The breakthrough of digital technologies and the IoT creates new opportunities for energy suppliers. “It is, however, essential that energy companies are willing to transform”, says Recep Yildirim, Energy & Utilities Consultant at Trilations. “They should clearly identify their customers’ needs and create a matching service offering.”
The energy sector is undergoing a transformation. The breakthrough of renewables has disrupted the classic system. Production is shifting from central to distributed; customers are changing from ‘passive’ consumers into ‘active’ prosumers; grid infrastructure is being used to exchange energy and information (e.g. data from smart appliances or sensors) bidirectionally. Recep Yildirim, senior consultant at Trilations, explains how energy suppliers can maintain a strong position in this fast evolving landscape.
Which technological evolutions are of crucial importance to the energy sector?
Recep Yildirim: ‘Today, many appliances and devices are ‘connected’ through the Internet of Things (IoT) and digital technologies. This means they exchange information or data through the Internet. By doing so, they function in a ‘smarter’ way and produce valuable data for analysts. This digitalization trend is of influence in people’s daily lives as well as in business, in all types of industry. Furthermore, in the energy sector, the breakthrough of renewables has important consequences. Solar panels and wind turbines generate renewable energy, but in contrast to classic power plants, their production isn’t constant, but intermittent – depending on the weather conditions. This makes the matching of demand and response more complex. It has become essential to install buffers, like batteries or power walls. Today, we are witnessing multiple trends in the energy sphere that are beyond the control of the classic energy companies. Think, for example, of the falling prices of electricity and gas, the increasing competition between energy suppliers and the rise of distributed generation. All these factors put pressure on energy suppliers. They are challenged to take a broader perspective and create new service offerings.’
Have the needs of energy customers evolved as well?
RY: ‘Absolutely. Due to the digitalization trend, today’s customers expect access to real-time information, anytime and anywhere. They are used to smart, mobile applications in many domains and expect them in the energy field as well. Smart home apps, for instance, already allow residential energy consumers to control their appliances from a distance, through their smartphones. It is essential that energy suppliers start thinking about truly innovative energy services. There is a great need for applications for efficient energy use, energy control and energy storage. Such apps promote sustainability, while they can be economically interesting at the same time.’
Could you give some examples of ‘innovative energy services’?
RY: ‘Well, defining them is of course the great challenge. A first step will be that suppliers, who in the past were selling ‘classic’ energy commodities like electricity and gas, broaden their offering with services like boiler maintenance, solar panel installment or insulation works. Many Belgian energy suppliers have already taken this step. They are also involved in projects on batteries, smart thermostats or charging stations for electric vehicles. A second, important challenge will be to combine several services into truly innovative energy solutions. At this stage, companies are no longer selling boilers with a maintenance contract. They are offering heating as a certain comfort level. This means the energy supplier engages to provide its customers with anything necessary to reach that comfort level – e.g. insulation, plus the installment and maintenance of a heating system, that may or may not be part of a heating network. Of course, energy companies will not make the switch to such an innovative offering, unless they know how to manage two things. On the one hand, they need a thorough understanding of their customers’ needs, in order to define a matching service offering. On the other hand, they need the ability to process and analyze all the real-time information from smart appliances or sensors. Such data are a prerequisite to innovative services. In the example above, for instance, temperature data and real-time information on the status of the heating system would be of use. In short: energy suppliers need to develop the capability to deal with big data.
That sounds quite challenging…
RY: ‘It does require a transformation and a search for new business models. But I believe there are interesting, new opportunities for energy suppliers who embrace the digitalization trend and analyze their customers’ needs. There’s huge potential in smart home and smart city solutions. That’s why it’s so important that energy suppliers decide today what position and what role they want to take up in tomorrow’s energy landscape. If they don’t act fast enough, technological players with less experience in the energy sector but a strong tradition in digitalization or customer focus, will seize all the business opportunities. Just think of Google’s Nest acquisition… However, when energy suppliers start their transformation today, they will be able to maintain a strong position in the landscape. Through cooperation, they can even benefit from the expertise brought in by new players.’
Trilations offers services to develop future-oriented market- and customer strategies. We provide the business consulting that ensures all advantages of the chosen strategy are realized.
Questions about this newsletter? Contact Frank Sels, Business Director Energy & Utilities, email@example.com