The Innovators Dilemma

Or “what do you do when energy is free?”

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Direct Energy, LP

•5 million customer relationships (largest non-regulated in North America)•S&P “A” credit rating (via parent company, Centrica plc)•Approximately 4,700 employees•1260 MW of power generation in Texas, 88 mmcfe/day production and P&P reserves of 320 bcfe in Alberta•Large Home Services operations in North America

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Disconnected Consumer and Utility Perspectives

Consumer Perspective Traditional Utility Perspective

Weather

Family ActivitiesMedical

Work Tasks

School

FriendsPets

Home MaintenanceEnergy Bill

DinnerElderly Parents

Groceries

Traffic ReliabilityDoctor appt.

Car PaymentVacation

Demand Response

Career

Retirement

Credit Card Bill

Mortgage

kWh

Base Load

CAPEX/OPEX

Rate Base

Net GenerationLoad

Peaking

To raise energy usage awareness a consumer service must acknowledge the noise level and fit into consumers’ lifestyle not simply

show up and expect attention.

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Standalone energy displays or applications will fail.

Regulatory

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The Abyss

Utility Infrastructure Consumer

Power Layer

Communications Layer

Smart Grid Applications

Layer

Control System

AMI, MDM

Generation Transmission Substation Distribution HomeDistributed

Generation and Storage

Corporate Network

LAN/HAN/

Device

Energy Company

Energy Cost

Consumer Info

Consumers

DataLayer

DeviceLayer T-Stat, Appliances

Corp Data Consumer Data

Smart Grid

A Chasm is being created between

Energy Companies and Consumers by

the Smart Grid

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NG Networks: From multiple legacy networks, communications and entertainment services are

migrating to one unified IP-based network

• Consumer usage information in near-real-time for savings decision making

• Utilities can leverage network investments made by communications and data service providers

• End-to-end network connectivity capable of new levels of efficiency and dependability

• Enabling converged services & offerings (e.g., IPTV with on-screen energy usage information)

• Improving customer service (e.g., more opportunities for extended relationship)

• Decreasing CAPEX and OPEX (compared to legacy technologies)

• Fastening time to market of new services & products

Leverage IP-based Next Generation (NG) Networks

Implications

FuturePast/Current

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“Disconnected vertical silo”

Application & service layers

Data Link &Physical

layers

All-IP network

“Interface to horizontal layers”

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AM

RD

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AM

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EM

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Emerging Energy Service Value Chain

Chips Appliances Home System

EnergyInstallation

Electronics HVAC User Interface Billing

Boards Gateway Back Office Repair

Radios Sensors Diagnostics

Communications /Network

Support

Firmware Monitors Remote Access TBD Add-on Svcs

Components Devices SoftwareService

ProvidersCustomer Services

– Direct Energy– Duke Power– AT&T– Comcast

– RSG– Geek Squad– Svc Providers– GoodCents

– Open Peak– Tendril– Google– SmartSync

– Motorola– TI– Echelon– Ember

– GE– Lennox– Scientific Atlanta– ecobee

Challenges face each segment of the value chain and include customer retention, cost effective services, and compelling consumer value propositions - All of these are addressed by working

collaboratively to deliver new consumer services

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New Business Models - NOT

Most current energy markets do not support innovation in business models due to regulated financial structures that preclude new paths to the customer.

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Sailing the sea of customer desires….in search of relevance