Amazon Just Broke Into Health Care. Is Energy Next?
WHY YOU SHOULD CARE
The tech giant might take aim at the utility industry next.
By Molly Fosco and Ned Colin
Technology is omnipresent, but there are still a few apps and services that would be missed if they disappeared. If you could no longer order shampoo, toothpaste or a television for delivery within a day or two, you would notice. The same for no longer being able to watch almost any movie ever made with the click of a button. So if Amazon evaporated into thin air, life would be very different.
Last year, the tech retail giant announced it would partner with Berkshire Hathaway and JPMorgan Chase to create a new venture aimed at using big data to lower the rapidly growing costs of U.S. health care. Amazon’s foray into the health sector, an essential industry, raised the obvious question: What would happen if Jeff Bezos’ behemoth made a play for other essential industries?
Austin Whitman, vice president of energy markets at FirstFuel Software, speculates that the utility industry could be next. After working in the clean energy space for over a decade, Whitman believes the world needs more analytics and intelligence when it comes to energy consumption. To get ahead of an Amazon disruption, energy stakeholders should consider how this would affect the industry. Whitman shared his thoughts with OZY.
Which utility sectors is Amazon most likely to get involved with?
It’s interesting to think about what Amazon is doing for health care. It’s a slow-moving, very regulated sector and they’re thinking about how to improve it. There are a lot of parallels between health care and utility. There are a lot of things you can do to provide energy that don’t necessarily mean you own power plants, or the transmission lines and heavy infrastructure. There’s a lot of focus right now on the retail aspect of energy provision, and if I had to guess, I would say Amazon would be more involved in retail innovations. They have a history of operational and logistics innovations — being able to bring you a gallon of milk in two hours, for example — so I think there’s a lot they could do on the retail side.
Which utility providers would do well to avoid an Amazon takeover?
Well, it’s a question of whether Amazon would take over an established provider or become an energy provider on its own. I don’t see any likely takeover targets unless they were to look at what’s called a competitive energy retailer — companies that buy energy from generators and sell it to customers but don’t actually own any of the infrastructure. We’re starting to see more of a split. For example, Pacific Gas and Electric (PG&E) in California wouldn’t send you the bill, it would be sent by another company. So PG&E becomes the logistics provider that gets you the energy but someone else actually works out the deal, sends you the bill, determines prices and manages your relationship. Many regulators see this as a way of introducing more innovation to customers.
What would an Amazon-owned utility company look like?
It’s about pricing and understanding how you pay for energy and what you pay. If you ask anyone about their utility bill, they generally don’t know the difference between transmission and distribution, transition charges and energy efficiency charges. And the way the pricing is done is pretty arcane. Amazon could certainly help us get better at how we price energy, but they could also elevate customer trust — Amazon is really good at understanding the customer and matching products to customers. They also could make things simpler to understand and potentially bundle services … It would change the way people understand energy and how they pay for it.
Would Amazon address customer concerns in a better fashion than current providers?
There are two aspects of energy services: There’s what’s on my bill — how I’m using energy — and then there’s how I could use energy better. Amazon operates a marketplace, and it does focus on reviews and ratings. If I were to try to find someone to install solar panels today, it’s a terrible process. I could never get a sense of who does a good job, who does a bad job and so on. We’re going to see a lot more energy services like solar panels and batteries soon, so Amazon could easily apply that history of providing ratings to make it easier for people to buy energy services.
Should we be worried about Amazon taking over everything from an ethical standpoint? What are the risks?
To the extent that energy is a monopoly service, the big question is, can everybody get access to the basic energy service they need? If I can’t find a power drill on Amazon, I can go to the hardware store. I have plenty of options, and if I don’t get the power drill at all, that’s OK. But electricity and other utilities like water and gas are essential services, which is why the energy industry is so heavily regulated. They’re fundamental! When the power goes out, your life grinds to a halt. With every evolution in the utility sector, the question is, will it benefit us without jeopardizing the security of everyone having access to affordable service?
But having said that, there’s a lot that Amazon could do. Maybe there’s a PG&E that provides service but then an Amazon sits on top of them and provides a ton of innovative product options related to energy. More broadly, do we have a problem with Amazon getting too big and touching everything? I think that ship has sailed.