Energy Services 2020 to 2030 Mapping Exercise

Invitation to an Energy Services 2020 to 2030 Mapping Exercise - Energy Futures Lab, Imperial College London, South Kensington

Wednesday 15th January 2020, 14.00-18.00

My colleagues and I would like to invite you to attend this event. Background details and context for the event can be found below. If you are interested in attending, please respond to [email protected]

1. Background and objectives

In many sectors of the economy, digitalisation has led to ‘servitisation’ of business models: we no longer buy a mobile phone, we buy a service contract and the phone, data and calls are all bundled in a fixed monthly service charge. We would like to explore how a market for energy services could emerge in the decade from 2020-2030; capturing opinions and perspectives on enablers and barriers – what do policymakers, regulators and the market plan already and what else is needed to deliver desirable outcomes for society? 

We will set the context for the energy services mapping with a series of future scenarios, setting out four very different futures for governance of the sector, participation in it by consumers, and how societal drivers could shape these things. We’ll ask the workshop teams to consider how changes in the 2020 could inform these futures. Taking account of things in the sector already planned and anticipated, and as yet unknown or unanticipated changes.

The purpose of the workshop is to rapidly synthesise a shared view, developed from differing perspectives, on how changes to the energy sector in the 2020s could relate to a range of alternate ‘futures’. In particular, seeking to understand the changes and enablers that underpin many different futures. It is exploratory in nature.

The outputs and outcomes will be open and shared, to be used by any of the participants in any way they think can support their own objectives (testing future business models, managing relationships with key business stakeholders, engaging with government, etc). Another desirable outcome is to test the ground for an informal network or group, with an ability to analyse energy futures from diverse perspectives to collaborate on topics of mutual interest.

2. Format

The format is simple. A half-day workshop from 14.00 – 18.00 on Wednesday 15th January 2020. The Scenarios and context introduced, quickly. And then a focus on populating an ‘Energy Services Map Canvas’ to map out the significant likely developments in the early, the mid and late 2020s. 

3. Context

Digitalisation could revolutionise the way the energy sector works. It will likely change the way we invest in, operate and regulate energy infrastructure. It could give rise to wide ‘servitisation’ both on the networks and ‘behind the meter’ in consumer’s homes. Harnessed well it should support decarbonisation. And it will very likely make consumers the focus of value in the sector.

We are seeking to capture what could happen only in those parts of the energy market which relate directly to domestic consumers: MV and LV distribution networks and low-pressure gas; emergent flexibility markets; the retail energy market and associated regulations (including consumer protection); ‘behind the meter’, the smart and connected home (including services for power, heat and transport); smart meters and their associated data infrastructure.  

The natural end of the ‘servitisation’ journey could be a state where consumers pay for valuable outcomes (for example, a defined level of thermal comfort in their homes), rather than the input commodities that support that outcome (buying a boiler, paying for a cubic foot of gas). It suggests suppliers integrating both technical and commercial elements of a service and taking the associated risks to capture the value. 

But it seems unlikely that either consumers or ‘suppliers’ will want to take that journey in one step. Services will emerge ‘piecemeal’ where consumer appetite for a new offer coincides with an incremental ‘integration’ step that suppliers want to take and are confident of doing so. For example, it is straightforward to imagine that, quite soon, a boiler manufacturer and a finance company could collaborate to lease a ‘connected boiler’ to a consumer, removing the capital cost burden and bundling lifetime warranties, maintenance and insurance services. Later, as they develop trust and traction with consumers, and an understanding of the value of their combined offer, they might partner with a ‘smart control’ actor to offer guaranteed energy efficiency savings to consumers. 

Business models will emerge which cover all or part of this potential value chain. Some – probably few - may seek to vertically integrate the entire chain to maximise value – one can imagine oil majors moving into this space, with some indications this is happening already. Others will partner to extract value from one or more parts of the value chain. Real outcomes will depend on how incumbents and new-comers perceive opportunity and risk; what capabilities they can bring to bear; the attitudes of their investors and boards; which partnerships emerge….and many other unknowable things. But by understanding how enablers and barriers could play out over time, we can develop scenarios of possible outcomes and plan interventions to support innovation. 

As these evolutionary changes take place in the business domain; policymakers, regulators and code management bodies are grappling with substantial changes; either in train, or planned. Among the more obvious are: retail market reform and changes to the Supplier Hub model; the transition to DSO on LV and MV networks; the growth of nascent flexibility markets; emergence of an as-yet unregulated services market (e.g. auto-switching); the Smart Meter roll-out as well as developments with the associated data infrastructure (Consumer Access Devices et al); and market-wide changes to metering, settlement and consumer tariffs.

The group would like to understand and organise a view on these dynamics. Capture some sense of the key interdependencies between them, and start to develop a feel for how this could relate to a range of potential futures.