Utilities today are facing the most competitive environment that the electric power industry has ever seen. They are facing regulatory disruption, stagnant load growth, financial pressures, and competition from distributed generation (i.e., solar) and other third-party service providers. At the same time, their customers have come to expect a service experience that is on par with other industry leaders like Amazon, Google, Netflix, and Uber.
The pressure is on for incumbent utilities to transform how they interact with their customers to find their place in this evolving market, but what is missing for many utilities today is a top-tier CX. Transforming CX is foundational to extending utilities’ value propositions in the customer-centered Energy Cloud—selling customers on evolving programs, products, and services that are becoming increasingly important for utilities’ business models.
Over the next 5-15 years, Navigant expects massive disruption across the entire energy value chain that will affect a broad set of stakeholders. Moving toward a multidirectional network of networks and
away from a linear hub-and-spoke model, this system will support two-way energy flows in which customer choice (optionality), clean energy, innovation and agility command a premium. At Navigant, we call
this the Energy Cloud.
The shift to the Energy Cloud presents a number of threats and opportunities that will require incumbent utilities to rethink their traditional relationships with customers. Key changes include a value shift to the energy customer, and the fact that a “good enough” customer experience (CX) is, in fact, no longer enough.
The implications of value shifting to the customer are significant and affect virtually every aspect of the traditional power and utility industry. According to Navigant Research, approximately 75% of $6.0 trillion in global value will shift downstream in the Energy Cloud. As a result, the customer ecosystem will evolve into a more dynamic marketplace with a highly diverse asset mix, unpredictable load, and increasing customer demands.
Customers are coming to expect higher levels of service from their utilities. This comes in part from a shift in consumer expectations in other industries, whether it be media services (Netflix), lodging (AirBnB), or retail (Amazon). The common thread in these industry shifts is digital disruption, with customer-centric thinking winning out in the end. These revolutionary business models have used technological innovation at the offerings- and platform-level to provide seamless, fast, and convenient service to customers.
Industries such as music, telecommunications, and taxis demonstrate how technological innovation and meeting customer demands can slice through traditional business models and regulations, leaving long-standing incumbents behind. Well-known platform companies today—such as Uber (car/taxi) and Spotify (music)—have used technology innovation and data to deploy disruptive products and services. The digital transformation of energy means that regulated utilities should not expect to be shielded from the reality faced by other industries.
Taking CX to the Next Level
Incumbent utilities must find a way to foster a truly seamless CX through digital best practices, starting from core services and expanding to new, value-added products, programs, and services. The need to reduce legacy-driven business process and enterprise architecture complexity is greater than ever. This will require a deeper transformation that ultimately reinvents the current state of CX for utilities.
Energy Cloud technologies produce vast amounts of data. Utilities are incumbents in a unique position to harvest, mine, and analyze Energy Cloud data to deliver targeted energy services that track customer lifestyle and business needs. Utilities can anticipate customer needs and propensities to offer the best option for customers through seamless customer journeys.
Pioneers across other industries (e.g., Amazon, Netflix, Uber) use data and digital, on-demand innovation to streamline CX. There are companies in the energy sector attempting to do just the same.
One of the more innovative case studies of this transformation in the energy industry comes from Drift, a hybrid between an energy services company and a DER manager. Using artificial intelligence and machine learning to forecast energy demand, Drift turns to its network of peer-to-peer energy producers to procure power for its customers. Users can access a dashboard to choose whether to prioritize cheap or low carbon energy sources and are able to terminate their relationship with Drift at a moment's notice. Drift currently operates in New York City, but has business models that identify pricing opportunities built for the entire state of New York and 16 additional states.
Vivint Solar is another emerging disruptor; this DER provider combines rooftop solar with smart learning capabilities to help customers achieve net zero homes. More recently, the company shifted from a pure solar offering to a residential DER solutions provider—which includes Mercedes Benz batteries and home management tools.
Business Models Require Repositioning
Utilities must begin thinking about how to remain relevant in an Energy Cloud future that positions them as more than simply wires and pipes companies. Many utilities are struggling to keep pace in this volatile environment, as they must balance increasing revenues while lowering operations and maintenance costs. Repositioning around a customer-centered identity can help catalyze this necessary transformation.
Vermont-based Green Mountain Power (GMP) is taking this to heart, repositioning itself as a “customer-obsessed” utility. Rather than viewing DER as an encroaching liability against the bottom line, GMP sees DER as a tool to create deeper customer loyalty. Much of this change in corporate culture and business operations is attributed to Mary Powell, the utility’s CEO. This highlights the importance of customer-focused strategy at the executive level. GMP has revised its traditional business model to emphasize the customer. As a result, the utility has added new revenue, reduced costs, and improved its customer satisfaction scores to 91% as of year-end 2017.
How Do Utilities Navigate This Transformation?
Moving beyond “good enough” CX is dependent on a business’s ability to conduct its operations via a digital, on-demand, fully automated, and intelligent platform, leaving any kind of live customer service interaction as an exception. This is the standard for the Energy Cloud.
We are starting to see examples of this progression. In Texas, for example, energy retailers are exploring creative digital solutions that create differentiation in the marketplace and enhance the customer experience. Grid+ is leveraging Ethereum blockchain to give consumers direct access to wholesale energy markets. Reliant Energy offers a digital marketplace where customers can purchase various products (e.g., generators, light bulbs, thermostats) and services (e.g., air conditioning, heating, home security). And the Texas energy company, Griddy, is targeting millennials by fostering an app-first approach that connects them with the wholesale market and provides insights around historical and forecast energy usage.
These examples provide some initial visibility into what will be required in the Energy Cloud, but there are many paths for utilities and energy providers to take toward the future.
Customer trust is critical to this evolution. If a utility fails to provide a seamless experience in terms of transactions and services, it is unlikely that it would be trusted by its customers perform the sophisticated evolution needed to become a total energy solutions provider. For a deeper view into why and how utilities are amping up their CX game, reference Navigant Research’s recent white paper, The Changing Value of Customer Experience in the Energy Cloud.