New Rules of Energy Industry in Action
In my previous article I placed a question for utilities: “How do we adapt to the needs of the new generation?” There is a new game being played in the utility industry, centred around the rapidly changing energy consumer. Today I’ll give you a couple of examples of utilities that have adapted to the new game, and have shown how to play by the new rules of energy industry. There is no a single solution, but many opportunities. The key to success is to explore a consumer oriented business model.
1) Charge & Drive by Fortum
Fortum’s vision is to be the forerunner in clean energy. To accomplish that, they need to enable customers to see the impact of their energy choices. As an example, Fortum has launched its Charge & Drive concept, providing service for customers with electric vehicles. Fortum expects that “there will be approximately 10 million electric cars in the world by the end of 2020.” Electric vehicles are crucial in preventing climate change, because they offer a way to reduce the traffic-based CO2 emissions.
Fortum bundles the normal household electricity consumption and the charging of cars into one bill. With this service they are making things easy for end consumers.
Fortum is an energy company operating in 10 countries, with 6.1 billion € revenue, and producing 64% of its power CO2 free.
2) Infrastructure as a Service by Mälarenergi
Smart cities can take many shapes, and one of the coolest projects is found in Västerås, a midsize city close to Stockholm. Mälarenergi handles electricity, water, sewer and a very extensive fiber network.
According to Jonas Persson, Head of the Smart City project, their target is not only to supply infrastructure, but to transform into an “infra service” model. Mälarenergi believes that there is much more than delivering kWh and m3. With full control of wires and cables of all kinds, they will exploit the opportunity to create added value for their customers. All infrastructure will be instrumented so that it can be monitored and analysed in best Internet of Things style and make the city smart.
3) The first move towards a Digital Utility from Agder Energi
Most of the energy markets are still in the integrated stage, where the monopoly (DSO) and the competitive business (Retail) operate within the same organization and shared IT systems. Norway is one of the first markets to move to the competitive stage, where there is a clear separation between DSO and Retail businesses. In other words, Retailer can fully focus on succeeding as a Retailer, and DSO as a DSO, without any restrictions from a dual role.
Agder Energi made the decision to be a first mover, splitting its business processes and CIS IT system between its DSO unit (Agder Energi Nett) and retailer unit (LOS). Stronger requirements for market neutrality come into force with the introduction of the Norwegian data hub Elhub in 2017, and these mandate separate CIS solutions as a prerequisite for going forward. Separation of CIS systems has provided an opportunity for the utility to improve customer engagement and sharpen their competitive edge.
Let your customer be your guiding star
Evolution is great, as long as you are a part of it. The energy market is evolving towards the stage of The Digital Utility Business, where customers and prosumers are becoming participants in the market. The introduction of battery storage and hydrogen fuel cells will drop the energy prices due to excess of energy. This will eventually open up for new distributive approaches. There will be new entrants, and most likely there will be startups for new broker services, bypassing traditional integrated value chains.
At the same time, I`m sure that many utilities have the sense of urgency and hunger to transform their business model. My simple advice for them is to do it together with your customers, because they are your golden ticket. Customer interaction in the future will be all about information sharing and added value. The cases I mentioned above are great examples of utilities that have realized that if they don`t take action, customers would abandon them and they would be ousted by competitors.
If you are interested in discussing what all of this would mean for your business, I will be glad to help. You can find my contact details below.
Stian
Stian Madsen
+47 99 24 58 79
stian.madsen@enoro.com
