By Jonathan Briggs, Innovation Strategy Manager, and Mike Carruthers, Managed Services Director
It was great to be back in person
Last Tuesday I attended my first in-person industry event in over two years: Future of Utilities Smart Energy (FOU) in London. Since the country was told to stay at home, not only have I changed companies, but I’m now a remote worker, and whilst I was looking forward to seeing colleagues old and new, in all honesty – I was also a touch anxious.
As it happens, once I’d settled, got chatting and listened to the first few sessions, I felt a lot more comfortable. As much as remote and hybrid working feel essential to business now, it really was great to be back in person discussing all things energy.
The stakes are higher than ever
I want to reflect, as many speakers did, on the global gas market price rises. As an energy industry professional, those spiralling prices have cemented my strong belief that the need to transition away from fossil fuels has never been greater.
From an environmental perspective (now also from the point of view of energy and financial security), the industry and policy makers simply cannot afford not to tackle climate change. The humanitarian cost of failure could be catastrophic.
Of course, as I write this, there’s a humanitarian disaster happening in Ukraine. The news and images coming out from there are shocking and heart-breaking, and like everyone I’m hoping a peaceful resolution can be found as soon as possible. It is a stark reminder of the humanitarian impact decisions can have.
I attended the Future of Utilities event alongside several of my colleagues, including Mike Carruthers, Managing Services Director at Gentrack. Together, we’ve reflected on several of the themes which came across strongly throughout the event sessions.
Access to data is critical for change
It could be argued that data has changed the way businesses are run in recent years more than any other single driver. The volumes available and the level of granularity have enabled some brilliant innovations in customer products and experience.
Open banking for example, has enabled 300 new ‘fintechs’ to enter the banking market while API call volumes have increased from 66.8M to 6Bn in 2 years. This has resulted in innovative new products, reductions in payment errors and vastly improved customer experiences.
Several speakers highlighted the comparison and argued that the energy system now needs to go through a similar transformation. Open data might not grab headlines but in an industry plagued by data quality issues, the benefits could be enormous. Easy, accessible, and real-time access to smart consumption data would provide a platform for a wider ecosystem of innovation and ‘cost free’ transactions.
In addition, it would allow for high quality predictive analytics, supporting companies to manage tasks like maintenance more efficiently. Better, more granular data access could also support the industry to identify customers at risk of falling into arrears, and enable them to put plans in place with the customer – ultimately reducing bad debt.
Which brings us onto the next theme…
Affordability and trust are blockers we must address
It was generally acknowledged by all speakers at FOU, that for many domestic customers the cost of low carbon technologies is a serious blocker – not simply the cost of the technology, but as one speaker highlighted; the cost of retrofitting homes to accommodate those new technologies. It was quoted that two thirds of homes would need retro-fitting – an astronomical cost of which there’s no current plan to fund.
In parallel, rising fuel poverty is a serious issue in B2C supply; Citizens Advice pointed out that 1 in 10 domestic consumers were in arrears in January, with the price rises still to come. It was also noted by another speaker that B2B doesn’t get much focus, but rising prices could be just as detrimental to businesses, with knock on impacts on costs of living and jobs.
It feels as if we’re stepping into the perfect storm; on the one hand we need customers to invest in new technology to decarbonise and reduce their bills. Whilst on the other hand those same bills are rising, potentially putting serious financial pressure on customers, and the suppliers who develop products.
Our industry needs to be able to provide financing options and business models to customers which understand their situation and can meet their unique needs. But alongside this is a need to better engage with customers. Unfortunately, a recurring theme at FOU was customer trust, or the lack of it. Several speakers referenced the historic errors of the industry in saying we cannot repeat the “issues of supply when addressing the future beyond the supply”.
How do we tackle all this?
Customers want a player in the market who can tell them how much something will be, how much it will save them, what the payback period is and give personalised information/analytics and recommendations. To highlight that point, one of the case studies presented at FOU was from a company using and analysing up to date data from the DCC to help consumers understand exactly how much money could be saved from having low carbon technologies such as solar and battery installed, or simply by adjusting behaviour.
This example reiterates the first theme around data – with good data, companies can innovate to support good outcomes. The above business model directly addresses issues of affordability and trust. It also proves the point that one speaker made, that the industry cannot and does not need to wait for the regulator to enable innovation.
However, if we really want to accelerate the pace, we do need those regulatory frameworks to really address the outcomes required. Why isn’t open data in energy top of the agenda? Why aren’t smart meters being mandated to accelerate Half Hourly Settlement? Our customer, So Energy, shared during an innovation themed panel that Half Hourly Settlement would be the thing they’d like to be enabled most rapidly, in order to facilitate “truly smart homes”.
Consumer protection is of the highest priority of course, but shouldn’t we be looking to do this in a sustainable way rather than simply papering over yet more cracks by simply ringfencing ROC payments and credit balances as Jonathan Brierly suggested.
Alongside this, the industry and regulators need to ensure lessons are learnt from the mistakes of SMETS1 through putting frameworks in place which enforce device interoperability. Otherwise, we risk eroding any consumer interest in things like solar, battery or EVs. We must ensure whatever assets customers choose, they aren’t left stranded to a single provider.
But at the heart of all of this is trust. Customers don’t trust the energy industry – period. This cannot be solved by the industry alone. The government, the regulator, and the media need to work with the energy industry to build this trust back up and bring consumers on this transition if we are to stand a chance of succeeding.
We have the technology and resources to tackle these challenges. The time to drive significant change and innovation is right now but it needs collaboration across the regulator, politicians, and industry participants.
We know that with the right political support and collaboration it is possible to rise to the most urgent of challenges quickly; that was proven with the speed and effectiveness of the vaccine rollout. Transforming the energy industry is now that urgent. It is an environmental, financial, and social priority.
It also has huge potential for the UK. As our CEO Gary Miles said “the UK has an opportunity to be a global leader in cleantech”. We must make sure we don’t miss that opportunity. The thing that gives us the most confidence, is that everyone at Future of Utilities Smart Energy event was ready for the challenge and it feels like finally, tangible steps are being made.