If Apple becoming an energy “provider,” in addition to consumer, doesn’t serve as a proof point of the massive change happening in the utility industry today, not much else will. This move not only means Apple can now offload its surplus and make some extra cash; it also signals mounting pressure for traditional utilities to innovate, or else risk seeing customers turn elsewhere for energy services. Commercial customers make up over half the overall load and revenue at a typical utility — in smaller numbers and greater concentration than residential customers — and increasingly are taking matters into their own hands to meet their energy needs.
Historically, utilities were seen as basic energy providers — expected to provide reliable electricity and gas service to homes and businesses, as long as customers paid their bills. Today, however, with the growth of renewables and increased competition, that paradigm has shifted. Now customers have more options and expect their utilities to help them navigate that through personalized engagement.
Apple’s recent approval to start selling solar power is a nod toward the future of the market. In a recent survey by PriceWaterhouseCoopers, 72 percent of U.S. companies indicated that they are actively pursuing procurement of clean energy. In other words, a vast swath of corporate America is reconsidering its energy supply. Companies like Apple are taking it one step further, becoming suppliers themselves. New energy providers are establishing themselves every day, competition is increasing, and utilities face growing pressure to respond.
The story of Apple holds a two-part lesson for utilities. The first is in regards to retaining commercial customers. The second is about out-competing present and future entrants to the market.
The good news for utilities, for now, is that they are still the default energy provider across most of the U.S., and they still hold customer relationships with the most energy consumers. This status means they have a lot to build on — and a lot to lose. If more commercial customers act like Apple, coming up with their own solutions to energy needs, soon utility customer numbers and revenues will look like a shadow of their former selves. Negative load growth causes all kinds of financial problems for utilities and their shareholders and big problems could arise.
A key to commercial customer retention is to recognize customer motivators, which may include corporate sustainability, strategic energy management, or simply low levels of satisfaction. Because of their incumbent customer base, utilities maintain many years worth of meter data that, when analyzed correctly, has the power to illustrate those motivators, building-by-building. By using data, utilities are able to assemble a composite picture of every customer at a granular level and better engage them with personalized information. Armed with customer intelligence, utilities know which customers will benefit from retrofits and can pinpoint how much energy they will save by implementing them. Utilities can also identify small operational changes for customers, advising them on how to adjust operations to save on energy costs.
This intelligence also sheds light on some more complex questions: Which of my customers are investing in rooftop solar? Which customers could benefit the most from battery storage? How can I leverage new commercial rate structures to please my customers and reduce distribution costs?
Which brings us to the second part of the Apple lesson. For now, Apple can only sell electricity on the wholesale market. But what if they were to launch a retail energy business — how would the company approach that market opportunity? They would win the way they’ve won in many other businesses — by innovating through understanding how their customers can use their products. In personal electronics, this innovation means designing devices like the iPhone that people love to hold and can’t live without. In energy, the innovation would mean understanding customer energy use in a granular way and evolving quickly to anticipate where consumer expectations are headed.
While data itself might seem like a small piece of the puzzle, it is in reality the most important asset for utilities to stay in the game. Intelligence gives utilities the opportunity to retain customers using highly personalized care and service, and to leverage deep information to design and sell new revenue alternatives suited to their customer base. New entrants who don’t have the data yet won’t have such capabilities. Apple uses data to out-compete present and future competition. Utilities should too.
The energy market is going through a massive transformation and most are unsure how it will shake out. Knowledge is power, and for utilities it’s a competitive advantage.
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