The old utility business model is coming to an end

The old utility business model is coming to an end

In case you missed it, the European Union just made another dramatic commitment to limiting its carbon emissions and combating climate change. EU leaders agreed last month to a new 40-27-27 standard a 40 percent cut in carbon pollution, a 27 percent market share for renewables, and a 27 percent increase in energy efficiency, all due no later than the year 2030. Utilities will need to deploy more renewables and sell less energy to comply, which could drive energy prices up across the continent.

Contrast that situation with a new PwC report on energy prices in the U.K., which highlighted just how much utilities need to decrease consumer energy bills in order to meet goals for affordability.

Together, these stories perfectly capture the double bind that many European utilities are in. Regulators are asking them to sell what amounts to a more expensive version of their product (renewable energy, rather than energy from fossil fuels) and, simultaneously, less of that product. Doing either would naturally push prices higher. But in one of the most expensive energy markets on earth, thats not really an option. So European utilities are feeling pressure to cut deeper into their margins, which are already worn thin by greater competition in the marketplace.

Add to that the rise of distributed generation and, down the line, cheap energy storage and the problems magnify. Within a decade, dissatisfied consumers may be able to sever their relationship with utilities entirely. The U.K. just saw its largest rooftop solar deployment yet, and similar trends are playing out all around the world.

All of this puts European utilities in a tough spot. To thrive in a deregulating market thats about to experience a solar renaissance, they need to build new, rock-solid relationships with their customers. And to stay profitable in an era when renewables and Russian turmoil are driving energy prices up, European utilities need a strategy to draw more value out of every one of those relationships without selling customers more energy.

It can be done. But it means pivoting away from commodity provision, and toward a business model thats centered squarely on the energy services that consumers want.

The key to winning customers' hearts

When it comes to customer engagement, any strategy should begin by acknowledging that the average European consumer interacts with their utility for just nine minutes a year.

Thats an incredibly small window of opportunity. And as companies like Amazon and Netflix have proven, the key to breaking through isnt sending wave after wave of broad communications to consumers and hoping something sticks. Its about delivering a message thats perfectly, personally targeted the right thing for the right consumer, sent through the right channel at just the right time.

A British utility customer with high winter energy usage, low income, and an expressed interest in replacing their boiler, for example, shouldnt be on the receiving end of a refrigerator rebate marketing campaign. They should be getting a highly personalized offer from their utility for a new, more efficient boiler something thats really worth some of those nine minutes.

With the arrival of smart grid technology and sophisticated data analytics, that level of customer engagement is finally within reach. And over time, it can build trust. Utilities that reposition themselves as energy advisers companies that help consumers save energy and money see a sustained lift in customer sentiment.

Source: OPower

SMART GRID Bulletin July 2017


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