It’s a market ripe for disruption and as a result, according to our research, the Big Six are adapting their existing business models in a bid to keep up with challenger entrants and evolving customer expectations.
So what is causing this energy revolution and how can utility companies ride the wave of change and innovate successfully?
The rise of off-grid
One of the primary drivers of this disruption is the increasing trend of people leaving the grid. Advancing renewable energy technologies, the falling cost of battery storage, and more empowered, sustainability-conscious consumer behaviour, are all changing how B2B and B2C customers use electricity.
Ten years ago, renewable energy was a nice idea. Now, with the average cost of electricity generated by solar and offshore wind expected to drop in cost by up to 59% by 2025 (it’s already decreased 86% from 2009 – 2016), it’s an affordable reality. This will see corporations and consumers alike move toward self-generation, putting pressure on the business model that underpins utilities. The Big Six find themselves at a cross-roads – business as usual is no longer an option. And herein lies the opportunity.
Is p2p energy an innovation lifeline?
As the energy ecosystem changes and self-generation becomes affordable for everyone, consumers are increasingly becoming ‘prosumers’, people who produce and trade their own energy in new ways. As a result, peer-to-peer (p2p) energy trading within local communities – a financially rewarding and sustainable endeavor with no wastage – has risen.
In 2017, 54 energy blockchain-based p2p start-ups were founded and $324m invested. LO3 Energy in the US, Power Ledger in Australia, and Conjoule in Germany are just three examples of start-ups that have developed blockchain-based p2p platforms. All are either managed by energy utility retailers or distribution companies; those agile enough to learn how this new technology works, how to improve it and how to scale it. Indeed, Power Ledger allows consumers to use the existing network to trade clean, surplus energy amongst themselves, therefore ensuring the ongoing relevance of the grid and utility companies.
This kind of collaboration is key. If utilities grasp the potential of p2p, they will continue to play an important role in the future of energy distribution, enabling the installation and operation of decentralised energy at scale while providing the necessary commercial skills to manage risk.
It’s clear that the biggest opportunity for utilities is to facilitate the move toward energy self-sufficiency. So now is the time to rethink the purpose of an energy retailer: to be truly customer-centric, providing solutions that fit the needs of the “prosumer”. That is how utilities will survive and thrive in a radically different marketplace.
Click here to read the full findings of our research into the impact of digital transformation on the UK energy market.