When did “Uber” become such a versatile word? Uber itself is obviously now the go-to reference for massive industry disruption. But now it also seems to be a description of what happens when an industry is being disrupted. At the start of November, the head of energy giant RWE’s Innovation Hub, Dr Braunschmidt, suggested at European Utility Week that she would far rather RWE “do an Uber than be Uber-ed”. I guess this is a demonstration of just how world-changing Uber has been. Good for them.
And she has a point. I’d been skeptical for some time about the oft-quoted “utility death spiral,” but now, I’ve changed my mind. For the energy business, the end of the world really is nigh. And I’m not sure many people are doing very much about it.
Dr Braunschmidt did a quick straw poll of the audience, asking who believed that energy would be free in 5 years. By my count, less than one percent believed it would.
But this was my epiphany. Free energy is coming (and I don’t mean via peak-shifting schemes like this one in Texas). I mean because we won’t need to pay big corporations for our electricity at all any more. Maybe not in five years. But in the foreseeable future. And what will that do to the energy industry?
Every technology that delivers energy from renewable sources is becoming more efficient and more cost effective. Whether it’s batteries; ground source heat pumps; local photovoltaics….or one of many other options. Governments around the world are under massive pressure to support such technologies, from their voting public; from international peers; and from a growing understanding that, actually, the fossil stuff we’ve been burning (a) might run out some day and (b) could actually be doing some of those harmful things that people talk about.
Local, small-scale renewables empower individuals to make a choice. It might be too soon for most to go fully off-grid today, but what’s wrong with a gradual transition to home-generated energy over a longer period? Makes sense to me. And if you’re generating it yourself, from renewable sources…. to all intents and purposes, it’s free!
In the meantime, while energy giants are scrambling to entirely reevaluate and reinvent their business models, regulators can’t keep up. Instead of driving change, many believe regulators are part of the problem. And the industry is getting more vocal about it by the day. So what hope is there for the industry? Should we all just pack up and go home? Not necessarily.
For some time yet, the majority of customers will want – or need – the comfort of a permanent connection to a reliable, secure grid – even if it’s something they don’t always use. While the price is right, they may still want to sell excess energy back into the grid too. But that permanent connection will only be of value for as long as it provides a service according to customers’ wants and needs. Price will be a huge consideration for most. But it is also about customer service; demonstrable carbon neutrality; and of course how often that connection is actually called upon to support the new primary source of energy in the home.
During these disruptive times, the traditional utility must reinvent itself to provide trusted, flexible, affordable, green energy supply options. Perhaps one day even as a new line item on your home insurance….who knows?
And that involves knowing so much more about customers – about how to serve and to sell to customers (and what to sell them); about new network connectivity trends and usage patterns; generation status now and in the future; plant and equipment reliability and predictive maintenance; and about key influences on future demand.
But wait. What kind of an energy company could possibly know all this? To my mind, the answer is simple: a data-driven energy company. It’s not such a difficult concept. Other industries have been doing it for years.
Being data-driven allows businesses to better understand their customers. It allows them to see and act on the range of factors influencing their operations. Data-driven businesses foresee and understand how change might affect them. They are more likely to be able to benefit from change, not just weather it.
Being data-driven allows businesses to clearly link goals to strategy to practices. And it helps them to learn from their mistakes. Data-driven companies outperform their competitors.
In the face of the oncoming death spiral, do the energy companies really have a choice?
This post first appeared on Forbes TeradataVoice on 04/12/2015.