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Customers set to take more control in power switch up

Customers set to take more control in power switch up

Electricity consumers want more control over their energy supply, usage, service standards and costs, according to findings from a PwC report, Utility of the future – a New Zealand context.

PwC Energy Sector Leader Chris Taylor says, “New technologies and energy sources, as well as the rise of new players, will increasingly allow consumers to manage their energy more effectively.

“Customers will be able to exercise choice over their energy requirements more freely than they can today. This power of choice will extend to the source of electricity, with potential for more customers becoming self-sufficient, particularly in remote areas.

“Energy companies will need to develop new ways for customers to want to engage with them because in the long-term - their customers could become their direct competition” he says.

Electricity distribution companies may also be impacted by a reduction in the volumes carried, and will need to manage this in the context of a largely fixed cost base.

“Regulators and policy makers will have the difficult role of balancing supply, affordability and proximity. Policy settings must provide long-term stability for the industry and a level-playing field for generation technologies, while giving customers the ability to make choices that suit them.”

A number of global trends impacting overseas markets are also expected to impact New Zealand's energy sector.

Decentralised power generation which includes roof-top solar and battery storage, the roll-out of smart grids allowing consumers to avoid higher charges associated with peak times and changes in the global regulatory environment, are some of these global trends.

In the United States, Europe and Australia, businesses and homes have increasingly adopted solar PV and other technologies which can cost less than traditional forms of energy. More customers are choosing to go ‘off the grid' and the adoption of new technologies such as this in New Zealand will continue to grow, albeit more slowly than in other jurisdictions, where incentives and subsidies drive higher levels of market penetration.

In New Zealand, with falling or flattening demand, plenty of generation capacity and cost-effective renewable options in the pipeline, the sector does not face the same level of exposure, but alternative distributed technologies are likely to start to eat into the traditional centralised generation and transmission model.

Utilities: Looking for new models

Different segments of the value chain - generation, transmission, distribution and retail - have generally determined the business model in the past.

“The utility model where the supplier controlled the ‘electrons' and the consumer had limited choice in this, will now struggle to meet customer needs Existing suppliers will use their presence to form alliances and joint ventures, and new players will enter the market including non-traditional energy suppliers like telcos and tech providers,” Mr Taylor says.

Electricity distribution businesses are already starting to offer new services to counter challenges from increasing distributed generation. This includes the provision of energy supply solutions, such as bundled solar PV and network storage solutions, and an increasing focus on how electric vehicles may be integrated and support management of the distribution networks. Electricity distribution businesses are expected to revise their pricing structures to reflect the actual costs and benefits to network providers of new generation technologies.

Retail businesses will continue to be a battle for market share, although we contend that it will be those that are customer centric, rather than necessarily the ‘biggest’ that will benefit the most. They will be leaner with many more product lines and multiple channels to customers – redesigning ‘content’ and ‘bundles’ to remain relevant to their customer base.

“We have seen large growth rates globally in innovative solution take-up such as niche retailers, increasing levels of solar take-up, or the creation of innovative business models such as Virtual power Plants and Demand Aggregators. These solutions are increasingly impacting on the New Zealand electricity landscape.”

New Opportunities: Data

“More than half of the customers in New Zealand are connected to smart-meters, and the roll-out of these nationwide continues. The data generated by these meters tracks patterns of individual, household, suburb, town, city and country power usage.

“Data is an open market and the value may end up being captured by existing data businesses rather than traditional utilities.

“Analysing data and making commercial use of this will become a competitive advantage. It also raises privacy concerns, with other industries finding this information valuable including advertising, the media and appliance manufacturers.

“What changes will occur to business models? That is the key question. Those that fail to adapt and embrace change will be left behind,” concludes Mr Taylor.

- ends –

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