The coming years are set to bring about big changes for the energy industry. In order to prepare for this, energy companies need to evaluate the most common problems in the industry and work out how to overcome them.
Below is a handy guide, identifying some key issues energy companies face –and how you can solve them.
Competition between companies
After the deregulation of the energy market in 1989, the open market has led to tough competition between established sector companies, as well as making room for new players.
Deregulation was accompanied by intense shifts in the market, caused by deeper industry changes like the introduction of renewable sources, changes to countries nuclear policies and structural changes that have come as a consequence of the financial crisis.
With this in mind, new players entering the market, offering great energy for a low price, has lead to high customer turnover and ultimately a decline in profit margins.
As a result of this, most energy companies now offer added value services, rather than just the sale of energy alone. For example, some companies offer to take care of exit fees if you switch, or free installation of smart metres.
High customer turnover
In today’s day and age, everyone is always looking to save money on their bills. Because of this, we know that a customer’s tendency to change energy company is constantly rising. In fact, according to EnergyUK, 6 million customers changed energy supplier in 2020.
The common belief is that changing utility company each year is the best way to get a better deal, because “all electricity is the same, it’s just being sold by a different company”. It’s so important to bring churn rates down, not only because of the revenue lost, but also because the opportunity to build a loyal customer base is lost.
To rectify this, utility companies need to begin to offer customers an experience. Pushing company marketing and customer service, shows consumers that they are the number one priority. Companies should also improve their services, in an attempt to differentiate themselves from the competition.
The way we consume energy is changing
Various studies have concluded that the rise in population won’t be in proportion to the rise in energy consumption. Globally, we are aiming to reduce our consumption use, through energy savings and efficiency policies, environmental awareness and continued technological improvements.
Over the coming decade, we will see energy efficiency and savings be consolidated globally, as well as an increase in the amount of energy from renewable sources. These changes are resulting in businesses developing a demand response, that encourages consumers to set up models that allow them to generate their own energy.
Because of energy consumption saving policies, energy companies can cut costs and are able to devote more of their resources to growing their business. You should be compensating for the reduction in energy sales, by increasing the volume of services linked to designing, installing and operating self-consumption set-ups.
Become a digitally led business
We know from user profiles that customers are more likely to use online channels than they were a few years ago. Why then, were the energy industry so slow to digitise their customer communication channels?
Customers expect a fluid, personalised experience, with lots of detail about their rates and consumption habits. It’s essential that we see a switch to customer centric strategies as services are digitised.
This could include setting up various communication channels for customer contact (like a Twitter account, as well as telephone and email), for a personalised experience.
Changing role of customers
Customers have the potential to add even more value to utility companies.
Installing photovoltaic panels and batteries is becoming increasingly competitive, leaving customers with the potential to become an “energy partner”, rather than just a customer.
Utilities working alongside customers, by letting services manage batteries according to the need of the gird, or working jointly in a photovoltaic “mini-power station”, means customers become more valuable to companies.
The Climate Emergency
Utility companies need to rethink their strategies in order to reach greater levels of environmental stewardship and protection. It is very much a now or never situation, when it comes to generating energy sustainably.
Implementing sustainable energy measures makes for major economic benefits. The mass generation of data and information makes it possible to bring costs down significantly.
To achieve both of these things, companies should digitise strategies that allow customers to play a starring role in implementing and operating new, sustainable technologies.
The COVID-19 crisis
Although the pandemic has resulted in a decrease in cost trends for renewable sources, renewable projects are still facing a number of challenges.
Projects that are already contracted or financed have a limited risk of cancellation, though they are facing some delays. Almost half of the projects we’re expecting in the next five years however, are tied to government funding, that isn’t finalised.
We can already see that, in the effort to tackle COVID-19, the government have extended deadlines and postponed planned auctions.
It is important that utilities have medium and long term scenario plans in place, to circumvent any delays in the move to renewable energy, that effect your companies long term plans.
At Green Deal First, we work to obtain ECO grants from energy suppliers, which results in helping companies complete their plans, both long and short term.