Assuring Smart Energy Services

In September 2010 Sam Laidlaw, CEO of Centrica who are the market leaders (as British Gas) in the UK and a major player in the US through Direct Energy, made a historic speech in which he put forward the view that the old utility model was dead.pyramid

His clear vision is that the new Utility model is based on helping customers use less, in this case energy. This might at first appear counter-intuitive given an energy retailer's interest in selling energy.

However, he sees a transformation taking place. He envisages a shift from energy companies selling energy, to energy companies selling the services to enable consumers to use energy as efficiently as possible. 

To this end he sees the growth area in the energy economy being the energy services arena comprising energy monitoring and advice, home insulation, micro-generation, intelligent home control, EV recharging etc

He sees the British Gas service business as becoming larger than their energy business within a few years.

A copy of his speech can be found below:

http://www.centrica.com/files/pdf/Sam_Laidlaw_RSA_Speech_16_Sept.pdf

This strategy is predicated on a global shift towards a Low Carbon economy which brings with it increasing energy costs and an increasing demand for consumers to want to use energy more efficiently to counteract rising unit prices, and for a significant and growing minority to protect the planet for future generations.

Being in the forefront of these developments should secure Centrica a leading position in the energy markets of the future.

However, in order to for these energy services to work consumers need to know how much they are using in real time and accurately over time, they need to get paid for any power they produce, and they need to be able to operate in a world characterised by much more renewable energy from sources which are much more intermittent than traditional fuels.

To achieve this they need to have Smart meters. They are a necessary tool to enable consumers to be able to manage their energy as efficiently as possible in the new energy economy. On their own they won’t bring any savings – and they do cost money to build and install. However, without them the savings which can be created through the adoption of the portfolio of energy services cannot be realised.

All countries around the world have conducted cost-benefit analysis on smart metering. Some of the research says there is a clear benefit, some of it saying the business case is not clearly demonstrable.

However, none of this analysis looks at the cost of not reducing emissions. The Stern report in the UK, written by one of our most respected economists and accepted by all UK political parties concludes that the cost of not reducing emissions is 4-5 times the cost of taking action now to mitigate climate change. Add this into the equation and the case for Smart metering is overwhelming.

That said it is definitely not the case that Smart metering will be a success. For it to deliver the benefits it can, it needs to be embraced by the consumer as the best way forward. The benefits in terms of energy cost reduction and environmental protection need to be accepted. This will not happen unless Utilities pro-actively explain to consumers what the benefits will be to them. What is needed is the three C’s – Communication, Communication and Communication.

Utilities around the world have been doing a really bad job in this regard. The problems in the US, Australia, and the Netherlands are a testament to how not to be effective in communicating the benefits of Smart. The UK is in great danger of following down the same path as the silence on the subject of Smart – to the broad consumer audience – is truly deafening.

If Utilities, regulators and government get their act together we can have successful Smart programs around the world, we will see dramatic growth of energy service industries and energy saving technologies, and consumers will see their energy efficiency levels improve dramatically.

If they fail we will all being paying more for our energy than we need to, and our children and our children’s children will probably face significantly higher climate remediation costs which could well have been avoided.  

Published by: Enstra Consulting

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