The possibilities for utility companies seem almost endless – not unlike the risks and perils.
According to 2017 Power and Utility Trends, a report published by PwC’s strategy consulting team Strategy&, “The push into emerging energy services will affect more than individual companies. It will reshape the power and utility landscape, favoring utilities that grow beyond their traditional business model to build a market-based technology and related services portfolio.”
The room for improvement is there, made by constant innovation and what we call “the Digital Transformation.” But to feel fully comfortable and prepared for the future, and, ultimately, to improve their services, energy companies need to take care of the following:
In the wider sense, the “demand gap” is the gap between the current market offering and the extent to which it satisfies the consumers’ needs.
In the past decade, due to a number of factors (not unrelated to the Digital Transformation mentioned above, as well as growing energy awareness among the customers), the demand gap in the energy market has shifted significantly.
Put simply, there’s a rift between what the consumer expects from utilities and what he gets. And the shift is now wide enough to become a problem – a problem for both the customer and the utilities.
For the energy companies, closing this gap (or satisfying the consumers’ needs) will mean the difference between getting on the lead or staying behind in the digital arms race.
But it will also require them to go full-on digital, all the way to embracing real-time consumption analytics, smart metering and smart grid systems, energy market retailization – all this in order to become more consumer-centered than ever before.
Today’s consumers, and especially large businesses, are rapidly becoming more energy-aware. They’re investing heavily in increasing their energy efficiency, tightening the control over wasteful practices, and shifting towards renewable energy sources and environment-friendly (or at least “more friendlier”) solutions.
Some of the world’s largest companies, including Silicon Valley’s tech-giants Google and Adobe, declare their intent to completely replace the traditional energy sources with renewables by the end of 2020s, the Strategy& report says.
But in order to really stay ahead of competition, utility companies need to provide for the actual needs of their customers, both the big and the small ones. And staying informed about what these actual needs are implies improving analytics and investing in smart-tech energy infrastructure.
And if the consumers want to reduce their energy consumption, utilities should provide them with tools that will enable them to do it – and as easily as possible.
Deploying advanced analytics – that is: analytics advanced enough to identify the energy use patterns and provide for them in the real-time – is the first step to reach that goal. The second is making that analytics work for the customer (or, in other words, making it user-friendly and actionable enough for the consumers to use it as well).
The smart homes in general, and smart-metering systems in particular, are changing the way the energy usage is perceived, and not only by individual consumers, but by companies alike.
Most importantly, the smart metering systems allows the consumers to monitor their energy usage on a moment-to-moment basis, providing them with much-needed data that, in turn, enables them to optimize on every step, for each device separately and for all of them in connection.
Smart grids, now more and more prominent, and not only in big cities, will connect these smart buildings to create a larger network – a network of highly energy-efficient, waste-reducing, semi-intelligent “cells” that will eventually form what we call the smart cities.
All of this – in service of what is known as “retailization” of the energy industry: a concept first introduced in PwC’s 2017 report Flipping the Switch, and involving “the development of more direct consumer-to-utility relationships, along the lines of consumer banking or online shopping.”
To account for the changes mentioned above, utility companies have to find a new way to monetize their services, preferably lowering the cost on the consumer’s end in the process. Not unlike mobile operators, who had to abandon the traditional contract-based business model, the utilities must focus on expanding their portfolios of additional services.
To account for this progress – and the consumption decrease that is bound to follow – utility companies need to come up with a new, mixed model of distribution, finding a common ground between their interests and what their customers really need. This doesn’t necessarily mean completely abandoning the previous model of distribution – that, in fact, may not be possible, as the industry is highly regulated and thus, bound to change in an “evolutionary,” not a “revolutionary” manner. But evolution means “enhancing” this model – and here, enhancing means deploying smart technology.
By deploying smart technology (and smart means for the users to control it), utilities can leverage that digital shift in their advance instead of fighting against it – which could surely result in them inevitably lagging behind their competition.
Due to all this, it is no less important for utilities to educate their customers as it is to invest in digitalization. Smart technology is crucial, no doubt; but without smart advice for the consumer to truly leverage its potential, it can still prove an empty investment.
For utility companies, as of now, improving services means closing the demand gap; and closing the demand gap means improving real-time supply-demand analytics, deploying smart metering and smart grid systems, and, last but not least, retailization.
For the consumer, all of this may mean a lot of good, especially in terms of energy consumption control and management. Whether or not it will, however, depends on the utilities’ ability to deliver.