From Digitilization to a New Energy Landscape

The digital transformation of the energy industry is creating new pathways for power companies to compensate for stagnating energy sales. Those who use analytics and new technologies to adapt their core business models will lead the transformation. Those who rely on anachronistic business models will be left behind.

If you look hard enough on Eversource Energy’s website, you may find their response to the “digital transformation”: The Green Button. According to Eversource, “[w]ith a click of the button you can now view your electricity usage quickly and easily from our web site…provided in a standardized format.” [1] Basically, this allow users to view their historical energy usage with a personal computer instead of a monthly billing statement. Although simple, The Green Button does provide an example of how energy companies are utilizing data in a way that is more meaningful to customers. However, modest steps like these and the assumption that a Green Button will be enough to carry a power company through this transition is myopic.

Digitalization provides opportunities for energy companies to develop new revenue streams and improve customer relations – especially in markets that allow customers to choose their energy provider (like Eversource in Massachusetts). Basic tools like The Green Button have little chance of competing with the myriad products and services offered by more forward-thinking companies in these markets. It is imperative that Eversource further embrace the opportunities presented from digitalization by taking advantage of smart technologies that connect devices in the home and interact with the electrical grid in real-time to ensure that it isn’t left behind.

First, Eversource should improve users’ digital experience by making information more accessible, expansive, and personal. For example, highlighting pricing forecasts correlated with detailed usage patterns through intuitive mobile apps could help customers understand options for decreasing their energy costs. Making this information available (and user-friendly) on platforms like smartphones and tablets could also create a more productive relationship between energy provider and customers, thereby increasing loyalty and decreasing the likelihood of choosing another provider.

Second, Eversource should offer additional products and services for the home. Smart thermostats would be a logical next step and “win-win” for both Eversource and its customers. Customers would benefit from the added functionality. Eversource would benefit from the added data, control, and revenue. Data would help Eversource improve forecast accuracy, mitigating losses from having to pay for more energy than it actually needs to satisfy demand. Control would help improve system reliability by allowing Eversource to change temperature settings in homes, diverting energy to other parts of the system during critical peak hours. Revenue generated from installation and program fees, for example, would help offset losses from stagnating customer demand as appliances become increasingly efficient.

Third, Eversource should offer bundled services and devices able to communicate with one another, automatically learn and respond to stimuli, and feed data to and from users. To facilitate integration and automation, Eversource should also create an integrated and centralized digital information hub for customers to access, control, and monitor each of their connected devices and services. Customers would benefit with each additional purchase through increased convenience and energy efficiency. By linking smart appliances with smart meters, for example, customers could decrease utility costs by automating their homes to respond to real-time price signals. The more linked products and services customers purchase, the more ancillary revenue Eversource will generate and the more difficult it will become for customers to switch to competing platforms.

Despite these opportunities, an energy company historically focused on commodity sales that adds new, non-commodity products or services presents a number of risks: (1) providing products and services not wanted by their customers, (2) creating and delivering platforms that are ineffective, inconvenient, and unappealing; and (3) failing to mitigate competition that is able to effectively implement digitalizable resources.

The basic idea is that for Eversource to remain competitive in an evolving energy market, it needs to act but not so quickly that it compromises its ability to sustainability grow its operations or maintain its relationship with existing customers. Without proper technical expertise, recognition of customer desires and capacities, or viable technologies, Eversource could inadvertently do more harm than good to its operations. For example, immediately providing superfluous usage data, forcing customers to manually link or use multiple platforms, or implementing poor sales approaches could each lead to a swift and expansive rejection of Eversource’s products and services.

To successfully overcome these challenges, Eversource must ensure that it creates an effective go-to-market strategy that aligns with customer aspirations and capacities; balances convenience with function to protect against creating platforms that are viewed as too cumbersome or unhelpful to use; and invest as soon as possible in the right people and technology to gain and sustain market share.

 

Word Count: 747

 

Reference

1. Eversource Energy (2016). Green Button (Usage History). Retrieved from the Eversource Energy website: https://www.eversource.com/Content/ema-c/business/programs-services/green-button

Previous:

The Sony Pictures Hack: Two Years Later

Next:

What makes good TV? Apparently the answer is more science than art…

2 thoughts on “From Digitilization to a New Energy Landscape

  1. V. Rubeus – Thanks for the insights on power providers! Do you think Eversource should create its own thermostat appliances or do you think the company should partner with smart home providers such as Nest or Sears? Sears, for instance, has appliances in 13 million US homes. Perhaps the two could work together to pass energy saving measures to customers. In addition to heating (as you mentioned), the companies can set timers for dishwashers/laundry machines/etc. to start cycles during off-peak energy hours. The bigger issue would be to make sure that cost saving measures are equitably shared between Eversource, Sears and the consumer!

  2. Eversource could look at what PG&E is doing in California. Several of the smart measurements such as data collection on home appliances and using a smart grid are helping them to stay up to date with the current technologies.
    https://www.pge.com/

Leave a comment