By Maikel van Verseveld, Accenture
It is not certain if the European Union’s 80 percent smart meter penetration target will be met by 2020. But it is clear that efforts will be largely focused on the massive logistical rollout in many countries, particularly the U.K., France and Spain, where the greatest rates of implementation are expected. Success will not be judged by the speed and smoothness of the rollout, however, but by how utilities adapt to the disruptive forces that smart meters will help to unleash.
Smart meters are not the only technology concerning utilities. Electric vehicles and distributed generation compound the sector’s transformation. And consumer expectations over the use of mobile and other personal electronics to help manage consumption will further test utilities. Some markets will be reshaped, some will be thrown open. Some incumbents will be threatened by change or by competitors. But others will see that they stand to gain if they are able to transform their operations to catch up with the new energy consumer.
According to recent global research by Accenture, nearly three-quarters of consumers (73 percent) indicated they would consider buying electricity, energy efficiency products, and related services from providers other than their electricity suppliers. More than half (59 percent) would consider buying from retailers, 49 percent from cable or phone companies, and 45 percent from online sites, such as Amazon and Google.
The bad news for incumbents is balanced by the fact that most consumers would still go to their utilities or energy providers to buy electricity and choose an electricity pricing program or to obtain personalized information about their electricity usage (73 percent and 67 percent, respectively). And levels of trust are generally higher for utilities than for alternative providers.
Despite this advantage, utilities and energy providers must not take a wait-and-see approach. They will have to reshape their consumer operations by focusing on three areas of transformation.
The first is information – for energy providers. It is the new currency and will need to be harnessed to improve competitive positioning. Smart meters and grids and a proliferation in customer channels will generate vast quantities of data that utilities must use in real time to respond to consumers. There will be a diverse range of customer segments – from eager and savvy energy savers to those who simply need more personal support and advice. Incumbent providers must use the wealth of data they have before competitors from other consumer industries erode this advantage. The use of data analytics will be central to this task, not just defining opportunities, but measuring the relative financial return of marketing and providing different services to different customers.
Secondly, utilities must redefine the meaning of innovation. The industry must extend its innovative skills beyond engineering. An “innovation engine” is required to perpetuate that creation of products and services and to refashion consumer relationships. The good news is that there’s margin in it. Consumers are not just seeking lower prices in return for signing up for energy management programs. When we asked consumers to trade off between programs with different attributes, 57 percent said they would adopt an energy management program even if it did not reduce their electricity bills.
The final need is to redefine the meaning of “consumer”. No longer should consumers be seen as bill payers. The new energy consumer will be on the move in electric vehicles, generating their own energy at home and expecting more from their service providers. 60 percent of respondents said they would be interested in technology to completely automate the management of their electricity. More than a third (35 percent) would want to monitor and manage usage through personal electronics. And 89 percent said it is important or very important for energy management programs to be easy to use for the whole family. Energy now has to be considered as part of consumers’ lifestyles, family life, even entertainment.
A number of utilities and energy providers are already blazing ahead with innovative business models and new consumer oriented capabilities and products. These energy providers understand that these three critical imperatives have the greatest chance to turn these disruptive developments into commercial advantages. But all energy providers will still have to make major changes to the way they analyze customer information, create new services and re-model their business around the new energy consumers – who are becoming active and less predictable members of a complex and fast changing marketplace.
Maikel van Verseveld is a Senior Executive in Accenture’s Utilities & Energy practice.