New Utility Business Model: leverage customer base

Energy Efficiency

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19 July 2017

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Jürgen Ritzek

New Utility Busines Model: leverage customer base

The typical utility model of the past is dead.

The rise of renewables is often mentioned as one of the key reasons. Giant utilities were and are operating assets worth billions which need to run at x% ongoingly for a duration af 20+ years, better 50 years.

Smart grids, distributed renewables production, climate change - all this has changed the landscape. Nevertheless, to change the strategy of such a giant is nothing you can do within a few month, not even years. Not talking about changing the entire culture. Only the real pressure from the unthinkable, bankruptcy, has in the meantime led to structral changes going on today.

But we are likely only at the beginning

In 2 earlier blogs, I referred to the reasons behind, see Utility of the Future (based on a study from the MIT Energy Initiative) and Game Changers in the Energy System (based on a whitepaper from World Economic Forum and McKinsey).

One of the key reasons/sources/opportunities for change is based on Digitilization, e.g. WEF/McKinsey call it one of the "Deep global trends". Whereas poeple tend to understand different things under Digitilization (big data, machine learning, automation, M2M, IoT, block chain technology, ...) there is one new development taking place which has kind of received some media coverage already: The collaborative model

The collaborative model: energy communities

Oliver Wyman used this phrase to describe the opportunity for utilities to engage with local or regional communities building open, transparent relationships. This approach is based on understanding (and treating) its consumers as energy producer. Think of all the households already having solar panels on their roofs. Block chain is the technology which seems to be best suited to organise such new partnerhsips (for details, check Blockchain in the energy sector: Institutional disruption?). But today, I would like to showcase a new model:

NEW - the loyalty model: Consumer as a shopper

A big threat for utilities is the easy way for consumers to change their electricty provider combined with the high customer dissatisfaction, especially in many European countries. Likely everyone knows from his own electricity bills how difficult they are to read. And this is most often the only link utilities have with their customers today!

Starting from a different perspective, a few years ago, two digital marketing entrepeneurs came up with a simple question: "How to easily buy the most energy efficient products for your home". And they build a new business model perfectly suited for utilities to develop loyalty models and even gain new clients. Intentionally I said "develop" loyalty models and not "enhance" them as I do believe this is something utilities really have to build from scratch (well, most of them).

The company behind is enervee.

Enervee built a data engine delivering an energy efficiency score.

And now think of the opportunities for utilities. Combined with available information about energy consumption and price this perfectly allow to calculate energy savings - hence "your utility" helps you to save energy and money. It can also link this to buying prices and show you what industry calls "total cost of ownership".

And it delivers an Amzon kind of consumer experience. Miles away from the old paper bill!

In the meantime, the biggest European energy company EDF has launched the enervee marketplace, called EDF Électriscore. It covers three main features

  1. Enervee Score
  2. ClearCosts & YouSave
  3. Product range and offer marketplace

(for more info, check https://blog.enervee.com/enervee-announces-edf-as-its-latest-european-marketplace-client-ab36bba0692b)

According to enervee, "consumers in Europe buy on average 19 energy-consuming products and appliances for their homes each year"

Or in other words 19 opportunities to build and increase loyalty!

Linked article: Here´s how European Energy Companies See The (Near) Future

Reference: Oliver Wyman, The New Utility Business Model

About the Author

Juergen Ritzek is co-founder and Business Director of EEIP