As the world reluctantly enters into a second year of the pandemic, we look back at what impact 2020 had on the energy sector and what learnings global energy retailers can take with them into 2021.
Disrupted energy demand, a slow-down in traditional electricity sales and a never-before-seen rise in renewable energy usage are just some of the key topics that will be covered, along with why energy companies should be seeing the rapidly growing ‘conscious-consumer’ base as more of an opportunity than a threat.
It comes as no surprise that the dramatic impact of COVID-19 lockdowns throughout 2020 has led to a shift in typical human behaviour resulting in a total crumple of economic predictions and industry-specific trend forecasts.
The energy system saw a quick and steady drop in electricity demand. According to International Energy Agency (IEA), electricity usage data through lockdowns resembled that of “a prolonged Sunday” all due to reductions in services and industry.
Hakan Ludvigson, CEO and Co-founder, Eliq, said: “We closely monitor consumption trends among the users on our platform, this is the first time we have ever seen a change in consumer behavior that happened simultaneously across the globe”
While commercial energy usage fell in 2020, domestic demand soared by up to 40% as large numbers of the global population began working from home to stop the spread of the virus. While increasing domestic demand did not offset the effects of closing businesses, energy companies began seeing rapidly changing usage patterns and their residential customers now taking the front row in energy demand generation.
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A rise in renewable energy
It’s strange to see the year 2020 and ‘good news’ used in the same sentence, however, when it comes to electricity generation, the very first lockdown brought about a positive change – low-carbon energy was on the rise.
Having already overtaken coal back in 2019 in some of the world’s largest countries with the highest number of consumers, renewable sources of energy accounted for up to 40% of generation in 2020, reducing global CO2 emissions by more than 5% in the first quarter of the year.
Renewables proved themselves to be the most efficient and reliable source of energy throughout the pandemic. Following wind and solar doubling their shares in the last five years, IEA says that even a rapid recovery from the COVID-19 crisis would not slow the rise of renewables, thanks to new projects in the pipeline.
What does this mean for energy retailers and consumers?
While COVID-19 has certainly shone a light on the importance and reliability of green power and, as a result, a decarbonised future, energy retailers have been observing a steady rise in demand for it over the years.
New market entrants, evolving policy, and regulatory models have been at the heart of the transition, along with the evolving, more climate-conscious energy consumer.
According to a report published by Accenture at the end of last year:
60% of consumers have become more aware of climate change and its environmental impact since the COVID-19 outbreak. While 50% are likely to invest more in energy efficiency today than before the pandemic.
Energy companies have little to no choice but to take action. While the pandemic might have disrupted demand and slowed down traditional electricity sales, their biggest future threat comes in the form of a new conscious consumer. Dramatic shifts in climate regulations also mean that providers have to move very quickly and at a substantial scale if they want to stay in the game.
Undermining the value of sustainable offerings and energy value pools such as energy management, distributed generation, e-mobility, and demand-side flexibility will push those providers perceived to be less conscious entirely out of the competition.
What steps can energy companies take to stay in the game and meet the increasing green-demand?
The global transition from carbon to green will take decades to complete, so simply providing a renewable energy option is becoming the standard and more actions are expected from providers to fulfil the conscious consumer’s needs.
Just as Accenture’s report further suggests, companies ‘will require transitioning from a high-volume, low-margin business to developing a low-volume, high-margin business with high growth. In essence, they must reimagine their business, centred on purpose-driven consumers and adapting to regulatory and market change, enabled through digital technologies.’
Whilst technology is playing a key role, at the core of the energy transition is the consumer. Behaviour changes markets, not just technology. Being able to leverage technology to deliver behavioural change at scale is critical.
The winners will be energy retailers that blend technology, partners and the wider ecosystem to engage with consumers and tap into their increasing environmental awareness.
Imagine if everyone spent 10 minutes per month thinking about and enacting change on their energy behaviour?
About the author
Hakan Ludvigson, CEO and Co-founder, Eliq