New Energy Experiences Key to Driving Value in a Low-Carbon Future
- Mar 25, 2021 3:36 pm GMT
Consumers are demanding better, cheaper and more sustainable experiences that reflect their values and lifestyle. Indeed, according to the latest edition of Accenture’s New Energy Consumer research, more than half of consumers are likely to invest more in energy efficiency today than before the pandemic. However, sustainable energy offerings are also a sensible decision for utilities’ bottom line.
Emerging demand-driven areas of value—spanning energy efficiency, energy management, distributed generation, storage, electric vehicle (EV)-related services and demand-side flexibility—are rapidly maturing. Indeed, our analysis revealed the value from consumer generation and storage business models is projected to reach €3.1 billion to €3.7 billion ($3.6 billion to $4.4 billion) in 2030 for key European countries alone. This figure could be as high as €5 billion for EV models.
So, what’s the next step for energy providers?
First, it’s essential to determine which opportunities to pursue to adapt to the new environment. We see four paths for energy providers to choose from if they want to thrive:
“Energy Value Providers” will maintain a focus on commodity sales and, to boost customer satisfaction and retention, will also offer new value-added perks in the form of extra services. This could include connections to local tradespeople or real-time alerts for impending events like thunderstorms, to evoke affinity with the brand without always generating additional profit.
“Energy + Home Service Providers” will provide customers not only with energy but also with closely related home services to generate additional profit, including insulation, boiler maintenance and smart home/thermostat installation.
“Connected Energy Services Providers” will look to the future and offer products and services in energy management, distributed energy resources (DERs), EVs and flexibility, to gain access to new profit pools. By 2030, these new business models could also drive an annual reduction of up to 76 million metric tons of CO2.
Others will go “Beyond Energy,” pivoting their business into manufacturing batteries, heat pumps or EV chargers and providing technology services related to the energy transition, or even moving into non-adjacent markets like transportation.
However, to drive growth from their chosen strategy, energy providers should adhere to nine guidelines to execute quickly and at scale:
Use artificial intelligence (AI) to power digital customer engagement. Advanced engagement enables an enhanced customer experience, which can be a real differentiator in a low-margin commodity business. In the front office, AI agents, virtual assistants and digital channels can help reduce the cost to serve while improving customer satisfaction. In the back office, technologies such as process automation and machine learning can be leveraged to carry out routine transactions. Accenture analysis suggests such an approach can yield a cost reduction of 20% to 40% and a 40% increase in digital sales.
Use customer lifetime value as a guide. Rather than basing decisions on the volume of customers acquired, it is more effective to focus on the value of those individual customers, quantifying the profit and loss for each one over their lifetime, based ultimately on their loyalty and their willingness to adopt new products and services. All decisions can then be aligned quantitatively with the most critical business goals.
Capitalize on intelligent pricing. Energy providers need to leverage the growth potential that intelligent, differentiated pricing—based on dynamic algorithms—can deliver. As intelligent pricing can calculate optimal prices for any given customer in near real time based on demand, competition and individual customers’ willingness to pay, it could increase sales 10% to 20%, improve margins up to 2 percentage points and increase revenues 5% to 15%, according to Accenture analysis.
Hone a brand and connect it with customer-focused offerings. A great brand ties together a company’s business strategy with customers’ service experience, and this can influence their decisions. Accenture analysis suggests 62% of consumers prefer to purchase from a purpose-driven brand, and the energy transition presents a unique opportunity for energy providers to redefine themselves this way, emphasizing their commitment to the challenge of a more sustainable future, for example.
Master asset, device and field operations. Asset-focused business models with a physical supply chain can be a challenge. Managing hardware procurement and logistics is a very different proposition to selling a commodity. Supply chain and logistics considerations including stock keeping and warehousing, managing the marketing and sales process from lead to conversion, asset installation, and returns are substantial. An energy provider’s field force is key to capturing market share and optimizing customer contact. So, to get the most from the next generation of commercial opportunities, top firms will need to monitor, manage and optimize large numbers of distributed assets in the field and break down siloes between energy retail and trading.
Partner for shared success. A key to success is strategically partnering with other firms in the energy ecosystem to improve how customers are served and bolster the diversity of offerings. Some partnerships may focus on augmenting missing capabilities, accessing new sales channels—such as through a local supermarket—or gaining access to customer data to gather valuable insights. Yet aspiring “Energy Value Providers” should opt to partner with firms that provide additional attributes to their commodity offer to increase loyalty.
Build a strong technology stack with a focus on intelligent platforms. This facilitates execution across business models. In digital energy infrastructure, it can be helpful to consider three layers of architecture, each with its own business needs and corresponding IT strategies: front end (relating to customer engagement), back end (focused on customer management, market messaging, billing and payments), and operational technology interaction (connected real-time device management, driving the broad set of new products and services).
Prioritize data. Effectively managing, leveraging and governing the increasing volume and diverse range of data they access is fundamental for energy providers that want to create new value. It is also vital to enable interoperability by connecting varied datasets and technology, for example, by connecting devices in the field and communicating with and between third-party systems.
Focus on the workforce and its digital enablement. Strategic talent acquisition, retention and training are vital, as new business models require different and evolving skillsets. Empowering the workforce with digital technologies also has the potential for significant cost efficiencies, increased productivity and enables firms to exceed customer expectations.
However, time is running out. The next decade is anticipated to be one of dramatic and accelerating change—customer preferences will evolve, digital technologies will offer more opportunities, and regulations will shift to facilitate the energy transition. Energy providers can harness innovation, adopt a digital mindset and empower their workforce to successfully crest the approaching wave of change, but what’s at stake goes beyond profit. Accelerating the energy transition represents the only viable path forward to ensure the world is livable for future generations.
Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.