Utility Week

UTILITY WEEK | JANUARY 2023 | 13 Customers utility would lead to added cost for them at some point," she observes. But, like our anonymous energy leader, Cook agrees that the more signi cant nd- ings are around willingness to change behav- iours and reduce consumption given the right support. "We need to be careful not to issue a blanket message on demand reduc- tion," she cautions, "because people on the breadline who are already self-rationing do not need to be encouraged to use less – quite the opposite. If we get the messaging right then there's undoubtedly a huge moment of opportunity for the industry right now given that consumers are hyper-aware of their bills. They've never been so alert to how much energy they're using – and to issues like the impact that hot water usage has on their consumption." Rebuilding requires tearing up So it seems that with the right technology and right messaging in place, the time is ripe to engage consumers with services that are targeted at driving down bills and cutting usage. But what of the more capital-intensive o- ers being lined up to make net-zero living a reality – like solar panels linked to domes- tic battery storage, heat pumps and electric vehicles? Here, the challenge is more complicated, according to our energy strategy leader. "A- ordability is clearly a big factor here. For a massive tranche of the population, they're just not in any state to be making those kinds of investments, and they're not minded to – trying to make ends meet is exhausting and more and more people will be in that posi- tion where they just don't have the band- width to consider options for improving the sustainability and eˆ ciency of their home. "That said, there will still be a proportion of society that the smart homes proposition will become increasingly attractive to – and that will be sizeable." Our commentator concludes: "If the role is [for suppliers] to be enablers of the net- zero transition, then some big changes are needed to the way the market works and the way it is regulated." As a rider, he airs the view that Ofgem may not be in a position to see through these changes, labelling it a "discredited brand". The design of what should come next and the opportunities that a new operat- ing environment should enable are ques- tions that will be explored in detail by Utility Week and Charles River Associates in a major report being published early this year titled Rebuilding Utilities. Jane Gray, content director Comment Simon Ede and Tilmann Hensel-Roth Vice presidents of energy practice, Charles River Associates A ' er years of focus on cost-to- serve and switching as the yardstick for competition, we are at the end of cycle for regulation and market design. Even without the current war- driven crisis, it seemed unlikely the current energy market model could persist because of the scale change needed. New markets, integrating household and business energy solutions – such as distributed energy production and storage, heat pumps, and mobility solutions among others – are emerging. But these may themselves only comprise part of a wider marketplace transformation and it is unclear whether today's utilities can comfortably assume that the consumer will look to them to play signi cant roles in the provision of those emerging goods and services. In this research, less than 10% of respondents saw service provision from their energy provider as desirable. The broader research ndings highlight what many will have intuitively known. The public mood is febrile. It doesn't have much sympathy for utilities, their investors, or regulators and policymakers. The recession and cost of living crisis are reorienting consumer priorities onto a- ordability and away from sustainability, for now at least. This was indisputably clear in the research ndings with 77% of respondents saying price stability is the most important thing their energy provider can o- er. Meanwhile, just one- ' h said that delivering net zero should be a priority for energy providers. In such an environment, we think there are three grand challenges for customer-facing utilities as they consider how to build legitimacy to participate in a value-add solutions marketplace. • First, utilities need to change the public perception they can add (at best) only limited value. This means building trust with consumers in their interactions and doubling down on basic hygiene factors like convenience and seamlessness. It also demands maintenance of high standards for transparency and integrity to regain and maintain long-term trust. As products and services sold by utilities become more complex, they will need to move from a sales and service model which has largely tried to minimise the amount of customer contact time to one in which the sales process could be long and complicated – think bundles of home energy, vehicle charging, solar panels, batteries and v2g as an example. Furthermore the a' er-sales customer relationship will need to be enduring and will require frequent interaction – think rental agreements and operations and maintenance contracts • Future business models must address needs across the wider range of socio- economic circumstances. As the market moves beyond tech-savvy early adopters and those with spare savings, utilities will need to nd a way to communicate the value from new technology and nd a way to facilitate its nancing (directly or indirectly). Even if the current cost of living crisis subsides, our research as well as that of others has shown far less willingness to commit capital for net-zero purposes than the importance ascribed to addressing the challenge. • Part of rebuilding trust must also come from a collaborative e- ort to build a new regulatory deal. De ning competition around numbers of utilities and customer switching levels isn't going to work in a market where households may be both buying and selling to utilities across a range of services. Relationships will be longer term, will involve commodity and non-commodity elements and competition may exist not just between utilities but with other rms for whom energy supply is only a small component of their o- er. Three grand challenges for the energy market in association with

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