How energy suppliers can fight to keep the tanks off the lawn

Innovative alliances and a focus on consumer need and experience could give UK energy suppliers a chance of fighting off the firms lining up to steal their market share, says Nadja Peltomäki.

Despite the big six having massive market share, a combination of consumer distrust, squeezed margins and a new energy price cap makes them vulnerable to competition from the energy equivalents of Airbnb and Uber. Distrusted and unloved by some, they are ill-equipped to fend off powerful and well-resourced disruptors seeking to harness emerging tech and the rise of the connected home to provide consumers with cheaper, more engaging energy propositions. You don’t need to look any further than Google, which is in pole position to dip into the domestic energy market, following its purchase of Nest Labs and its development of a digital home ecosystem.

One way the big six could counter this threat is through more effective use of the data they gather from smart meters. But if energy firms are truly to stay relevant, competitive and re-engage with consumers, they also need to harness technological change by forming smart partnerships. To pick the best partners, it’s critical that utilities increase their level of interaction with customers – to help them gain a deeper understanding of customer needs beyond electricity.

People are tired of having multiple different contracts and providers. The winning companies or partnerships will be those that can solve many different customer needs at once. An obvious starting point would be an alliance with appliance manufacturers, which have their own ambitions around data and the Internet of Things (IoT). Philips Lighting, for example, has announced a number of strategic partnerships for its connected lighting system for the home, HUE, including with Amazon’s Alexa and Baidu in China. Partnering with an energy provider could make sense for Philips, and could lead to a scenario in which, with one click, customers could access their next bill, together with an estimate of how much they could save by using more efficient appliances. It could even include links to order those appliances.

IoT partnerships could also help big energy suppliers improve their relationship with enterprise customers. Open Energi has devised a technology to transfer IoT capabilities to power-generating assets. It supplies large-scale commercial customers such as water firms and supermarkets (including Sainsbury’s) with a smart platform that can connect to and collect energy and operational data from assets such as aircon units, fridges and water pumps. This gives companies greater visibility of their energy consumption and allows them to manage patterns of demand in real time – with potentially significant financial implications.

The IoT is just one example of how a partnership model could help energy suppliers embrace digital technologies. In 2018, Centrica unveiled a trial to explore blockchain technology. Delivered with energy blockchain pioneer LO3, Centrica’s goal is to find new and better ways of delivering energy and services to customers – an ambition that could have a positive impact on loyalty. In the same arena, start-up Electron is developing a blockchain trading platform that will incentivise electricity customers to flex their energy consumption to balance supply and demand. Technical support is being provided by Germany’s Siemens; several energy firms have already built a consortium around the platform, including EDF Energy.

Embracing expertise through collaboration is also likely to be critical to the big six as they attempt to secure a leadership position in emerging technologies such as electric vehicles (EVs). Car manufacturers want to build holistic packages to sell alongside their vehicles, with home charging and charging on the go included. Establishing and operating public charging networks offers an opportunity for energy suppliers to gain a foothold in an adjacent new market, where their scale and existing infrastructure potentially offers a competitive advantage and makes them an ideal partner for auto brands.

None of this is likely to happen without collaboration, particularly now that major companies are invading from the other direction. Take Shell’s purchase of independent supplier First Utility. Combined with its acquisition of EV charging firm NewMotion, the company has a presence across the electricity supply chain, from producing natural gas for use in generation, investing in solar and wind, to selling and marketing electricity through First Utility. So disruptors are not necessarily recently launched start-ups.

Sealing partnerships is not always intuitive for hierarchical legacy players. But innovative alliances, combined with improved use of data and analytics plus a sharp focus on consumer need and experience, could be the magic formula that gives UK energy companies a chance of holding back the disruptors lining up to steal their market share.