A powerful transformation progresses
The energy sector is going through quite a radical transformation.
New objectives, new constrictions and new driving factors facilitate changes across the energy supply chain. These changes are dramatically altering business landscapes of the sector. Paired with the emergence of new technological solutions, these changes also affect the way consumers think about energy supply and consumption.
Possibly the most obvious impact of market dynamics are the changes in the generation mix. Facilitated by government policies, power producers have switched their interest towards renewable energy sources (RES). Looking at things from a global perspective, the renewable sector has been recording biggest growth rates in installed generation capacities for years.
Significantly raised awareness regarding both environmental issues and the impact of electricity generation on the greenhouse effect caused a stir among power companies forcing them to adapt their business strategies. Environmental pollution emerged as a global issue, directly related to the quality of life.
In this transitional period towards a low-carbon energy system of the future, companies in the sector had to be quick to react to new market circumstances. As the line between energy producers and consumers gets blurred, utilities face several challenges novel to the industry.
Globally, the electricity system is a colossal organism supplying billions of people in real-time. It consists of components designed and built over 50 years ago and components implemented just today.
Liberalisation of the energy market
Among other, liberalisation entails the restructuring of vertically integrated utilities dividing their business into 4 separate entities in line with the 4 main parts of the energy supply chain: production, transmission, distribution and supply.
This enabled production and supply to become market-viable business areas.
Raised awareness regarding the harmful impact of the energy sector on the environment resulted in an endeavour towards achieving a sustainable, low-carbon system of the future.
This effort is an ongoing process having a profound effect on the energy system.
Decarbonization of the energy system
Digitalization of the supply chain
As technology evolves, the world becomes more digital. Digitalisation facilitates the optimisation of processes opening countless opportunities in all segments of the supply chain. It enables consumers to get more involved and more informed than ever before.
Decarbonisation, decentralisation and digitalisation are the driving forces of change disrupting the energy system and introducing new players and concepts
With the emergence of new technologies consumers should have an option of being able to choose the optimal source of energy suited for their particular needs
Today, we have more options to power supply than ever before. With the emergence of new technologies in areas such as photovoltaic (PV) systems, energy storage, wind farms, combined heating and power (CHP), electric and gas infrastructure and many more, consumers should have an option of being able to choose the optimal source of energy suited for their particular needs and specific micro-location.
The goal of transitioning towards a sustainable, low-carbon energy system forces an abandonment of the old energy paradigm in which large power plants played the dominant role.
Emergence of distributed sources
The energy system is now leaning towards distributed generation in which consumers are in close proximity of power generation units.
Smaller-scale ways to produce and store electricity are becoming cheaper. Governmental policies and market trends support their development and deployment.
With the rapid progression of technological solutions in the energy sector, distributed sources, operating at a scale closer to that of an individual customer, have the potential to displace large power plants currently used for power generation.
What's next for utilities?
So what’s next for utilities? Perhaps they should focus on improving the services they offer. Perhaps it’s time for them to start offering integrated solutions able to reconcile consumers’ specific needs and the complexities of the energy supply chain.
As more consumers become prosumers, the gap between them and utilities becomes narrower. This presents a unique opportunity for the energy market.
If a company is able to adapt to these changed circumstances and offer a solution that fits the advanced needs of consumers it can draw a significant advantage on the market.
Utilities have fallen on the margins
...but there are ways to start turning things around
Despite energy being at the heart of each process in the world, numerous energy providers find themselves acting behind the scenes
Utilities, in general, have fallen on the margins.
It’s not because we don’t need electricity. It’s because the majority of utility companies still operate within an old paradigm. They simply offer a commodity, not a service.
Future of the energy sector will continue to bring change which will substantially alter its current form.
In the years to come, new production models will be established within an increasingly smart market.
Utilities will need to strive to become more agile in order to survive.
Sustainability will drive change and utilities will have to focus on three crucial fronts:
Utilities have to acknowledge their commitment to reducing the global carbon footprint.
This requires investments to be directed in the renewables sector, while at the same time, gradual and selective reduction of thermoelectric capacities should be conducted. In this context, research into new low-carbon technologies is crucial and should involve both internal and external stakeholders.
Following traditional business models is leading to the demise of energy utilities.
Utilities need to find a way to be customer centric and offer a superior service, not just a product.
Customers of today are more demanding, more evolved, more informed and more involved than ever before. They want a superior service and if you don’t offer it, there are plenty of competitors who will.
Utilities need to become digital platforms.
The utility platform must function as a connective tissue that connects various players of the energy ecosystem and enables a digitally controlled, decentralised flow of energy and services throughout the system.
Energy sector faces significant challenges
Energy sector will become digital
Digitalisation will enable the creation of value across the energy supply chain augmenting efficiency, optimising processes and lowering costs.
Instead of large centralised power plants, distributed energy sources are implemented. Battery storage, big data and smart meters are a key enabler helping to proved balance to the supply-demand equilibrium of the system.
Smart grids and smart heating pipes enable automated control of energy flows throughout the system. Optimisation of flows allows the increase in efficiency and improves stability making the network more resilient. These improvements inevitably lower costs and raise the safety of operation.
Customer-orientated platforms enable forming stronger connections with end consumers opening unique opportunities for service improvements and new offerings. Creating a quality customer journey and personalising interactions has a fortifying effect on the bond with customers. This is the first step towards achieving a modern service-based business that can create value through for its users.
With the aid of big data and artificial intelligence new models of asset management are implemented augmenting the efficiency of preventative and condition-based maintenance procedures.
Paired with creating new sources of value, the rise of digital will inevitably cause a proliferation of new market players offering a string of different products and services. This will prove to be make-or-break for utilities.
Customer-centric approach is crucial
Customer centric strategy is facilitated by offering services related to 4 key areas:
Consumers, particularly businesses, are increasingly looking to reduce their energy bills by augmenting their energy efficiency. Offering bespoke solutions that can save money is a key step towards a premium service.
Home energy management systems
Demand response measures are increasingly used for business and home applications. Its two key enablers are favourable regulation and smart meters –both of which are still missing in Croatia. Things, however, are changing at rapid pace.
Consumers are becoming prosumers, and more of them are interested in producing their own energy by the day. With favourable policies and falling prices we will be seeing a lot of new distributed generation being implemented –why not be a part of it?
With each day there are more solutions making life easier for households. Smart thermostats, remote management, smart home devices, heat pump etc. all help making our home more efficient, more sustainable and more comfortable.
Consumers are looking for ways to reduce their energy bills and make their lives simpler. When it comes to appliances and energy related issues it is only natural that they turn to their energy provider.
The future lies in digital platforms
Utilities based on digital platforms are the future of the energy industry. Platforms will be prove to be a way to unlock the value behind energy provision.
The utility platform must function as a connective tissue that connects various players of the energy ecosystem and enables a digitally controlled, decentralised flow of energy throughout the system. Unfortunately, unlike other sectors, where platform companies can often act simply as matchmakers between supply and demand, the story in the energy sector is quite different. And much more complicated. This is because of the specificities of electricity as a commodity and the gravity of the energy system itself.
In order to be successful, a platform operating in the energy arena needs to be able to draw real time data from countless physical components of the system. It then needs to utilise this data to optimise system’s operation (again in real time) without endangering the reliability of supply. When numerous consumers, regulatory restrictions and technical issues are added to the equation, we are presented with an enormous task of reconciling these constraints with needs and desires put in front of a platform.
All utilities offer the same end product with slim profit margins that disable significant price variation.
The key is, therefore, to offer a premium service.