From Energy Suppliers to Energy Managers: The Future of the Energy Company
by Bob Shively, Enerdynamics President and Lead Facilitator
“Change is no longer just a strategic aspiration but a pressing business need”
LCPDelta State of the New Energy Market, July 2023
The energy industry is going through a dramatic revolution unprecedented since the early 1900s. Multiple forces including decarbonization, climate change, decentralization, digitization, and customer expectations are requiring energy companies to find new business models to avoid becoming irrelevant.
.jpg)
Certain regional energy markets are moving into the future more quickly than others due to supply and cost issues, government policies, and consumer preferences. Markets worth studying for hints of the future include Australia, California, Europe, Hawaii, and New York state. Here, we’ll take a look at energy markets in Europe as studied in detail by the energy consulting firm LCPDelta in its recent report titled State of New Energy Market 2023 and Supplier of the Future – The Need for Change.
Change in Europe is here now
The transition in Europe has been accelerated by a mix of supply/cost issues driven by Russia’s invasion of Ukraine, governmental decarbonization policies, and strong pro-green ethic among middle-class families. Results presented by LCPDelta indicate:
- 88% of European customers distrust energy suppliers
- 55% were financially strained during the recent energy crisis
- 75% believe energy companies should help manage energy use and costs
- 36% are open to pay for energy management services
- 35% are willing to pay more for sustainable services
- “Green thinking” has spread to the mainstream
- Customer spending on new energy products and services in Europe will more than triple in the decade covering 2020 to 2030
- This spending will include behind-the-meter solar and storage, heat pumps, EV charging infrastructure, and smart homes
The result for energy companies is that change is no longer just a strategic aspiration but a pressing business need.
How will energy companies respond?
The traditional energy company model in Europe and the U.S. hasn't focused much on consumers' needs beyond reliable supply and relatively affordable rates. Energy company financial success has resulted more from outcomes in regulatory proceedings than from satisfied consumers. In regions with retail competition, many suppliers tried to supplement their commodity offerings with additional services, but most struggled to find profitable business models. Companies that have survived tend to focus on strict cost efficiencies and a menu of pricing options. Utility distribution companies have focused on spending to maintain reliability during increasingly volatile weather and spending to modernize grids. In Europe and some parts of the U.S., energy companies have struggled with rapidly rising supply costs. The result is a strong concern over a rapid decline in energy affordability. Meanwhile, energy companies managing mandates to reduce carbon emissions will increasingly need cooperation from their consumers. In discussing Sacramento Municipal Utility District’s Zero Carbon Plan, CEO and GM Paul Lau states “we need our customers to understand why we are taking such an aggressive approach and get them to partner with us, because we can’t do it alone.”
LCPDelta’s work suggests that success will come from transitioning business models from those of an energy supplier to those of an energy manager. Energy suppliers sell kWh, whereas energy managers empower and reassure customers.
What will the menu of choices look like? Here are some suggestions:
Home and facility upgrades
- Energy auditing coupled with cost-effective energy efficiency upgrades
- Evaluation and installation of heating and cooling alternatives such as heat pumps
- Installation of EV charging to match consumers' lifestyle needs
- Evaluation and installation of solar and storage systems
- Smart home component installation and integration
- Digital customer interface installation and integration
Ongoing energy operations
- Offer base no-hassle energy packages for traditional consumers
- Offer pricing options to reward more active consumers for providing demand flexibility, storage, and distributed supply
- Assist consumers in understanding service options and the technology required to benefit from given choices
- Offer green supply options
- Help prosumers participate in markets to maximize asset value
- Interact with consumers based on the consumers' preferences whether digitally, by phone, or in person
A key to satisfying consumers is hassle-free services. Right now, energy services are offered by a diverse set of players, and consumers are left to piece together solutions that often require self-knowledge along with the ability to manage complex sets of choices. The energy companies that make this as easy as shopping on Amazon or watching the latest on Netflix will be the companies that dominate the future.
Need to bring your employees up to speed on the energy transition without taking them away from their jobs? Check out Enerdynamics’ half-day live virtual seminars including Distributed Energy Resources and the Electrical Grid, How Your Utility Makes Money, How Your Utility Sets Rates, and The New Energy Consumer.
Back to Energy Currents blog
