Heralded as a ‘meeting of energy minds’ the Advisory Committee Meeting was a chance for industry experts to share their progress and challenges, and to discuss the most pressing issues facing the market ahead of the European Utility Week 2016 (EUW) conference and exhibition.
From the intelligent grid to smart and sustainable cities, Engerati has pulled together key session takeaways and outlined the topics we believe will be central at the event and for the industry in the coming year. And with talk of customer-centric business structures, industry newcomers and future innovation buzzing in our ears, what is clear from the outset is that we are part of an industry on the cusp of major change. [Engerati-Power in Europe 2016 and In Focus Power In Europe]
Modern consumers in energy retail
Consumers. Consumers. Consumers. This was a central theme in all the panel groups at the meeting.
Today’s energy customers have become ‘know it all, want it all’ users. They expect more on all levels, from better services and prices to increased flexibility to choose and control their energy usage. Expectations are set from their experiences from other consumer and retail services. In turn, the issue of customer satisfaction has become deeply ingrained, which poses a challenge for traditional utilities and vendors.
But while discussions at this year’s event procrastinated over the idea of an ever evolving utility/consumer relationship, we were keen to push the conversation forward and ask “what are utilities actually going to do to engage with the end customer?”
Companies that are progressing in this area are taking on board more customer focused strategies, and, as Jessica Stromback of Joules Assets Europe AB noted, “combining what customers are really interested in into what they as a company provide.” Utilising data, broadening customer reach and redefining the customer experience will be key requirements that utilities need to address. Hopefully by November’s EUW 2016 we will see the discussion moving away from ‘definition’ and progressing towards ‘objectives’. [Engerati-In Focus Customer Centricity - Billing & Customer Care]
Contemplating a shared risk paradigm?
The 21st century has brought an unprecedented number of changes for utilities and energy providers. Addressing these changes will require the ongoing rethink of the current utility/customer relationship, but could also open up the possibility of migrating towards a shared risk paradigm in order to meet the needs of a more distributed and customer-focused energy system.
For example, a customer might wish to install a solar panel and a battery, generate their own energy and take themselves off the grid completely. In this instance a utility could offer an insurance-like backup tariff to encourage grid connection. Creating a market structure for tariffs with a varying degree of responsibility for continuance of supply.
Alexis Phelizon of ERDF said “we as a distributor and transmission system operator can help customers to go in that direction. TSOs and DSOs are key actors to enable the energy transition to smart cities, to prosumers and to the integration of renewable energy sources.”
While countries across Europe are attempting to tackle the issue of a shared risk paradigm, all have different opinions on how to move forward and it’s clear to us that one size doesn’t necessarily fit all. Austria for example, has an average annual household energy bill of around €360, while the UK on the other hand, has average household bills clocking in at around £1,200 – almost four times higher.
The energy revolution and infrastructure investment
Stephen Haw of the Baringa Partners said “Over the last couple of years there’s been a lot of investment and a lot of progress made around technology and innovation. But really, the Energy Revolution is about what HASN’T happened yet.”
We have now entered a phase where the industry’s traditionally bureaucratic and capitalist attitudes towards energy are seriously under threat. Utilities are constantly being told what should be mandatory, but without it being clear how they should invest or who is in charge of making these all important investment decisions.
“This is an important moment where there are more and more renewable energy sources, where prosumers and consumers are evolving and we need to have a clear vision of what is going to appear in the next 10 or 20 years because we need stability in order to invest,” said Phelizon of ERDF, “We must innovate to operate our grids but also prepare a human resources evolution because it is not only a question of equipment but also a question of process.”
Fonger Ypma of Eneco commented that energy suppliers are seeing their current margins eroding and they are looking for new business models, and asked: “Will the utility industry be able to grab hold of the value pool or will new entrants disrupt it from the start and leave energy suppliers with a dying business?’ For energy retailers, this is the question of the decade.
During the meeting, there wasn’t so much a disagreement over the definition of the ‘Energy Revolution’, but rather differing opinions on what the future of energy will be. For many the Energy Revolution is about investing in the best technology and innovation and improving investment models in infrastructure in order to revolutionise the market and make future visions a reality.
We are left feeling that many energy suppliers, in the European Union and internationally, are ready at the start line of an innovation revolution; eagerly anticipating the sound of the gun so they can begin shaping the future of the industry. The dam will burst when the EU finally and clearly defines a framework to facilitate investment. [Engerati-In Focus Digital Transformation in the Energy Sector]
Smart city models
With the Smart City World Expo co-located in Barcelona with EUW 2016, it is no coincidence that the event is sited there – and especially as Barcelona is regarded as a model example of an evolving smart city.
While smart cities are a relatively new area of interest for the electricity sector, requiring it to work with closely with players from across the spectrum of activity, there is no doubt that it is also foundational. Energy is fundamental to all aspects of daily life and a sound and thriving economy.
Still there are some very fundamental issues that need to be ironed out: What defines a smart city? Different players bring different perspectives. What are the requirements for a smart city solution? Cities generally start with small pilots but solutions normally will be required to be expanded city-wide. What is an effective governance model for smart cities? Coordination between many different players will be crucial to development.
“Barcelona is the right place to have these discussions,” says Roberto Zangrandi, special advisor to EDSO for Smart Grids on secondment from Enel, pointing to the need to map what makes a smart city successful and enables it to stay ahead in its evolution. “This is the year to define the point where the planning policy of cities and nations must support the evolution of smart cities. Targetting investment could trigger dramatic improvement in the general quality of life.”
Antonio Messias of Portugals’ EDP Distribution also comments on the importance of the city’s residents in smart cities. “In the end we are talking about citizens and the affordability of the solutions we are putting in place.”
With its smart metering and smart grid activities, a forebear of an Internet of Things, the utility sector has a head start on other sectors and is able to provide infrastructure, lessons and leadership. We are aware of just one utility initiated smart city initiative – Envision Charlotte. With the move towards additional revenue streams for the future utility business, smart cities should offer considerable potential but it will be the early birds that take the initiative that catch those worms. [Engerati-In Focus Smart & Sustainable Cities ]
New entrants to the energy game
Do we need to see more start-ups and smaller utilities attending these pre-conference events? The answer appears to be a resounding ‘yes’.
Forums like the Advisory Meeting can sometimes come across as close minded and unclear in their direction, going hand in hand with a noticeable absence of smaller companies and new market players around the discussion tables.
Guillermo Amann of T&D Europe believes this lack of representation contributed to the somewhat “stoic” approach of the day. He said “the people that were around the table and the people who will ultimately attend the conference (EUW) are the people who already specialise on the grid – the utility and solution providers – therefore we miss the opportunity to educate those newcomers on the reality of the grid.”
These smaller companies and startups, as Nicolas Arcauz of Iberdrola points out, run their whole value chain – “they will have a guy who operates the network, but the same guy also deals with customers calls and complaints.”
The Advisory Committee has gathered together the biggest international utilities and vendors but perhaps it is the new companies and entrants who should be leading the way for the energy industry. It is easy to see how large companies such as EDF and T&D might lose touch with the value chain as a whole; from the crystal towers of large corporations, layers of management and branches means that their vision is deep but also narrow.
Smaller utilities and start ups on the other hand have a larger vision of company activity – free from the shackles of past concepts and ready to adopt new customer risk and investment strategies, now and in the future.
While there is a fear that newcomers could whip the rug from under the feet of many well-established suppliers, small companies can benefit from the resources and knowledge of industry leaders whilst providing a much needed, clearer perspective on how to approach the Energy Revolution and define the industry moving forwards. [Engerati-In Focus T&D Predictions for 2017 - IoT and In Focus Retail Predictions for 2017 - Customer Centricity]
We look forward to an exciting and dynamic edition of EUW 2016 and expect the conversations and discussions to build on this momentum and feedback.