The outlook facing the energy sector in the UK is both challenging and exciting. The biggest challenge of our time is twofold: the need to meet rising energy demand while simultaneously reducing carbon emissions and reach Net Zero quickly. To top this up, customers are adding to the pressure by demanding a better customer experience. With these asks, the energy sector in the UK is undergoing a major shift.
2020 promises to be a year that will change the market in many ways – here are the trends that will shape the market according to our energy and utilities experts James Forrest, Alain Bollack, Mark Hewett and Mike Wilks.
Net-zero emissions by 2050
With a continued focus on sustainability in 2020, the UK passed laws to end its contribution to global warming by 2050, becoming the first major economy in the world undertaking this initiative. This target will require the UK to bring all greenhouse gas emissions to net-zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels. This very ambitious target will be taken much more seriously by energy companies in 2020 and will require an increased investment towards renewable generation and decarbonisation of heating. The UK government also announced its ambition to set up the world-leading carbon capture and storage (CCS) that is aimed at cutting emissions and stop greenhouse gases from entering the atmosphere. This move poses a big opportunity in 2020 to export this technology to emerging markets and large carbon polluters, making the UK the de-facto leader in CCS technologies.
As a result, utility organisations are reshaping strategies and placing sustainability at the forefront of their business missions. Companies running gas and electricity transmission and distribution networks are working with Ofgem on RIIO-2 price controls (for the next five years) to maximise their role in ensuring a low carbon economy and broader environmental objectives.
Customer is still king
Better data acquisition (particularly asset and customer data that is generated at the edges of the business operation that could help, for example, with water leakage detection) is becoming a core focus for the utility sector in 2020. This is because organisations are feeling the need to better understand their customers to be able to manage their distribution demand and network better, adapt to the changes of distributed generation and create commercial opportunities. This will be a key to business success in the wake of increased competition from highly data savvy and modern organisations.
In 2019, disruptors like OVO, Bulb and Octopus demonstrated the success of their customer engagement strategy, differentiating themselves from The Big Six, promising customers green energy, cheaper tariffs, time of use tariff and a simple on-boarding process. According to a recent report by the Competition and Markets Authority (CMA), the market share of The Big Six has fallen by 24 percent since 2014. In 2020, these new entrants have bigger plans to disrupt the market, presenting strong competition. Also, OVO’s acquisition of SSE Energy Services could pave the path for other mergers between the disruptors and The Big Six and also the integration of Npower customers with E.ON. This shift in the market is caused due to being bound by legacy procedures and the inability to transform the customer experience by The Big Six.
AI and ML become mandatory
With the advent of smart metering and other data capture technologies that have been multiplying volumes of data is making sector realise that their existing data and analytical capabilities are not sophisticated enough to understand the data and derive insights. Though the adoption of AI and ML is already helping organisations to understand their customers better. But as data continues to explode, only those utility companies that adopt AI and ML in all aspects of business, including operations, assets management and customer engagement, will be the business that will survive the next decade.
Technology to the rescue for impacts on the energy sector caused by electric vehicles
Electric Vehicles (EVs) currently represent a small but rapidly growing part of the transport market. The transition to EVs should provide substantial benefits like lower fuel costs, reduced maintenance bills, and zero or discounted car tax. But car manufacturers realise major infrastructure gaps that currently exist, hence hindering the growth of the segment.
We predict that 2020 could be the year when distribution network companies would leverage the investment made in 5G and IoT, to be able to fill gaps to manage capacity and infrastructure availability. Using these latest technologies can allow optimising the network allowing for mass-market EVs to be charged. 2020 could bring the distribution network companies at the centre of the transformation for EVs, filling in infrastructure gaps and ensuring the least carbon emissions.
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