The Internet of Things: utilities warned they may lose the customer relationship

The Internet of Things is coming and it could see traditional energy utilities’ business slip away. That was the message from a survey on the IoT published in the January issue of New Power Report. Utilities have to act now to change their customer relationship and should not rely on the smart meter rollout to do that job for them.

New Power Report asked representatives from five IoT specialists about how the energy industry would interact with the growing IoT industry. Our interviewees suggested there was enormous potential for making energy services more efficient and consumer-friendly. Indeed, Rich Hampshire, director, smart utilities and IoT, at CGI, said that without it “Britain is unlikely to achieve a decarbonised energy system that fully embraces demand side flexibility and delivers the opportunity for consumers to become active participants in the system.”

But the responses had warning signals for energy utilities if they expect to retain customers in a connected world.

Energy utilities who view themselves as providing a unique product could find themselves driven out of the customer relationship, as providers of other predicts and services start to provide energy alongside.

That message came through clearly when our survey subjects were asked about how fit energy industry technologies and attitudes were to take on the IoT challenge.

Veronique Addi, director of business development Europe for smart grid, Nokia, warned that energy companies’ traditional silo mentality ran the risk of stranding hardware assets – and losing customers alongside.

Addi says, “What I’m hearing as show stoppers are the standardisation aspects of IoT and the regulation that is not evolving in the right direction to enable the transformation of the industry. Utilities have been using vertically integrated and proprietary solutions, but with the use of more generic platforms they will be able to fully unlock the power of IoT.”

Simon Anderson, chief strategy officer and co-founder, Green Energy Options, suggested that utilities’ focus on single technologies, as in the smart meter roll-outs, could leave them vulnerable to IoT applications that had been driven by the customer relationship. He said, “Currently, the IoT systems in a home are sold as point solutions. The user has to buy, install and manage them. However, if they were to be integrated, as in a hybrid car, and then connected to the cloud, where the data could be integrated with other data-feeds, the value could be increased significantly.”

And John Teeter, chief scientist, People Power, noted that market pull for the IoT is coming from different directions to meet different needs, citing “Security, wellness, community engagement, mobility, market aggregation of distributed resources (and note that the pull is a mix of energy and not-energy evolution).”

How can utilities respond? Survey responses highlighted the example of the telecoms revolution as a model, but warned that to be successful companies have to be consumer-led and innovative, not follow the pack. Jens Madrian, chief financial officer, Reactive Technologies, said, “If we look at the rate of technological innovation in telecoms over the last decade, that is the sort of trajectory the energy industry should be on. The companies that were successful through this tech boom didn’t just replicate what competitors were doing, but instead sought to create a product that would meet future needs and wants, based on completely new functionality people could integrate into their daily lives.”

That may mean the industry taking a different route in its technology decisions, looking for standard, interoperable and easily updated systems and products, instead of bespoke systems. CGI’s Rich Hampshire said, “We need security standards for consumer confidence. We need self-provisioning of devices for simplicity and as an enabler to mass consumer adoption. We need market rules and systems to support the effective operation of the market.”

People Power’s John Teeter said that could also help smaller players in the industry, “Rather than a barrier, the IoT can be a driver to help overcome fragmentation. The enabler is the support of standards for inter-operable operation and analytic services.”

The final warning for traditional utilities came from David Tuohy, senior vice president & general manager of Europe, at Tendril. He said, “We believe that data analytics is arguably more important than IoT. As the IoT makes physical inroads into the home, the amount of data being generated is going to increase exponentially.

“…There is already a world of possibilities with building physics and behavioural science for which you don’t need the IoT or hardware.”

Energy utilities should be warned: the IoT is a change in attitude as much as technology. Once customers and service suppliers can see a benefit in sharing data, they will not wait for a single technology – like smart meters – to change the way they buy services. Smart meters are one enabler, but smart data analytics that can work with existing data sources could already be allowing customer relationships to form that leave energy suppliers out in the cold.

 

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