At Engage we understand the data underpinning the key facets of the energy market and how we can help clients leverage value from that data. We also understand the importance of digitalising systems and processes to help clients leverage value internally from data sources and unlock more potential.
The Energy market is transitioning at speed. The electricity infrastructure used to be almost exclusively top to bottom; with the power stations at the top, consumers at the bottom, and the transmission and distribution networks in between. There was ample capacity at all times in terms of power and the electricity networks over which this was delivered.
Alongside this, the market arrangements in place did not provide for anything other than very simple time of use price differentials, at least for the consumer mass market. As a consequence, most consumers gave little thought to their electricity usage patterns – other than considering the overall amount they used and were paying.
Usage forecasting was quite predictable, with reliable methods to forecast what consumers would use, largely based on the time of the year and temperature forecasts.
Transition to a Flexible Energy System
The energy system is part way through a transformation, driven largely by Net Zero targets.
Three key characteristics arising are:
- Extensive electrification of transport, heating and industrial processes.
- A more diverse set of power sources that are distributed throughout the electricity infrastructure, including on the transmission network, the distribution network, and on consumers’ premises.
- Electricity market arrangements that more closely reflect temporal and locational energy system costs, alongside the ability to measure consumers’ use and time of use.
This provides for a far more complex energy system. There is no longer ample capacity in terms of power and the electricity networks over which it is delivered. Many of the newer power sources are intermittent, with a generating cost that does not relate to the cost of oil / gas, and a generating value to the energy system that, along with a demand reduction value, is locational, temporal and highly variable. New and changed markets will discover this value and make it possible for consumers, suppliers, and new disruptors to access it, predominantly via new products and services.
Value Driven by Digitalisation
Energy product and service providers (including disruptors as well as established energy suppliers) will want to access this value and will develop propositions to do this. Many of these are likely to be founded on a far more digitalised basis than previous propositions – with electronic assistants, apps and automation all playing a part. Consumers (including groups of consumers such as business chains and councils) will also want to access this value and will engage with energy in different ways to do this.
Product and service providers need to be able to understand and model what drives this value, in terms of its magnitude, location and timing. To do this they will need to consider how the many and diverse drivers of energy usage affect system costs; how these costs are reflected in energy market prices; how consumers are exposed to these prices; and the extent to which consumers react or engage because of the time-based price differentials.
This will require energy sector experts to come together with service providers, technology providers and financiers. At Engage we are energy industry experts. Get in touch to talk about how we can work together.