Citi Report on Energy Darwinism

With the advent of smart grid technology and increased automation, utilities companies are facing a massive change in the way they distribute and monitor power. The uproar increased after a recent report by the investment banking company Citi that focused on energy Darwinism—the evolution of the energy industry. The report focused on the increasingly easy availability of alternative energy sources and likened utilities companies to dinosaurs, which has sparked a considerable amount of debate and worry in the industry.

Though environmental groups have been predicting the end of the traditional fossil fuels industry for decades, many utilities professionals have dismissed them as alarmists. The Citi report, on the other hand, came from the company’s analysts responsible for research in utilities, oil and gas, commodities, metals and mining, and alternative energy, making it impossible for the utilities industry to ignore.

The Citi report, which is entitled “Energy Darwinism: The Evolution of the Energy Industry,” states that developed markets around the world are now spending more on renewable energy sources rather than traditional methods. It makes a point of mentioning Japan, which has made a massive shift to solar energy in response to the high cost of burning natural gas. Other growing solar markets exist in Australia and Germany, according to a recent story in Echo NetDaily.

In fact, says the report, the change to alternative energy sources is happening in all types of markets, at varying rates; rather than slowing down, the rate of renewable energy adoption is increasing. Based on the available information from markets around the globe, Citi predicts that fossil fuels are likely to become more expensive and less popular. It likened the process to evolution and coined the phrase “energy Darwinism” to hint at the possibility of extinction.

According to Citi, the implications of energy Darwinism on utilities companies will be significant. The report lays out two possibilities. Successful companies, it says, will adapt their energy strategy to the increase in demand for renewable energy by investing in smart grid technology and updating their infrastructure to help consumers integrate alternative power sources. Other companies will refuse to change their energy strategy and, as a result, will wind up as state-funded, asset-based businesses.

Though the energy Darwinism idea seems dramatic, the Citi report simply points to the fact that utilities companies are facing a major shift over the coming decades. As the learning rates for consumer-built renewable energy sources speed up, utilities companies will need to keep pace.

As companies across the utilities industry conduct their own studies to determine how best to respond to Citi's assertions about energy Darwinism, it seems certain that change is coming. By preparing for the eventual shift in consumer demand, utilities companies can reduce the impact on their employees and bottom line.

(Photo courtesy of freedigitalphotos.net)