Max Claps (Research Director, IDC Government Insights)
Phevos Skalidis (Research Manager)

Electric mobility (or emobility) is a strategic focus for European utilities that want to innovate their business model and find new sources of revenue. The European utility industry is not alone in the increasingly complex landscape of companies involved in mobility. But if they embrace emobility as part of their broader transformation, they will increase their chance of success.

eMobility Acceleration Triggers

With transport accounting for a quarter of the EU’s greenhouse gas emissions, electrification will be key to achieving ambitious environmental goals. As set out in the EU’s Green Deal, a 90% reduction in transport emissions is needed to achieve climate neutrality by 2050. Europe is expected to step up its regulatory push, with the Alternative Fuels Infrastructure Directive heading toward a revision in 2021 and a new Sustainable & Smart Mobility Strategy currently in the making by the European Commission.

Regulatory incentives aside, the economics of emobility are increasingly appealing. Battery costs are rapidly decreasing, inevitably bringing down the price of electric vehicles (EVs). Consumers now have more choice, with car manufacturers launching new models. More charging points are being developed, and cars’ ranges are increasing.

The emerging “virtuous circle” of incentives both for demand and supply helps explain the market’s recent growth. In 2019, electric cars’ market share in Europe rose to 3.5% — an increase of 50% over 2018. With car sales plummeting in the first four months of 2020, sales of electric cars were about 90% higher year on year in the four largest European car markets (France, Germany, Italy, and the U.K.).

Impact on the Utility Industry

Electrification of transportation is just too important a trend to overlook, and has attracted genuine interest and significant investments from both utilities and players in adjacent sectors (e.g., car manufacturers, oil and gas). Infrastructure, in the form of public chargers, will have to be constructed to make EVs a realistic choice for inter-urban transport.

Avoiding congestion in the low-voltage level of the grid will require the development of a bidirectional flow of energy, coined vehicle-to-grid (V2G). Also, services to final energy consumers will have to guarantee frictionless use of private or public infrastructure by integrating it into their customer journey with the utility.

Despite being nascent, electric mobility comes with the promise of new revenue sources. After years of stagnating energy demand in the developed world, this will be a huge incentive for utilities to adopt a proactive stance. Advances in the electric engine are not the only determining factor for the future of mobility from a utilities standpoint.

Shared mobility has rapidly grown in the past few years, providing a compelling solution to the problems of urban transportation. As range anxiety is not an issue for short distances, electric passenger cars, motorbikes, and scooters will give utilities the chance to penetrate this new market. This will enable them to increase their relevance for end customers and at the same time show they are investing in an environment-friendly future.

Sustainable, Electric Mobility

According to The Future of Mobility: An IDC Vision, sustainable mobility will materialize if people consider private vehicles a cost and therefore reduce ownership. There will be widespread availability of AI-enabled connected, autonomous, electric vehicles that will make shared mobility more convenient.

Putting sustainability at the forefront of the way goods and people move is similar to the utility sector’s long-standing efforts toward “greener” energy generation. To realize the benefits, utilities will have to invest in digital to modernize customer experiences, infrastructure, and ecosystem collaboration:

  • User experiences will be further tied to one or more utility of their choice, offering anything that ranges from clean energy supply to an integrated set of services (e.g., electric fleet management, grid balancing, EV charging). This stands in stark contrast with the rather dull, periodic bill payments to the same utility that continue to characterize their interactions with most energy consumers.
  • The evolving mobility landscape will require high capital expenditure, for instance when developing the necessary physical infrastructure. Public chargers will have to proliferate in cities as well as on highways. These in turn will be made possible by expanding the grid in yet another capital-intensive investment. The same is also largely true for shared mobility, as a critical mass of vehicles must be reached before the service’s launch.
  • While large utilities may seek to vertically dominate the mobility space, others will have to limit themselves to segments that enable them to take advantage of their specific positioning along the energy value chain. Moreover, the pressing need for fast scaling will have them participating in joint investments not only with their peers but also with companies such as OEMs, car manufacturers, and investment companies. Partnerships are a means to share both risk (e.g., when investing in mobility start-ups) and knowledge.

Recipe for Success for Utilities in eMobility

To maximize their benefit from the “future of mobility,” utilities should:

  • Align investments with long-term transportation trends. It’s crucial for utilities to map out plans that take mobility into consideration. Interestingly, large utilities are themselves in a position to (co-) shape the future of mobility, and thereby play a double game.
  • Focus on business models that best suit positioning along the energy value chain. Grid operators should invest in charging point networks that will form a natural extension to their current business models, while aggregators, for example, should extend ancillary grid services to encompass emobility.
  • Have a versatile market entry strategy to tackle the blurred industry boundaries. Partnerships (with peers and with companies from other sectors) will be fundamental for utilities; those that don’t partner, risk being left out of the emerging mobility revolution.

Utilities have historically played a marginal role in mobility. Unlike incumbents, whose objective is to protect their stakes amid transformational changes, utilities must prove relevant for the mobility industry in order to stay relevant for their end customers.

 

For more information, read our research:

eMobility: Snapshots from a Rapidly Evolving Utility Ecosystem

Future of Mobility: Impact on the European Utility Industry

 or contact Phevos Skalidis.

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