Utility Week

28 | JULY 2021 | UTILITY WEEK Customers Analysis Flexibility in the market must be a priority Any discussion between a group of senior energy retailers will inevitably veer towards the decisions of regulators and policymakers – or the lack of them. And so it was at the Utility Week and Charles River Associates dinner in London to mark the launch the report. One invitee pointed to a recent management exercise taht mapped points of • nancial stress in the company's history and then looked at what had sparked them. They admitted there had been some strategic missteps along the way but that 9 out of 10 downturns in pro• ts or revenues could be traced directly back to the unintended consequence of a policy imposed upon the industry. They added: "And yet there's still this narra- tive of 'we must crack down on energy retailer pro• ts'. That job has been done pretty success- fully already, I'd say." Despite this, there was also a common thread in our conversations that retailers can- not wait for government and regulators to act, they must lead and • nd new ways to connect with the consumer of the energy transition. There was agreement that this is already starting to happen and there are encouraging signs of how customers will respond to price signals. But this is still predominantly the domain of prosumers, and as one participant put it, "for many people, they just don't want the value that's on the table". The solution for many customers will be for retailers to take on all of the complexity, accord- ing to one senior • gure. They added: "People accepted recycling because it was made easy for them – you put your cans here and put the bin out on Tuesday, and job done. You can feel good about playing your part but you didn't really do much." For another, the key is for retailers to be seen to be sharing the pro• ts of decarbonisa- tion with the consumer. Match this with great customer service and loyalty can be regained, they said. But although retailers can be the frontline of engagement with consumers, some ground- work must also be laid. This includes getting the incentives right to create a truly flexible energy market. However, there was some pessimism about the appetite within government to really tackle this issue. As one executive put it: "The prob- lem is that a minister can't cut the ribbon on a decentralised system." continued from page 26 cap, is paying dividends in that regard. But what comes over loud and clear from those interviewed for this report is that the main future prize lies in the wealth of oppor- tunities that await as we move to net zero. The deep investment needed to make the transition will mean we will continue to see the number of players shrink. Some observers say we could be looking at a handful of conglom- erates dominating the market in the same way as oil and gas com- panies have done for decades. Scale will continue to be important, as will embracing brand values that consumers trust. If making a few cost sav- ings and bagging a few custom- ers with cut-price o• ers on price comparison websites ever rep- resented a sustainable business model, it is clear those days will soon be long gone. As several of our interviewees made clear, the energy supplier as pure re-seller of wholesale energy will be increasingly dif- • cult to pro• tably sustain. Instead, in the year when the UK plays host to COP26, in what has been billed as the biggest sum- mit ever hosted on these shores, energy retail is • nally coming to the net zero transition party. Denise Chevin, intelligence editor Key trends • Energy retail is in a state of transition as companies reposi- tion themselves from traditional energy supply to more renewable and low carbon energy solutions, built around the customer. • We can expect to see more integration from generation to demand, with companies own- ing their own electricity and EV charging infrastructure. • More diverse business mod- els will emerge as companies become enablers of customers' journey to net zero. • In the short to medium term a tough operating environment is likely to prevail, particularly in the wake of rising debt levels. • The transition will require long -term investment – change will start slowly and accelerate as EVs become more prevalent byŽ 2030. • Consolidation will continue and we could see just a handful of retailers le" . • Building long-term relation- ships and establishing trust will be essential for those looking to o• er more services to consumers. • There will be growth in the inte- gration of utility and other home services, including broadband. Key trends • Energy retail is in a state of transition as companies reposi- tion themselves from traditional energy supply to more renewable and low carbon energy solutions, built around the customer. • We can expect to see more integration from generation to demand, with companies own- ing their own electricity and EV charging infrastructure. • More diverse business mod- els will emerge as companies become enablers of customers' journey to net zero. • In the short to medium term a tough operating environment is likely to prevail, particularly in the wake of rising debt levels. • The transition will require long -term investment – change will start slowly and accelerate as EVs become more prevalent byŽ 2030. • Consolidation will continue and we could see just a handful of retailers le" . • Building long-term relation- ships and establishing trust will be essential for those looking to o• er more services to consumers. • There will be growth in the inte- gration of utility and other home services, including broadband. The full report Remaking Energy Retail can be downloaded for free at: https:// utilityweek.co.uk/ remaking-energy- retail-major-new- report/

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