Digitally savvy customers’ expectations about value offered by their utilities are radically different from earlier generations
They demand real-time pricing data, more control over their consumption and access to renewable energy sources from utility providers
Utilities should balance traditional offerings with digital-led services to create a win-win value proposition
The Energy & Utilities (E&U) industry is in the midst of irreversible change. Customers’ expectations are being re-shaped by the immediacy of online experiences. They are evolving into prosumers who generate their own energy and also sell it. Technology has overtaken competition as the catalyst for redefining the utilities-customer relationship. All of these factors have collectively changed the utility customers’ perception of value.
Navigant Research predicts an interesting scenario about the evolving nature of customer value in the E&U industry. As per the research, value will be delivered in the future through the ‘Energy Cloud’ – a digitized system that will enable and support customer-centric energy flows underpinned by clean energy, innovation, and agility.
The epicenter of disruption and consumer value, according to Navigant, will pivot around technology, business models and operational efficiency – factors that are beyond policy and regulation.
Value as seen by customers in the E&U industry is a complex and multi-layered construct. On the one hand, the sector is expected to deliver on the traditional demands of safety, availability, reliability and pricing. On the other, customers today – especially millennials – having experienced superior digital touchpoints are expecting more from utilities.
The key to retaining customers depends on providing experiences that match their needs and aspirations. Digital transformation has placed the onus on utilities to integrate the reliability of a traditional supplier with innovative capabilities to engage digitally savvy customers.
This is exactly what the Australia-based AGL Energy has done. In 2017, the company announced the ‘go live’ of the world’s largest residential Virtual Power Plant (VPP). The VPP is expected to help customers reduce their energy bills, increase energy security and accelerate the shift towards renewable energy.
Over the years, the traditionally disengaged utility customer has become relatively engaged. They are now generating their own electricity , looking to monitor / manage their energy consumption and demanding real-time pricing information for optimum energy use. The empowered customers today expect more from their utilities and are no longer content with just reliable electricity supply.
In order to give their customers more choice and control, utilities are expanding their retail offerings. They are integrating Distributed Energy Resources (DERs) into their existing infrastructure for improved energy efficiency and grid reliability. The integration also allows them to engage the environmentally conscious customer base. Though the growing adoption of DERs is generally seen as a threat, 76 percent utilities still believe that these are critical for their future success.
In the U.S., utilities are projected to invest USD 110 Billion in smart grid infrastructure by 2027. With half of all households equipped with smart meters, the smart grid allows utilities to accurately balance the demand and supply of power. It offers customers real-time visibility into their energy consumption and the flexibility to use energy when it is cheapest.
Smart grid analytics is another focus area for utilities as they look to control operating costs, improve grid reliability and deliver personalized energy offerings. The insights extracted using analytics are also helping them to optimize marketing campaigns, smartly plan outages and reduce the overall energy consumption by raising awareness amongst customers.
The energy value chain of the future will be interconnected to form an integrated ecosystem of energy management and related services, home experiences, security and micro-generation. Partnerships and alliances with niche innovators will become important strategies in the emerging boundary-less energy landscape.
Utilities need to transform themselves into integrators of non-traditional and value-added services. Only then they can motivate prosumers and consumers to share data and usage information to further enhance value. Such an approach will cascade into a ‘culture of innovation’ for a sustainable portfolio of products and services that will surpass customers’ evolving expectations of value.
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