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How do energy suppliers react to the energy transition?

Dr. Martin Ammon, Director for the Energy Industry at EuPD Research Sustainable Management GmbH

Dr. Martin Ammon: “Dedication is a question of will”. Dr. Martin Ammon, Director for the Energy Industry at EuPD Research Sustainable Management GmbH, answers seven questions on how utility companies are responding to the energy transition.
 

Mr. Ammon, this year is the third time that EuPD – together with the German CleanTech Institute (DCTI) and The smarter E Europe – will be honoring Germany’s most sustainable utility companies with the energy transition AWARD. Which criteria determine the companies’ ratings?

Underlying the energy transition AWARD is a specially developed, integrated quality model. In general, utilities engage in an exchange with their customers on three levels, meaning they offer services and products and provide information. The quality model incorporates information, services and products in keeping with customer demand in the four branches of the energy transition – energy efficiency, mobility, electric power and heat. All in all, the quality model comprises about 50 criteria, from green power services to thermographic inspection of residential buildings. In rating the utility companies, we check to see if they provide these services.

 

From your standpoint, what sets a sustainable utility company apart from the rest?

For starters, we’ve seen that utility companies’ dedication generally has nothing to do with their size. Rather, it is a question of will. They must be prepared to respond to the challenges posed by the energy transition and adjust their structures accordingly. Changes brought on by the energy transition need to be reflected in their services and products. Sustainability always comprises the three dimensions of ecology, economy and society. Consequently, utility companies can be considered sustainable if they manage to integrate novel services and products in newly created business divisions and thus operate economically in the intermediate term.

 

How have the requirements in terms of customer relations changed for utility companies in the past years?

Customers have always seen utilities as being knowledgeable in energy matters. So they expect to be informed and catered to in the new energy world in the way they are accustomed to. As elsewhere, customer relations have moved in a digital direction in the energy sector, too. At the same time, price comparison websites enable maximum transparency when it comes to energy prices, and make switching suppliers easier. While utilities used to have an uncontested monopoly, they now face more and more competitors – and not just for electricity and gas. Services and products related to the energy transition, in particular, are supplied to customers by a whole range of new competitors.

 

What are some typical services and products that utility companies are offering in reaction to this transition?

Typically, those products are introduced which require the least possible restructuring. Green power already formed part of most companies’ portfolios, and we’re now seeing an enormous increase in the number of utility rates that accompany it. Specific utility rates are being offered for electric heating and heat pumps as well as for electric vehicle charging. In the past years, we have also seen a variety of utility companies introduce online shops for energy efficiency products. These so-called white label shops are operated by third parties and suggest to the customer products which are ultimately not provided directly by the utility itself.

 

Have you noticed any differences in the overall approach of utility companies in regard to promising electricity and heat supply or sustainable mobility services?

We differentiate between three types of utility company in evaluating our annual survey for the energy transition AWARD: the traditional companies, the implementers and the pioneers. Traditional companies are focused on conventional sources of energy. They’re still not addressing the energy transition. Consequently, they barely offer any products in the field of renewable energy. The implementers, however, have recognized the demand for renewable sources of energy and have adjusted their company structure accordingly. In expanding their product range, they are more focused on conventional, easily implemented services and products. The pioneers offer an even starker contrast. They are unafraid to take risks and they actively look for new business models. In addition to conventional products, their product portfolios include innovations such as electricity products with savings bonuses or micro combined heat and power plants.

 

In your opinion, which new business models seem particularly promising for the future?

Integrating energy transition technologies into the value creation of utility companies is imperative for new business models to succeed in the future. On the one hand, we have to cater to the demand for renewable energies and efficiency technologies, and on the other hand, we have to prevent the rise in customer self-supply from leading to a fall in revenue. Contracting models offer the right approach to meet customers’ demand for new technologies while winning their loyalty long-term. What’s more, e-mobility is opening up great potential to tap a new market for electricity. The business models go above and beyond just power supply to include the installation and operation of charging infrastructure.

 

To what extent do you see these new business models already being implemented?

A large number of utility companies are already offering contracting models in the heating sector. And some utilities are already applying these models to power generation technologies or charging station operation. In developing the potential of e-mobility, however, utility companies still have a long way to go.