Future energy providers: data-driven businesses or cooks without recipes?
Energy needs to think creatively about data to stay ahead, says Nadja Peltomäki, business strategist at Futurice.
They know where you live, what kind of house you have and when you arrive home. They know whether your washing machine is as energy efficient as your neighbour’s. They know when you last vacuumed at home.
Who are “they”? Google? Apple? Amazon, MI5?! No, the company that has all this information about you is your good old energy provider.
Since the advent of energy deregulation and market-driven electricity pricing in their markets, energy companies have been looking for new ways to match consumption data with generation data.
Smart electricity meters are part of the answer; they provide utilities with energy consumption data on their consumers by the hour, the minute and even by the second. Energy companies can use these huge volumes of data to understand customers' behaviour and needs in a much more profound way than simply informing consumers how much energy they use each month.
By identifying a customer’s individual energy consumption patterns, they can analyse equipment efficiencies and even predict breakdowns. When combined with other easily accessible data, such as weather, energy providers are better placed to sustain the entire grid, as well as helping customers to monitor their consumption and lower their electricity bills by allocating their consumption to hours when electricity is cheaper.
Some companies have gone a step further by creating so-called virtual power plants. These enable demand side response programmes whereby customers can save or even earn money by agreeing to connect their energy assets to the energy provider’s virtual power plant software system, allowing any spare capacity or periods of reduced consumption such as weekends, to balance increased demand elsewhere. Eon actively encourages business customers to join its virtual power plant software system while clean energy company Fortum is piloting virtual power plants for both business and residential customers; with the latter group allowing their water boilers to be used for short intervals in order to lower the output of hot water tanks during peak electricity consumption periods.
Initiatives like these allow energy companies a cost-effective way of integrating the growing number of renewable technologies into the grid. They also have the advantage of balancing sustainable considerations with the opportunity for customers to save and even make money, so positioning energy providers as adding value.
Ultimately, the goal for energy companies is to become full-service businesses that can offer solutions beyond electricity such as smart homes and mobility. They could even order new home appliances when the old one’s stop being energy efficient. Currently, however they aren't maximising the potential of the data they own sufficiently to reach that goal. Why is that?
In a word, it’s due to silos.
Most energy businesses don't have a comprehensive view of their customers. Sure, they have CRM data, billing data, customer service data and smart meter data, but this information is often stuck in departmental silos and not aggregated at a business level to provide a strategic overview of customer usage and needs.
As a result, companies find themselves a bit like cooks without recipes. Having all the ingredients doesn't really help if you don’t know how to combine them.
One immediate step energy companies can take, is to reach beyond energy data and find the right network of partnerships to provide a “one-stop-data-shop” for customers. This could lead to a scenario where with just one click, customers could access their next electricity bill, together with an estimate of how much they could save in the future by switching to more efficient home appliances. It could even include links enabling them to order the more efficient appliances.
In terms of realising this vision, getting different databases to talk to each other isn’t that hard. Helping customers to feel comfortable with energy companies knowing such granular detail about their energy usage, is much harder. That’s before we get to the problem of asking customers to allow this detailed information to be shared with partner companies so that they can help recommend cost-effective alternatives.
The key to solving these challenges is to get customers to trust that energy companies have their best interests at heart. To build this level of trust, energy providers need to involve their customers more in generating ideas and experimenting with different solutions. Breaking down the traditional barriers between “customer” and “energy provider” and inviting interested customers to special focus groups or brainstorms, is the most effective way of creating data-driven services that solve genuine consumer problems in a way that adds value. It is also an important first step to energy companies fulfilling their full-service potential.
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