In a world of increasing distributed energy resources and evolving consumer expectations, the energy retail ecosystem is undergoing significant change. Wytse Kaastra shares his insights on the digital retail plays available to utilities in this new market, as well as provides detail around customer engagement imperatives, the evolving retail ecosystem and how to deal with new competitors.
What is the customer engagement imperative?
In my opinion there are three customer engagement imperatives. The first one is digital transformation: moving at speed into a More digital experience, moving through all the channels and having a full 360-degree view of the customer.
The second is more internal but very important for customer engagements—commercial optimization. And this is about understanding the appropriate price points, how to structure tariffs, and how to differentiate between segments. It’s also about understanding at what price point churn will become higher or lower.
And the third one is all around new products and services and innovation of the business models—coming up with new value propositions, products and services to meet the expectations of the new energy consumer.
How is the retail market evolving?
The retail market is changing from a centralized-led model toward becoming more decentralized. In the past, the market was dictated by wholesale markets, with centralized products and one direction toward customers who simply consumed what was being produced on a central level. Now we are moving to a more hybrid model which still has a central wholesale market but also has local retail markets matching supply and demand on a local level.
One example of this would be the facilitation of different kinds of local initiatives between neighbors or between communities, with customers having solar panels, electric vehicle or batteries in the house, and thus creating a small energy ecosystem.
What will the new retail energy ecosystem look like?
Taking a deeper step into the decentralized market, the connected home will take on a very crucial role in the new ecosystem. The home of the new energy consumer will be full of new technologies, devices and sensors, and appliances. And there will be a need for optimization and monitoring of energy consumption, but also optimization of the different appliances in the house. And that’s only the energy part.
On top of that, you might see security, media and health propositions. We call that the connected home ecosystem and energy is at the heart of that. Obviously this creates many new opportunities for traditional utilities to move into this market.
What can utilities do to combat new competition?
Competition in the connected home space is very interesting. In addition to typical players, we are seeing many different kinds of companies moving into the home, including telecom, security, appliance companies and others.
The big question is: What is the big play for utilities in this space? There are times when it is too difficult to compete, and sometimes there is asymmetric competition. Just imagine companies like Google putting billions of dollars of investments into these types of plays. That’s difficult for utilities to match.
In my opinion the sweet spot for utilities would be to focus on the energy side of things. This means providing energy services that require deep understanding of how to do that—understanding trading capabilities, supply and demand capabilities, and how the smart meter works. That’s an edge and capability utilities have that the others do not.
Secondly, I think when you go into the connected home, you need to be smart about it. Don’t go in with all kinds of appliances—try to stay asset and hardware light. Make it a software play, centrally managed and having impact on the decentral level, but being able to push firmware, services and solutions without having a physical intervention in the house.
It also needs to be plug and play, so end consumers can use the products and services easily without the need for external assistance.
I also think it is very important for utilities to look for opportunities to partner with others as much as possible, rather than trying to reinvent the wheel themselves. It’s also important to have an open ecosystem, so future devices and technologies can be easily added along the way.