Skewing To Renewables

Communicating the benefits of a smart grid (Image credit: Enel)

When Francesco Starace told the recent UN Conference on Climate Change how different the world’s energy use will look in the future, it carried particular weight: As CEO of Enel, Italy’s largest utility, he’s a leader not only in embracing tomorrow’s innovative technologies, but demonstrating that it’s sound business practice today.

How a business that was a public company less than two decades ago is transforming itself and its markets says a lot about Starace’s leadership, and the company’s ability to match the requirements of its customers with its plans for the future.

“I’m old enough to have seen at least two major breakthroughs in our industry dismissed by experts, and then become norms,” Starace explained.

“I believe we’re at another inflection point now, as technology, financial, and cultural change are structurally skewing the market to renewables.”

Those potential changes could be as disruptive to energy production and distribution as digital was to content. But, unlike building a web site or app, the requirements for capital and time are far greater, as are customers’ expectations for reliability.

“Enel supplies electricity to Bogota, Columbia, which is experiencing an inflow of about 200-250,000 new residents every year, and they want their lights and heaters to work,” Starace said

That’s why one of his first initiatives when he took the helm at Enel in 2014 was to challenge the company’s 70,000 employees to find ways to innovate their jobs. He reconfigured management to push more authority closer to customers, while putting in place regular mechanisms for ideating across business units.

This opened up a vast amount of institutional knowledge, in everything from how plants could conserve energy use (“A car factory doesn’t consume cars, but ours use and discard energy,” Starace pointed out), to process improvements that he described as “the passion engineers have to tinker and improve their turbines.”

This also unleashed some interesting new opportunities.

A decade ago, Enel installed meters across Italy’s homes and businesses in anticipation of a confluence of energy with teleco, water, gas, and other utilities that never materialized. Instead, the 37 million smart meters it runs today are now being reimagined as nodes for smart grids, and a second generation unit will make Italy a world-leader in enabling customer control over how, and how much, energy they consume.

Starace’s innovation strategy has yielded a number of operational benefits for the company, too.

First, its approach to meeting demand requirements has allowed it to stay focused on meeting its performance targets, as the company recently reiterated its earnings projections for 2015, while concurrently introducing a more flexible pipeline of smaller scale projects aimed at reducing investment and regulatory risks.

It also skews its development projects toward renewables, as well as other technology-based solutions, while letting Enel benefit from the best ideas and tools available in the marketplace.

“I don’t think it makes sense for any utility to try to dictate technology, since its development is a self-feeding, evolutionary system.”

“Our role is to be flexible and go along with that transformation, and innovate how we put it to productive use,” Starace explained.

Emblematic of Enel’s approach is its ENabling ELectricity initiative, a drive for electrification in remote, rural and poor urban areas around world. It has already benefitted 2.5 million people by creating access to infrastructure, removing economic barriers and building new renewable energy capacity, such as an off-grid hybrid system that supplies round-the-clock electricity to a small Chilean village’s 100 or so families via PV solar, CSP and mini-wind power plants.

“Who owns the wind, or the sun?” Starace asked me near the end of our conversation. “We are entering a new era in our relationship with energy, and the opportunities for our industry are incredible if we figure out how to innovate our present, as we innovate the future.”