this dynamic decentralized environment, it’s almost impossible to go at it alone. The right strategic partner brings a major competitive advantage to every step of the value chain.