Understanding the customer is central to innovation in the energy marketNovember 9, 2018
Our CEO, Stuart Lacey, is featured in this week’s Utility Week providing his ‘CEO View’. He highlights how understanding the customer is central to innovation in the energy market and the role data has to play.
The energy market is currently undergoing a period of unprecedented change driven by global technology trends and a rejection of fossil fuels. Be it the rapid growth in electric vehicles, the falling cost of battery storage or the development of distributed generation, these global trends mean that customers are interacting with the UK energy market in novel and sometimes unpredictable ways. This rapid customer evolution is challenging the traditional business models of both the retailers and the owners of distribution assets. The energy market needs to innovate and do so at a pace that matches its customers, a task which can only be achieved if players make better use of the available market data.
Much of the rhetoric around building a competitive energy market for the domestic consumer has focused on cost. A strategy of offering cheaper energy has provided a window for new entrants and there are now 70 active retailers in the energy market. These new entrants have introduced product innovation however, ElectraLink’s analysis of market switching data indicates that this innovation is being enjoyed by a minority of engaged customers, with the majority of UK household yet to switch energy retailer since privatisation.
Customers often do not shop around for their energy because of a preconception that switching is time consuming and prone to go wrong. An improved customer experience, reduced switching timelines and the reliability of the process are all critical in encouraging customers to change their energy retailer. Ofgem’s Switching Programme tackles some of these issues but innovative business models are also required to make the switching process as painless as possible – this requires up to date and accurate customer data.
ElectraLink is a regulated business owned by the DNOs which operates the UK’s Energy Market Data Hub. We have been providing such customer data to retailers ranging from Flipper, an innovative start-up concierge switching service, to British Gas. ElectraLink’s API means that innovators now have instantaneous access to customer data to facilitate the switching journey. Customers are no longer required to know their consumption and get to grips with mysteries such as the kilowatt hour. Instead they simply provide some basic information about themselves and permission to access their data and in return they obtain precise quotes, set accurate Direct Debits and have confidence in the accuracy of their switch.
Perhaps a greater challenge for the UK energy market is how to accommodate the changing ways that customers want to utilise the country’s electricity distribution infrastructure. This infrastructure has a finite capacity which cannot be easily upgraded in a way that is possible, for example, with fibre optic telecoms networks. Capacity and load therefore need to be carefully managed at a local level and again customer data has a valuable role to play in doing this. But how can the DNOs and National Grid, who historically have had no direct relationship with energy consumers, utilise customer data to drive this transformation in their business models?
Since 2014 ElectraLink has been developing a dataset, based on electricity settlement data, that now provides National Grid with visibility of distributed connected generation. National Grid was facing a growing problem of accurately predicting demand due to the invisibility of these generating facilities. This innovative use of customer data will ensure that the system operator is able to match more accurately demand to supply and ultimately save significant sums for the consumer.
ElectraLink is also working with DNOs on the innovative use of customer data to predict network demand. The Low Carbon Technologies Detection project, recently launched by Western Power Distribution (WPD), will make use of customer data, provided by ElectraLink and enhanced by IBM’s Watson AI technology, to provide the DNO with much needed visibility of electric vehicles and other low carbon technologies such as solar panels and heat pumps deployed in their region. This will allow WPD’s network planners to accurately forecast the load on their network and manage the system accordingly.
The use of customer data to drive energy market innovation is possible within the constraints of GDPR but it does require solid governance and all parties to embrace transparency as a means of transforming the energy market.
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