As a result, the big six are no longer tasked simply with defending market share against the rise of non-integrated challenger brands. They are also preparing for battle against non-traditional players from beyond the bounds of the energy sector.
But the challenges of the future are as much about opportunity as threat, with the UK’s largest utilities already taking bold steps towards their reincarnation as home service providers.
RWE is thinking big. Last week the Npower parent company launched a new communications protocol for the Internet of Things (IoT), in which the connected homes market will exist. This protocol, called Lemonbeat, provides a “common language” between devices on the IoT and “could interconnect practically any everyday object with another device” RWE says.
“It shows how our strategy of exploring and developing solutions which are additive to our core energy offerings is really starting to create exciting new market opportunities for us,” RWE npower’s head of innovation and, data and analytics Will Siddall tells Utility Week.
The launch comes just a few months after RWE confirmed making inroads in Silicon Valley in order to drive forward a change in the company’s business model across European markets through innovative new technologies.
At the time Npower director of innovation Neil Pennington told Utility Week that a “small, hand-picked” team had moved to Silicon Valley for an initial six month period but the company may also decide to establish a permanent presence in the Californian tech mecca.
Their mission? To identify new partners, technologies and solutions so that the company can come up with an initial business model for our markets in Europe, Pennington said, adding that the primary focus is on products and services for decentralised energy management.
RWE is “spending hundreds of millions of Euros in this area” Siddall told delegates of the Utility Week Congress in October. RWE also has a growing smart homes business, built on its partnership with thermostat manufacturer Nest and has built a device-to-device telecoms company and invested in a home automation business.
Siddall says he is looking beyond the “incremental innovation” in the connected homes market to how to “down-sell our product”.
“The bit that is really interesting and where we spend most of our time is the potential for retail market disruption. The concept that in 5 – 20 years this concept of needing an energy retailer might disappear, that’s quite alarming if you’re an energy retailer. So how do we turn from Blockbuster into Netflix? How do we work out what’s coming along to destroy our world and make sure we are a part of it?”
Lemonbeat looks beyond the connected homes market to the wider IoT, solving a key problem that has so far “hampered” the development of the IoT. By proving the answer to the “lack of uniform, secure communication standards” Lemonbeat could form a key building block in the IoT’s ongoing development.
“In the context of a global standardisation of the IoT, we can play a key role,” Dr. Dietrich Gemmel, chief executive at RWE Effizienz GmbH, the arm of RWE responsible for developing the technology said.
Lemonbeat will potentially open up both partnerships for RWE with any IoT device creator, and with other companies creating the very fabric of the IoT. “The response to our communications protocol has been extremely positive. Lemonbeat’s wide performance range is being met with enthusiasm,” Gemmel said.
Although RWE has blazed a trail in the IoT direction, they are unlikely to remain innovation outliers for long. The focus on customer-facing technology innovation is emerging as a key trend within the utilities space as profits from traditional generation assets have come under pressure in recent years.
German energy rival Eon announced plans last year to spin-off its centralised energy business in favour of supply and network innovation. And this summer Centrica echoed the move announcing a billion pound strategy swing away from centralized power generation and its long-standing interests in oil and gas E&P to focus on British Gas and its ‘connected home’ offerings.
Neither have wasted any time. British Gas has already begun to build on its connected homes business, leveraging the existing success of its thermostat Hive. And Eon earlier this month launched the Eon Touch smartphone product, building on its existing Energy Savings Toolkit for neighbourhood energy comparison.
These new market opportunities, not just in the energy market but in the wider emerging technological world, could be the answer to what role energy suppliers will play in the future. If the other big six plan to not be left behind they will need to think about innovation on a similar scale.