Utilities Tech Outlook Weekly Brief
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Csilla Kohalmi-Monfils, Director of Innovation Ecosystems, ENGIEUtilities are a public service. Once monopolies having to answer mainly to regulatory requirements, today utilities find themselves in strong competition and therefore having to answer first and foremost their clients’ needs if they want to stay in the game. With competition from new entrants and offers looming at every step of the value chain, their customers having become much-more savvy and interested in what they are buying for how much, with what benefits, innovation is key to keeping, engaging and winning over customers. Given that many of these innovations are digital, the speed at which they are evolving and upgrading is also in line with what we experience on the AppStore. New features that are innovative today become the norm tomorrow and the minimum requirement the day after. As such, utilities need to be up-to-speed with regards to what competitors and new entrants are doing, comprehensive with regards to the impact a given new technology can have on the market, and open to partnerships with those who bring the next best ideas.
The specific choice of geographies/markets/customers very much depends on the utility’s core competencies and skills, either based on legacy assets built over time or market/technology bets made along the way
For these same reasons utilities also have to fight for investor confidence. Considered low-risk/low-return safe investments in the past due to the monopolistic public service nature of their business, utilities today have to come to grips with a growing scrutiny and loss of investor confidence, seeing their share-price suffering in the wake of a deconstructed value chain with new entrants at every intersection enjoying the investor attention.
So what can utilities do to tackle this storm of change?
Choosing their battle fields
As national, regional or global champions, most utilities have historically been vertically integrated, with in sourced operations and solutions throughout the value chain, oftentimes with a number of other related activities in their scope over a number of geographies. Focus in these turbulent times is becoming a top priority in order to reduce the number of battles fought simultaneously, and choosing the battles with a higher probability of success. We have seen a number of utilities decrease their geographic footprint, split their activities into standalone companies or spin-offs, refocus on key activities with a competitive edge, or even targeting specific customer segments they are best equipped to serve. The specific choice of geographies/markets/customers very much depends on the utility’s core competencies and skills, either based on legacy assets built over time or market/technology bets made along the way. Such re-focusing measures usually get a positive investor response as they provide more strategic clarity and a leaner organization moving forward.
Be part of the solution
The energy industry having been the first convicted for its negative impact on climate change, had a head start in renewable generation, decarbonization technologies, carbon accounting methods and regulatory compliance frameworks. All products in high demand post COP26, in a world where commitments to decarbonize are multiplying across sectors at an impressive pace. Building these new skills and solutions into their offers opens new markets for utilities, effectively repositioning the scapegoats as Solution Providers. Corporate PPAs are a shining example of this phenomenon, where the long-term Power Purchase Agreements signed by states and governments in the past for fossil-fuel plants are replaced by similar agreements for renewable power directly with the end customers to support their decarbonization commitments. Despite COVID, 2020 was another record year for green corporate PPAs. Further growth can be expected as the membership of RE100 companies and ensuing sustainability commitments multiply. But PPAs are not the sole prospect for new offers. ENGIE has launched its sustainability consulting and delivery subsidiary ENGIE Impact in 2019, with Sustainability Transformation as the main value proposition and launched its Zero Carbon platform (Ellipse), a dynamic intelligence tool to accelerate the decarbonization pathways of its clients during Climate Week this year. Blockchain solutions to certify the origin of green electrons 24/7 (example: www.theenergyorigin.com) are fast becoming the new standard of customer scrutiny, and the next frontier may well be the capture and re-use of emitted CO2 as a valuable carbon resource.
But individuals – not just corporates – are becoming equally demanding with regards to their energy purchase decisions. ‘Mon Programme pour Agir’ (‘My plan to Act’), the customer loyalty program of ENGIE’s energy retailer in France partners with various programs, startups, NGOs offering individual participations with a positive impact, helping customers consume less and reward them for doing so with “KiloActs” (loyalty points/currency), which they can use to help partner organizations and their local communities – boosting both impact delivered through these initiatives, and loyalty of the engaged customer base.
Integrate customers into the workflow
Utilities already equipped with a myriad of digital apps and solutions helping engaged customers improve their energy consumption, easily manage their contracts and billing online, customer service centers with long lines are a thing of the past. COVID has brought further efficiencies with remote assistance, minimizing contact points and further digitalizing the customer experience. New solutions and apps where customers can take/upload photos and videos of their installations essentially cut out the need for an in-person inspection by a qualified technician, who can now do this tasks remotely, sitting in front of a screen - bringing further economies, faster lead-times and even self-resolution by customers (example: www.vyntelligence.com)
Photo and video is thus the new data file, which with purpose-built AI can further accelerate processes and enable new business models. An AI model built on thousands of old photo files of gas meters, helped GRDF (France’s gas DSO) identify the locations of a specific production of meters needing exchange, avoiding 20 thousand site visits. These are also the technologies that enable a completely new type of ‘utility’, that of energy access, serving remote, unserved populations in developing regions. ENGIE Energy Access electrified over 1.3 million households in rural Africa with microgrid and solar home system solutions, PayGo micropayment system and remote assistance of field technicians. All this through smart digitalization to enhance operational efficiencies, product development and customer experience, not just selling energy but also the products and services that are being powered by off-grid solutions such as internet , water, productive appliances and even financial products and services.
Battle fields and strategies may be different from utility to utility, but none can ignore the plea of its customers to embrace innovation and sustainability.
