As meters get smarter, who gets the power?

By

Paul Micallef

EY Global Digital Grid Leader

Passionate about the future of energy. Outdoors lover. Avid traveller.

4 minute read 26 Apr 2018

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New tech is taking control from energy suppliers and giving it to consumers. To remain relevant, utilities must redefine their role.

The power and utilities industry is undergoing a seismic shift. Consumers, untethered from traditional utility monopolies, are using smart meters and digital technologies to generate, store and trade their own energy.

In this new energy world, it is customers who will have the power.

Power to the people

Technology has changed every aspect of our lives. The internet and digital tools have transformed how we work, interact with friends, keep up with the news and spend our leisure time.

These changes have marked a shift in power away from centralized organizations. Consumers can now use technology to get what they need, from a variety of different sources, on their own terms and in their own time.

This disruption of power is now coming to the energy sector, as new technology and tools — such as smart meters — take control away from traditional monopolies and give it to individual consumers.

This disruption of power is now coming to the energy sector, as new technology and tools — such as smart meters — take control away from traditional monopolies and give it to individual consumers.

Every one of us can now take control of how we use electricity thanks to three critical trends:

1. More information

Smart meters allow consumers to see their energy usage in real time, and to understand how their consumption rises and falls and what it costs. Smartphone apps linked to home smart meters give consumers regular usage updates, allowing them to dial back use of their most power-hungry appliances at peak times. This transparency lifts the mystery that used to surround our power bills and is proven to encourage energy efficiency. Research shows that more than 60% of people said they would be encouraged to be more energy efficient if they could understand how much their daily energy use was costing them.

This knowledge creates educated and empowered customers who are no longer prepared to be passive players in the energy world.

2. More choice

Digital has made changing energy suppliers easy. More consumers are switching — and more often.

For example, in Germany around four million households switched supplier in 2015, up 6% on the previous year. In the UK, where smart meters are being installed in every home, consumers are actively switching suppliers, with about a third moving to smaller, independent companies. This has eroded the market share of the country’s dominant “Big Six” energy retailers, which went down from 96% in 2012 to 85% at the end of 2016.

Price is often a major factor in prompting customers to move, but it’s not the only driver. Many customers are now choosing suppliers that reflect their personal values, such as retailers selling 100% renewable energy or those offering access to community schemes.

And superior customer service delivered in other sectors is raising expectations of energy providers. A new focus on customer relationships is translating into new innovations, including in the Netherlands where one utility has partnered with a smart thermostat and energy display provider to give the consumers a clear picture of their energy use and cost. In another example, a utility has adopted a voice-activated assistant that allows customers to check their energy account balance, next payment date and submit a meter reading.

Along with raising standards, digital technology is also lowering barriers to entry in the electricity market. Nontraditional players are crashing incumbents’ party with new, innovative ways to sell power. Some retailers are offering customers the option to buy electricity “packages” that mirror how mobile phone services or streaming video subscriptions are sold.

3. Right to play

Smart meters and digital technologies, including blockchain, are making it possible for consumers to become players in the energy value chain. Peer-to-peer (P2P) trading allows neighbors — both those with and without rooftop solar — to buy and sell energy among themselves, turning communities into self-sufficient microgrids.

Brooklyn Microgrid is one company harnessing this exciting trend. The New York-based utility is developing microgrids in its home city, with the aim of using locally generated electricity to improve efficiency and to increase resilience to extreme events.

Utilities can remain relevant — if they act now

By putting the consumer at the center of the energy world, the smart meter has triggered a rapid countdown for utilities. The clock is ticking on traditional business models. Consumers that control their own energy don’t need utilities to act as a middleman.

The clock is ticking on traditional business models. Consumers that control their own energy don’t need utilities to act as a middleman.

If energy companies are to avoid being sidelined, they need to find new, influential roles in the center of this new energy future. It’s time for utilities to flip their thinking — are today’s challenges, tomorrow’s opportunities?

  • Instead of pushing products and services “one way” to consumers, could utilities use digital platforms to make the educated consumer an active participant in the design of new energy services that better meet their needs?
  • Instead of seeing new energy technologies, such as home energy storage batteries as a threat, could utilities take a leading role in their further development, perhaps through collaborations with start-ups?
  • Instead of resisting customer’s moves to go off-grid, could utilities use existing distribution assets, network knowledge and transactional platforms to enable the self-generation, storage and trading of energy?

Smart meters and digital technology give utilities the power and the platform not only to secure their own future, but also to help shape more sustainable and equitable energy markets for everyone.

Utilities already have the assets, information and customer relationships they need to redefine their role. But do they have the will to change, to move fast, to innovate and to begin to see customers as partners?

Summary

The smart meter has put the consumer at the center of the energy world, and companies need to transform business models to keep up.

About this article

By

Paul Micallef

EY Global Digital Grid Leader

Passionate about the future of energy. Outdoors lover. Avid traveller.