Energy firms look outside sector to increase revenue streams

Energy companies are increasingly looking outside of the industry for new revenue streams, according to research commissioned by consultants Capgemini.

The findings showed 84 per cent of the energy market’s main players have identified or plan to identify new business opportunities related to the increasing amount of data being produced.

Of these a subsequent 84 per cent are already pursuing or plan to pursue these opportunities while 52 per cent are looking beyond the current value chain to find alternative revenue streams, prompting “significant shifts” in business models.

Capgemini says all UK energy suppliers agree that the market will be completely turned on its head by a host of digital transformations over the next five years, while 86 per cent cite the government’s 2020 smart meter target as the “pivotal driver” for this.

Smart metering and other initiatives, especially those focused on customers, mean that energy retailers are generating and receiving large amounts of data.

Over three quarters said they feel “well equipped” to handle this influx while 70 per cent have already implemented innovative technologies to manage and use data effectively.

Last week the government announced it would be implementing mandatory midata in the energy sector in a bid to make it “quicker and easier” for customers to access their data.

Midata is a method of electronically transferring customers’ data with consent from a company system to a third-party intermediary using an application programming interface.

Capgemini’s research found almost three quarters (72 per cent) of the market stated that they are at least open to sharing their data with third parties. Providers cite prospects of an improved customer experience (68 per cent), new products (61 per cent), and new revenue streams within the value chain (39 per cent) as the benefits for smaller suppliers.

For larger suppliers it was new revenue streams from both within (50 per cent) and outside (75 per cent) the value chain, plus a reduction in costs (50 per cent) that most appealed to them.

Alain Bollack, vice president at Capgemini, said: “The retail energy market is in the midst of unprecedented, significant and enduring change. To respond to these pressures, energy suppliers are working hard to re-evaluate their business models and break down barriers to innovation.

“Faced with massive external forces, attitudes to collaboration are surely shifting within the industry, with the opportunities it affords quickly becoming too evident to ignore.”

The research also showed smart metering to be the number one area of collaboration for the industry, with 71 per cent of those surveyed currently collaborating or planning to do so.

Although collaboration may be established in this area, the results showed room for improvement elsewhere. Only two fifths of larger suppliers are currently collaborating or planning to collaborate with companies from adjacent markets.

Interestingly six in ten (63 per cent) of those large suppliers who are not planning to collaborate admitted their preference to grow and pursue new business opportunities was through acquisitions.

Bollack added: “Data is the lifeblood of today’s innovation, so the fact that the government has provided a mandatory stimulus to increase it within the energy market will prove a huge boon to the industry.

“It is paramount that energy providers take full advantage of this, and while they will continue to improve customer experience and services with it, looking beyond their immediate boundaries for integration with other markets will also open new doors for both companies and customers alike.”