Power Sector Transformation – Putting Consumers at the Center

Consumers are demanding more than ever from electricity companies. New technologies  such as solar Photovoltaics (PV) and smart meters are giving them an unprecedented number of options to produce and consume their own energy. And continued improvements in affordability, reliability and customer service in other sectors are driving their expectations higher and higher.

In some parts of the power sector, the pace of change is remarkable. Utilities in Europe and some parts of the US are seeing their revenues suffer as consumers choose to produce their own electricity from rooftop solar panels instead of buying it all from the grid. In countries from Australia to Italy, smart meter roll-outs are allowing consumers to understand and control their consumption. This has opened up new possibilities for services and products that could not have existed even a few years ago. And in Norway, the best-selling car of 2014 is the Tesla Model S, an electric sedan.

It’s against this background that top technologists and business leaders from power companies across North America will gather in Cincinnati, Ohio, on  May 22, at the TCS Innovation Forum 2014. They’ll be discussing the opportunities that power companies have to engage with today’s electricity consumers, and the capabilities they need to do so successfully.

For power companies, the emergence of more empowered consumers in the electricity sector raises a big strategic question: how best to create new value by engaging more closely with them? Strategic advisory firm Xyntéo, working with TCS, has surveyed 50 major utilities in North America, Europe and the Asia-Pacific region to understand this. The report reveals that there are large variations in the response of utilities and power retailers to this emerging opportunity.

Some have substantially re-orientated their businesses to focus more heavily on offering new products and services to their customers. A notable example is British Gas: alongside its traditional business of selling gas and electricity, it now offers householders a wide array of energy-related products, including water-boiler repairs and insurance, home insulation, and solar PV. This strategic change of direction is having a positive impact on the company’s bottom line: almost 30 percent of its retail profits now come from these new offerings. By contrast, other utilities and power retailers have barely made any changes to their businesses and are focusing almost exclusively on their traditional business of supplying electricity.

Making a success out of engaging with consumers is not easy; it requires strong leadership and vision; a robust strategy; and excellent execution. TCS explored some of these themes in a thought leadership paper produced in collaboration with Xyntéo, built on our own analysis and modelling, and featuring in-depth interviews with high-level executives and power sector experts around the world.

The good news is that, despite the challenges, there are steps that power companies can take to grow their businesses by engaging successfully with consumers. A crucial first step is to understand the playing field: the products and services available to consumers; the business models being used to deliver them; the evolution of consumer-side technologies; and policy and regulatory frameworks. The second step is to analyze data to understand different segments of consumers, and evaluate how different consumers are likely to value new offerings. And the third step is to evaluate the internal capabilities that the company needs to offer these new products and services. All these activities require leadership, and possibly a significant change of organizational culture. But leaders don’t need to fly blind: their choice of strategies and how they execute them can be underpinned by objective, data-driven analysis.

These are precisely the areas that will be under discussion in Cincinnati, and it is certain that there will be lively debate. Participants will be discussing the most recent developments in the product offerings and business models that are being used to engage electricity consumers. They will also exchange views on the latest in policy and regulation – a particularly relevant topic given the strong role of policymakers and regulators in shaping emerging areas like smart meters, solar PV, and electric vehicles.

At the Innovation Forum, TCS will share the tools and approaches it has been developing with electricity companies around the world to help support senior executives’ decision-making and the implementation of business processes that allow closer relationships with consumers.

TCS aims to help its clients ‘Experience Certainty’. Our hope is that the time spent in Cincinnati will be a small but significant step towards achieving this mission.

About the Author

Dayfdd Elis
Dafydd Elis, Senior Analyst, Xynteo
A senior analyst at Xyntéo’s, Dafydd works with Xyntéo’s partner, Tata Consultancy Services, to understand how electricity companies can improve their financial performance; offer a better experience for their customers; and reduce their environmental impact by engaging more deeply with consumers. He also works directly with utilities to develop their consumer engagement strategies, particularly for products and services that relate to distributed generation, efficient heating and cooling, insulation, and demand response.

Dafydd also works on Xyntéo’s Policy Shapers initiative, in conjunction with Shell and Unilever. The purpose of Policy Shapers is to identify innovative policy that is successfully addressing the water-food-energy-climate stress nexus around the world. After a successful roundtable held in September 2014 with leaders from business, civil society, government, and research institutions, the project is now applying some of the lessons from these success stories to other challenging situations around the world.

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