Disruption Due

Selling Power and Gas

The power and gas market for domestic customers has been pretty boring since the privatisation of the industry in 1989 and the beginning of retail competition on 1990. Retail competition did have an impact and by 2008 three quarters of households had switched energy supplier. By the end of the decade the switching rate was close to 20% per year. Consistent drives to ensure customers are aware of their right and ability to switch have transformed the makeup of the industry with 22% of the market now being supplied by companies that are not the “Big Six”. The graph above shows the change in retailing based on Ofgem data from July 2018. See the Big Six story for more. The industry however has largely been driven by an offering of price led energy tariffs and some minor innovations around value add services such as boiler care, insulation and some new devices such as Hive from Centrica who own British Gas.

Your energy supply is probably not the most exciting part of your life, however, I believe the retail market is ripe for disruption and here are my three areas where I think it will come.

Why now?

The market is primed for disruption for three reasons

  • The drive towards electrification has meant that there is a surge in uptake of electric vehicles and old polluting industries transforming to electricity.
  • Smart technologies are filling the home. I don’t mean smart meters however these have their place, but smart appliances from connected thermostats, solar panels, batteries, fridges, freezers and all sorts of gadgets that will form the internet of things connecting to be able to play in the energy market.
  • Data and analytical capabilities as well as buzzwords like blockchain mean that you can interact with your home and your energy use in ways never before possible.

New opportunities

There are three areas that pose significant opportunities in the new energy retail environment based on the changes in the macro environment above.

  1. Retailing for the future electric consumption – Some of the biggest oil and gas companies who have very deep pockets are beginning to embrace the infrastructure challenge and commodity volume business that will come from the future needs of an electrified world. Millions of electric vehicles will need to plug in and buy electricity in the decade to come.
  2. Retailing devices – Understanding energy consumption in the home means that companies will be able to help you like never before make smart purchases to help you manage your energy needs and reduce your bills. From LED lights, to smart appliances, security products and your own generation and storage capabilities, retail companies will be able to use your energy consumption to sell you products and services tailored to you.
  3. Creating cash from clever – with the proliferation of smart devices, batteries in cars and in homes, and micro generation, the ability to balance the electricity demand and supply will become ever more valuable. Working with aggregation of thousands or millions of devices, companies will be able to optimise supply and demand like never before, cutting the need for expensive short term operating reserve power plants and potentially meaning your fridge or battery might start making you money without you lifting a finger.
What do you think could be a winning business model in the future energy market?

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