Customers Hold The Key To Transforming The European Utility Business Model

Engaged energy customers could add €40 per household annually to European utilities’ bottom line, reveals Opower report.
Published: Tue 04 Nov 2014

Opower a leader in cloud-based customer engagement software for the utility industry, has published a report that quantifies for the first time the value of strong customer relationships for European utilities: “The Value of the Engaged Energy Consumer”.

The report, revealed today at the European Utility Week, demonstrates that utilities can increase the return on their customer relationships by 20 to 55 per cent, and add an increment of up to €40 annually to their bottom line for every household they engage.

Customers-utilities’ greatest assets

Across Europe, utilities are facing a new set of challenges, including flat energy demand, increased churn, and rising energy costs. In order to address these challenges, innovative utilities are taking advantage of new customer engagement technologies and are looking for additional ways to turn their customers into their greatest assets.

Commenting on the Report’s findings, John Webster, VP Marketing and Strategy, Opower EMEA said: “Many utilities are failing to keep up with customers’ expectations about quality of service. And while adopting a more customer-centric approach will be a challenge, our report clearly quantifies the value of the engaged energy consumer.”

Best practices around the key value sources

In collaboration with more than 95 of its utility partners in nine countries, including leading European utilities, Opower examined five key value sources for European utilities. These include:

  • Improvements in customer satisfaction to reduce churn and increase acquisition

  • Better digital engagement to drive a lower cost to serve

  • Improved marketing effectiveness through more effective customer segmentation and communication of programmes (such as home appliances and boiler repair insurance)

  • Use of Behavioural Demand Response to improve load management and integrate intermittent renewables

  • And a future value source of cost-effective, scaleable Energy Efficiency, which is mandated by the EU across all member states by 2020.

Opower concluded that incremental value could be achieved in all five areas that it examined with its partners:

(The monetary values below are the annual benefit per household to the utility.)

  • Reduced churn and increased acquisition €3 - €8

  • Lower cost to serve €7- €11

  • Increased cross-sales €1- €10

  • Demand optimization €0.5 - €3

  • Energy efficiency €3 - €8

Total expected benefits come to €15- €40

Transforming customer relations

“The Value of the Engaged Energy Consumer” provides insights that will enable utilities to transform the way they relate to their customers, including best practices around the key value sources from companies from around Europe, New Zealand and North America. The report includes case studies from several partners in highly competitive markets, such as E.ON UK and Mercury New Zealand that have positively differentiated their brands by advertising their customer-centric tools and services.

Ben Harvey-Lovell, Head of Marketing, Mercury Energy, New Zealand, expands on this in our webinar How Energy Consumer Engagement Build Competitive Advantage.

Three questions for utilities

Opower concludes its study stating that the best customer engagement strategies will carefully account for local challenges and context. Three questions are offered for utilities around Europe to consider:

1. What are they key challenges and pressures we face, and how should we start to address them?

2. How should engagement approaches vary across our customer base?

3. How can we minimise cost and maximise impact?

These are the questions that leading utilities have tackled head-on to build a systematic approach to customer engagement, and dramatically expand the number of households they engage with personalised and timely communications.

Momentum for behavioural energy efficiency is building across Europe. Denmark, Ireland and Italy have all approved behavioural programmes as an accredited energy efficiency approach in their national implementation of the Energy Efficiency Directive. Included in the report is data from Opower demonstrating that behavioural efficiency could save 12TWh of energy and €2.4 billion for consumers across Europe. Our article, Customer Behaviour (not incentives) Can Shave Peak Demand, discusses Opower’s recent pilot programme which shows that utilities may not need to spend millions on residential demand response programmes as consumers seem to be willing to conserve energy without the need for incentives.

Engerati will be conducting a live studio interview with Opower at the European Utility Week to gain more insight into the new report. The interview will go online shortly after the event.

Download the whitepaper

Opower –The Value of the Engaged Energy Consumer