Our take on the UK Energy Industry
What are the current energy sector challenges?
One of the biggest issues across the entire energy sector is surrounding data. This is a prevalent problem for energy suppliers who often struggle to receive accurate, up-to-date customer and consumption data.
In ecommerce markets, there is a much clearer picture when it comes to data. Customers provide their information, select their product, and understand exactly how much it will cost. Both the vendor and the customer know how much will be used and the correct price for this. There isn’t much room left for disagreement.
However, in the energy sector, this is not the case. Energy suppliers often do not have visibility of who lives in a property or how much energy is being consumed. This leaves the supplier needing to estimate and charge the consumers based on assumptions of their usage, rather than using solid data. When customer bills are based on guesswork and estimations, it puts both supplier and customer in the risky situation of incorrect amounts of energy being paid for.
Energy suppliers do have the option to send someone to a property to take a meter reading, otherwise they rely on the person living at the property to contact a customer call centre to provide meter readings. However, less than 20% of energy customers provide regular meter readings.
There has been an impact on suppliers’ profit margins by the introduction of tariff caps, as these put limitations on what suppliers can charge consumers for energy. This means it’s less financially sustainable to operate so many call centres to handle customer enquiries and take meter readings. Energy suppliers need to embrace more automation instead.
This has been partially addressed with the installation of smart meters. Smart meters lead to more automated meter readings, clearer billing, and happier customers and suppliers.
But the rollout of smart meters have faced delays and as such has seen a slow implementation. The rollout of smart meters began in 2011, and still yet to be complete, however, the landscape of energy has not stood still. The world - and the energy sector - has changed a lot during the decade, and technology (along with consumer expectations) has also advanced hugely. So the question becomes, are smart meters still even fit for purpose?
Consumers are used to convenience and simplicity, and more often than not, they expect access to everything they need at their fingertips. Smart meters need to be tied into mobile apps to make them easier to use and more accessible. This move to more self-service will let people access and input all of their energy data with just a few clicks from wherever they are.
How is the UK's energy demand changing?
There is a shift in the energy landscape towards more sustainable lifestyles. This is being prioritised by governments across the world to address climate change, and is also a hot button issue for consumers too.
We have already seen the beginning of a movement towards electric vehicles. But this is still a relatively niche market, even with government grants available. However, we are seeing an accelerating change towards a future where electric vehicles are far more commonplace.
Within the next 10 to 15 years, it’s likely all vehicles produced and sold will be electric. This will have a significant impact on the energy sector, and the industry will need to evolve alongside this change.
Currently there is inadequate infrastructure in place to support an upswing in electric vehicles. While people who have driveways attached to their homes could install charging points, drivers without driveway access will also require the ability to charge their vehicles. This requires a huge investment in electric vehicle charging infrastructure.
Convenience and cost effectiveness will be essential when it comes to electric vehicle adoption. While consumers will no longer need to pay for petrol or diesel, they will still have energy consumption costs to cover.
We’ve already seen a change to how some energy suppliers charge for energy. Octopus energy offers variable half hourly rates based on projections on how much energy is available at different times of day. For instance, overnight costs would be available at a cheaper rate as there is more excess energy available. When consumers can see how much their energy consumption costs at different times, they can make better use of their energy by planning out how and when they use it.
Now is the time for the energy market to be planning for this change. How can you adapt to address the arising consumer needs when it comes to electric vehicles? Will the costs of charging a vehicle differ to energy used for domestic household appliances? Can you provide self-service options for consumers, where they have less reliance on contact call centres?
What is the future of energy in the UK?
These changes we’re seeing in the sector are going to have a significant impact on the future of energy companies and how the market operates.
As the smart rollout increases in speed, we will see a growing demand for more complex billing systems that are tailored to users’ specific needs, along with more variation in tariffs. This will likely start to become a prevalent need in the next 3-4 years.
The future will also bring more change through having large batteries sitting in people’s driveways. This has the opportunity to lead the way into more solar energy. But electric vehicle batteries have the potential for even bigger change. Consumers will have the option to charge their EV battery at cheaper times and then use that to power their households.
People can also take advantage of this new way of energy consumption to go off-grid and cut-out traditional energy suppliers from the chain. Instead we could see a rise of a peer-to-peer market where consumers can buy energy from people who have stored it in their domestic or commercial batteries.
Energy trading platforms could replace the traditional energy supplier in the distributed energy market. There will be less need for typical customer service based energy suppliers, and instead energy suppliers will need to adapt to emerging technology early to position themselves for success.
Customers will expect more cost efficiency which will see profit margins for energy suppliers to decrease. This means it’s time to start moving away from the customer services model. Embrace convenience for consumers, with more self-service options, and ease of access to information on their products and how much energy costs to consume at different times. By providing your customers with what they are looking for, energy suppliers will be able to stay ahead of the evolving consumer and industry demands.
While there are a lot of changes on the horizon for the energy sector, many of these are still years away. But change is happening, and it’s essential to start preparing for where the industry is going. The future of the energy market is an exciting place, and though there’s a long way to go, those who can adapt will thrive.