But what are the key trends in the market which will rise to prominence over the next 12 months? Which technologies will become prevalent across the sector and will cause further disruption to legacy utility companies?
Net zero emissions by 2050
With a continued focus on sustainability in 2020, the UK passed laws to end its contribution to global warming by 2050, becoming the first major economy in the world undertaking this initiative. This target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80 per cent reduction from 1990 levels. This very ambitious target will be taken much more seriously by energy companies in 2020 and will require an increased investment towards renewable generation and decarbonisation of heating.
The UK government also announced its ambition to set up the world-leading carbon capture and storage (CCS) that is aimed at cutting emissions and stop greenhouse gases from entering the atmosphere. This move poses a big opportunity in 2020 to export this technology to emerging markets and large carbon polluters, making the UK the de-facto leader in CCS technologies.
As a result, utility organisations are reshaping strategies and placing sustainability at the forefront of their business missions. Companies running gas and electricity transmission and distribution networks are working with Ofgem on RIIO-2 price controls (for the next five years) to maximise their role in ensuring a low carbon economy and broader environmental objectives.
Customer is still king!
Better data acquisition (particularly asset and customer data that is generated at the edges of the business operation that could help, for example, with water leakage detection) is becoming a core focus for the utility sector in 2020. This is because organisations are feeling the need to better understand their customers to be able to manage their distribution demand and network better, adapt to the changes of distributed generation and create commercial opportunities. This will be a key to business success in the wake of increased competition from highly data savvy and modern organisations.
In 2019, disruptors like Ovo, Bulb and Octopus demonstrated the success of their customer engagement strategy, differentiating themselves from the big six, and promising customers green energy, cheaper tariffs, time-of-use tariff and a simple on-boarding process. According to a recent report by the Competition and Markets Authority (CMA), the market share of the big six has fallen by 24 per cent since 2014. In 2020, these new entrants have bigger plans to disrupt the market, presenting strong competition. Also, Ovo’s acquisition of SSE Energy Services could pave the path for other mergers between the disruptors and the big six and also the integration of Npower customers with Eon.
This shift in the market is caused due to being bound by legacy procedures of the big six and the inability to transform the customer experience quickly enough to compete currently.
AI and ML become mandatory
With the advent of smart metering and other data capture technologies that multiply volumes of data, it’s highlighted to the sector that their existing analytical capabilities are not sophisticated enough to understand the incoming data and derive worthwhile insights. Although the current adoption of Artificial Intelligence (AI) and Machine Learning (ML) is already helping organisations to understand their customers better.
But as data continues to explode, only those utility companies that adopt AI and ML in all aspects of business, including operations, assets management and customer engagement, will be the business that will survive the next decade.
Technology to off-set energy sector deficits caused by electric vehicles
Electric Vehicles (EVs) currently represent a small but rapidly growing part of the transport market. The transition to EVs should provide substantial benefits like lower fuel costs, reduced maintenance bills, and zero or discounted car tax. But car manufacturers acknowledge the major infrastructure gaps that currently exist which are hindering the growth of the segment.
2020 could be the year when distribution network companies will leverage the investment made in 5G and IoT, to be able to fill gaps to manage capacity and infrastructure availability. Using these latest technologies can help to optimise the network, allowing for mass-market EVs to be charged. By putting distribution network companies at the centre of the transformation for EVs, it will help fill in infrastructure gaps and ensure lower carbon emissions.
Despite the utility sector continuing to lag behind other industries when it comes to digital transformation at this scale, we are already seeing a real push from both start-ups and legacy brands to drive in this direction, which should provide some confidence to consumers. There will be no excuse in 2020 for poor customer experience and consumers expectations are only going to grow over the next 12 months, so companies are going to have to implement technology not only effectively but fast to keep up.