Disruption at Every Turn - How does the Energy Industry Survive?

One thing is for sure – the energy industry is facing unprecedented disruption at an ever accelerating pace.

Changing types of generation driven by an every increasingly urgent need to slow down man-made climate change, government regulatory policy, political uncertainty, increasing complexity, the rise of new entrants both in supply and in the growth of new technologies, the smart meter roll out and the resulting increase in data (and what to do with it!), digitalisation – all driving complexity and a rolling tide of change. What will the energy industry participant of the future look like and how can existing businesses ride the waves?

When the smart meter roll-out was first mooted many years ago, many suppliers perhaps saw these new meters as a simple asset swop. They may have perceived some incremental improvements in how the electricity market was balanced and settled, with a shorter settlement period, and the need for meter readers would decrease, but very few people actual foresaw the tsunami (and pace) of technological change that smart is unleashing.

At the same time as this tidal wave of technology and data sweeps through incumbent energy suppliers and providers, the government is pushing the industry to adopt ever tighter regulatory standards, as well as conforming to environmental commitments to ‘net zero’ carbon emissions. To existing industry stalwarts, it must feel like they are being attacked from every angle! The traditional energy suppliers are not known for their ability to react to change quickly – in fact they have often been likened to oil tankers - slowly changing course over a number of years, rather than adapting to change as it occurs.

And it’s this slow ‘change curve’ that might end up reshaping the energy marketing completely. The big six have already seen their business models change over-night with the introduction of the retail energy price cap. No longer able to take advantage of their ‘sticky’ customers, suppliers are going through rapid ‘reinvention’ programmes which often mean shedding jobs and adopting far leaner business practises. 

At the same time, we’re seeing new entrants, both in supply and technology, responding to changes far more nimbly, offering innovative products and services that an increasingly tech savvy consumer base is keen to adopt. Can the traditional energy utilities successfully surf the wave and come out unscathed? Only time will tell, but it’s clear that right now, the turbulence is set to continue for considerable time to come!