Reimagining the utilities business with new business models
Customer satisfaction has always been a key challenge for the utility industry across the globe. According to a 2014 UK CSI report, the utility industry ranks low in customer experience.
Stringent regulatory norms with emphasis on sustainability, combined with growing competition due to the blurring of traditional industrial boundaries, have put the utilities’ traditional ‘energy selling’ business under threat. Utilities need to embrace new enablers such as demand side management, energy efficiency, distributed generation, and electric vehicles to make a transformational journey towards the energy service business.
Empowered consumers now decide what they need. This has forced utilities to develop a customer-centric strategy. Utilities today need to allow consumers to create their own communities, consumerize energy technology, control their consumption, and choose their own supplier, services, and products.
In operations too, emphasis on secure supply, along with the closure of the fossil fuels plants, has resulted in innovative services such as capacity market, contract for difference, demand side balancing reserve, and so on. The new regulatory norm RIIO (revenue = innovation + incentive + output) has specifically put innovation at the center of focus.
Lastly, technologies will be the major driver of the future business for utilities. The number of M2M connections in the utilities industry will grow from 100 million in 2010 to 1.5 billion in 2020, Cellular connections will ultimately dominate, growing from 38% to 57% of installed base by 2020.
In conclusion, utilities are at an inflection point where they need to reimagine themselves to stay ahead of the competition — not just from within the industry but from outside the industry too. By adopting digital technologies for empowered consumers, smart assets, and intelligent field force, utilities need to offer innovative services, solutions, and products like home energy services, gamification, multi-channel, and charging stations for plug-in hybrid electric vehicles (PHEVs).
Sumit Kumar Ray, Head, Strategy & Innovation, Utilities Industry Solution Unit,TCS