Utility Week

20 | 2ND - 8TH AUGUST 2019 | UTILITY WEEK Operations & Assets A t a recent conference on AI, a senior utility executive was overheard muttering their frustration about the ironies of the status quo. On the one hand, there was the promise of innovative technologies opening up new ways to connect with customers, deliver automation and improve e ciency. And yet for all this upside, some- how it felt the customer and the front o ce employee of the utility company were dri• ing apart. This distancing is a subset of the broader upheaval sweeping the energy sec- tor. Decar- bonisation, decentrali- sation and digitalisation are reshaping business mod- els and break- ing down traditional values chains. Amid all this change we must also consider the transforma- tion of the relationship between customers and energy companies. Engagement is becoming more dynamic and technologically enabled, while customers now expect a greater portfolio of services to be provided quickly, on their terms, seamlessly integrated across a variety of channels. Those compa- nies that can shape their business to reinforce the link between front o ce employees and the end cus- tomer will be those most likely to capture the growing opportunity in the emerging energy value chain. New entrants, new value chains and new business models are emerging In the UK market there has been a seismic shi• in the provision of energy with the larger power and gas utilities - nding themselves in competition against an array of new entrants, which has led to a swelling of customer switching. Much of this disruption has been driven by smaller companies with a more agile and innovative way to develop and deliver services to customers. Additionally, major oil companies are also making inroads and investing in the market. Several of the oil and gas majors are continuing to transform their legacy model with a more signi- - cant move downstream, in an e„ ort to own the customer relationship. We are seeing this across a variety of strategic areas including market access arrangements, investments in electricity and gas retail, battery storage and electric vehicle (EV) charging. We are also seeing a broader shi• from products to services. In the UK, for example, there are pilot projects with companies o„ ering households the opportunity to buy a heating plan tailored to individual lifestyles with home heating scheduled either hour-by-hour or room-by-room. As part of this services trend, there is a blossoming of new o„ erings around the "connected home", which, according to PwC research, is worth some £11 billion. The connected home continues to be an area of opportunity for utilities as they look to expand their footprint throughout the home and share of wallet. This market is evolv- ing with the likes of Lucid, a tech- nology start-up originally developed and supported by Toshiba. Against this backdrop of increased competition and change, companies are reinventing them- selves. The larger UK energy sup- pliers have reduced their exposure to carbon-intensive operations in power generation as they focus e„ orts on becoming an integrated energy service company. Many UK utilities are also developing EV charging related services ranging from the installation of chargers to providing renewably sourced energy for EV drivers, as well as V2G (vehicle-to-grid) o„ erings. Despite these exciting new devel- opments, the energy retail sector continues to grapple with an array of perennial challenges: ● High customer and operational demands; ● Constant margin erosion from intense competition; ● Low levels of customer satisfac- tion and trust; ● Political and regulatory pressures; ● Vulnerable customers and vari- able costs to serve. All this is creating an operat- ing environment with wafer thin margins and weakening market capitalisation for some of the lead- ing players. Despite these challenges, energy retail remains active from a trans- actions perspective with further market consolidation expected in the next year or so, highlighting the value that many see in the long-term customer relationship. EXPERT VIEW DOUGLAS GRAHAM, PwC DIRECTOR, FRONT OFFICE TRANSFORMATION Human-centric transformation of your front offi ce: the critical factor in maximising value from the energy transition Front Offi ce Transformation There is a blossoming of new offerings around the "connected home", which, according to PwC research, is worth some £11 billion.

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