At least 80% of the consumers in the European Union will have a smart meter by 2020. As smart meter roll-outs escalate throughout the region, utilities are asking how they can improve customer engagement tactics and how new business models can be created around this.
Lauri Penttinen, Project Manager/Energy Consultant, Central Finland Energy Agency / Benet Ltd, Finland, in his presentation Creating New Business Models Around Consumer Engagement, discusses how smart services and products will improve customer engagement and create new business opportunities for the utility.
Although policies and regulations are supporting the large-scale adoption of smart meters throughout the European region, they don’t cover the significant potential of smart meters. Utilities need guidelines to help them engage better with the consumer so that they can show them how to save energy by taking part in demand response programmes.
The enormous potential
Smart metering technology has the potential to achieve cost-efficient energy savings and it plays an important role in smart grids. However, the smart meter alone acts as an enabler only. To realize its full potential, innovative end-user services must accompany the roll-out, explains Mr Penttinen. He adds that better energy management will be attained through the means of rewards, automation and data.
Only once smart services are added to the smart meter, will the customer become “smart.” Once this is done, we will then see the true potential of smart meters.
How to achieve consumer engagement
The utility needs to move from a “regulated” utility point of view to understanding the consumers’ needs. There is a huge potential for customer engagement. This can be done via various technologies such as in-home displays (real time feedback) and home energy management and demand response systems for the smart home. By designing and integrating different services, proper customer engagement will be attained and its full potential will be harnessed. This also means that the consumer will enjoy an added-value service.
Smart services and products-Who will invest?
Additional investment is needed to carry out proper consumer engagement. Therefore, when investing in smart meters, it is also important to invest in smart meter services. The question is who will pay for these investments?
Regulation – led investments
Regulation demands that utilities roll-out new products and services. Compensation is attained through regulation but customers end up paying in the end. Regulators are given the opportunity to choose the winning products and the benefits come from economies of scale and greater penetration of smart meter services. Although regulation can boost new services, it may not cover all the aspects of smart services.
End-user led investments
Here, the end-users make investment decisions and are compensated through energy cost savings. There is a sub-optimal penetration in the market and benefits are attained through market dynamics.
Therefore, it is up to the utilities to add services to make customer engagement stronger. There needs to be more value added services to really engage with consumer.
Consumer engagement-information value chain and business opportunities
The smart meter is merely the basis for information but the smart metering data and functionalities can be refined through the value chain so that the consumer enjoys added value.
According to Mr Penttinen, utilities are beginning to offer these added value services already, whether forced by regulation or by sound business cases. Smart home products such as real– time in-home displays, home energy management systems Hems are being introduced, as well as emerging third party services such as energy service companies, demand response aggregators (at consumer level), and energy brokers.
Says Mr Penttinen: “This is bringing about new enterprises and new business opportunities. With the consumer’s permission, consumption data can be sent to third parties for aggregation. There is a world of possibilities for new entrants.”
Business models and collaboration
There are three types of services offered to the consumer:
Services offered by the utility (driven mostly by regulation)
Fulfilling the minimum requirements to offer consumption data and feedback to customers.
Services are provided without nominal extra charge or commitment from the customer
Online feedback, in-home displays, informative billing
“Extra” services and products offered by the utility (driven by business cases)
To provide these additional services, a nominal extra charge or commitment is needed from the customer
More advanced consumption feedback services, in-house displays and demand response services are offered
Suppliers differentiate their products-from energy retailing to energy services.
The “retail market route”
Products are sold through retail channels such as home energy management systems, which are developed to integrate smart services. These offer real time information and help to control heating, and ventilation and air-conditioning systems, as well as home appliances. Dynamic demand response controls (linked with spot price information) are also offered to assist customers with energy efficiency. The integration of these services will only enhance consumer engagement.
Innovative market players are presented with a great opportunity as they fill the missing link between utilities, regulation and consumer engagement. Since consumers are looking for the most cost-efficient, user-friendly, automated solutions to their electricity needs, new entrants should consider partnering with utilities, telcos, building product and construction companies and AMI vendors. By partnering, parties will be in a better position to find solutions to how the smart metering infrastructure can support new smart services and products, concludes Mr Penttinen.