Utility Week

e problem is how to bring about this change and make it work. Nygard himself used to work at British Gas, so understands the nature and scale of the task facing the incumbent major players. "I've spent enough time in the larger utility space," he elaborates. "One of the reasons Limejump started was because it was quite clear there was not enough technology infrastructure across these businesses to really deliver value to customers in the power market. "Electricity can be controlled but the solutions were not readily available to end customers. We thought about how we could rebuild a utility model with the customer in mind." 13 ISSUE 01 OCT/2018 "O ne of the main issues you have when it comes to the big, old utilities is cultural," explains Erik Nygard, chief executive and co-founder of Limejump. " ey were never created to solve problems so that's never been their business." Limejump, a company that began life in 2013 as an aggregator for industrial clients in the flexibility market and now – among other things – manages the UK's largest portfolio of batteries, is representative of the sort of problem those "big, old utilities" are facing. In a nutshell, that these kind of disruptor organisations may soon make them obsolete. e speed of technological development over the past decade has transformed the entire sector to the point where the incumbent big beasts of the energy market in particular face challenges from every direction. Digitalisation – whether in the form of smart metering at the consumer end or predictive analytics of assets at the supply end – may open up new possibilities and revenue streams for utility companies, but the influx of more nimble competitors means there is also real danger for those who are slow on the uptake. In essence, if the market is changing then anyone wanting to play in that market has to change as well. And the bigger the tanker, the harder it is to turn around. So if business transformation has become a necessity as opposed to an option, what will this transformation look like? And what must companies keep in mind when embarking on their journeys? First of all, it's important to understand the nature and scale of the threat to traditional utilities. In the energy sector at least, the challenge is genuinely existential. e major suppliers' loss of market share is already a fact of life, but failure to respond could be fatal. Bulb, to take one high-profile case, has grown from virtually nothing to taking 750,000 customers in the space of just 18 months. As Nygard puts it: "If big monolithic organisations fall away, then the industry will be fine. Bulb is an example of how you can rip nearly a million customers out of the market with just a couple of hundred staff. Imagine 20 of those and that's taken virtually the whole market." Limejump itself is another example of the sort of company that demonstrates both the threat and the opportunity that the digital age presents for utilities. As a self-proclaimed disruptor (it identifies itself as a tech company, rather than an energy company, on its website), it certainly represents a challenge to the incumbent players. Yet the range of services and revenue streams Limejump has developed in just five years also shows that there is untapped potential for those willing to take a risk. "We first entered by telling customers we were aggregating flexibility and selling it to National Grid," recalls Nygard. "It was just simple products in 2014, then we got a supply licence in 2015 and sold into the wholesale space. e next year we got into dynamic frequency response, and we have built on that." Limejump's revenue is now split across a number of business streams: managing power exports; trading in the wholesale market; taking fees for managing credits for distribution network operators (DNOs); as well as from the capacity and dynamic response markets. e company's flexibility and adaptability are what has driven its success, but it is also a model for others looking to change their business model. Ofgem's new sandbox aids innovation It's fair to say that a regulated industry and disruptive innovation may not always be the easiest bedfellows. However, Ofgem has made a concerted effort to embrace new technologies and ways of working. In December 2016, it launched its 'Innovation Link' to offer feedback on the regulatory impact of new ways of working. It also provides a 'regulatory sandbox' for testing products and services. " e energy sector is transforming at a faster pace than most people expected, so it is hard to predict which technologies will have a transformative change," Daniel Kirk, head of Innovation Link tells Flex. "Our job is not to back any particular technology. Instead we make sure that regulation is fit for purpose, and does not hold back any new developments that could help consumers." So far, more than 150 organisations have sought feedback through the Innovation Link, with more than 80 per cent of these not companies already involved in the energy sector. Among those making use of the sandbox are innovators developing peer-to-peer trading platforms, 'concierge' services that help switch consumers to the best tariffs automatically, and smart devices designed to reduce energy consumption. "It is always good to see the breadth of ideas people approach us with," adds Kirk. "We are also finding that everyone, from small non-profit organisations to large corporates from other sectors, is interested in innovating in energy." What about the regulator? // Digitalisation – whether in the form of smart metering at the consumer end or predictive analytics of assets at the supply end – may open up new possibilities and revenue streams for utilities companies // Transformation

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