Electricity is a key driver of our global economy. The utilities industry is at a turning point: Electricity demand is rising rapidly in growing economies like China, India, and other emerging markets. At the same time, the capacity to generate power is tight in many countries, and large investments in power-grid infrastructures must be made in the coming years.

The International Energy Agency (IEA) estimates that an investment of more than US$7 trillion in new power-generation assets will be required to satisfy growing demand. In addition, about $6 trillion will be needed to extend and upgrade the electricity grid infrastructure. According to the IEA:

• Electricity use will nearly double by 2030
• The share of coal-fired power stations is expected to increase from 40 percent to 45 percent, and will continue to dominate the fuel mix
• CO2 emissions are expected to rise by 57 percent through 2030; India and China alone will be responsible for nearly 60 percent of the expected incremental CO2 emissions
• Alternative green strategies could reduce global carbon emissions by 19 percent by 2030, but would require a significant increase in renewable power generation and energy efficiency measures

These figures illustrate the importance of changing the existing electricity system to a new, efficient, reliable, and clean system of the future. The smart grid is the platform for this new energy system. Smart grids improve the integration of renewable and distributed power generation sources, drive energy efficiency on the consumer side, and provide access to future vehicles, such as plug-in hybrids and electric cars.

IBSG Helps Shape Future Market Developments

The Utilities Practice within the Cisco Internet Business Solutions Group (IBSG) is involved in many strategic customer engagements to support key initiatives and help them along the value chai—from power generation, to trading, to transmission and distribution, to retail. For instance, the Practice helps leading utilities define their smart-grid strategies, including the development of options to implement a smart-grid infrastructure and work out new business models for a changing market. Key industry themes are:

• Security of supply—what are the options for satisfying future growth in demand?
• Smart-grid strategy—how do smart grids impact the utility industry’s future business models and what are the regulatory implications?
• Collaboration—how can leading utilities increase their effectiveness given rapid international expansion?
• Customer strategy—how can utilities increase their customer retention given the rise in competition?

The utility industry of the future will have a different business model. Today, the industry makes most of its money from power generation. In the future, there will be a better balance between revenue derived from power generation and revenue derived from retail; under this new model, traditional electricity suppliers will become electricity service companies. IBSG is here to help leading utility companies transition to this new model, proving strategies and support as they prepare for a changing market.