Smart_at_Baringa_WEB-FINAL
- 1. The Smart Energy Revolution Smart@Baringa
- 2. Smart@Baringa 1 Introduction: The Smart Energy Revolution 3 Baringa’s role in the Smart Energy Revolution 4 Smart infrastructure roll-out 5 Smart Retailers 6 Smart Grids 7 Smart Customer Smart@Baringa
- 3. Technology is evolving at an increasingly rapid rate with innovation enabling opportunities for energy businesses and prosumers to co-exist in a highly connected energy ecosystem. In five to 10 years, we will live in a world where Smart meters, micro- generation, Smart appliances, electric vehicles and battery storage will be common place. Customers will be empowered with information at their fingertips, helping them to manage multiple energy sources from energy providers and their own home. Today’s customers that use a one-size-fits-all energy tariff will no longer exist. In parallel, system operation roles at local distribution level will emerge. Projections by National Grid* suggest that the percentage of generation connected to the distribution system may rise from 17 per cent now to 28 per cent by 2025. By that time it is also anticipated that unpredictable wind and solar could account for 40 per cent of installed capacity. Over time, these green energy sources will efficiently and effectively co-exist with Smart Grid technologies and deliver savings to an evolving customer base whilst playing integral roles in the transition to a low carbon economy. Traditional energy market participants will need to adapt to the evolving landscape driven by political mandates and technology develop- ments. The clearly defined and transactional roles with customers will move to a highly connected web of participants working to deliver a cost-effective, secure and lower energy ecosystem. New business and market models are developing. Retail competition is on the rise as new entrants gain ground and the industry is already talking about ‘mid-size’ energy suppliers. In the future, energy service providers and aggregators could be driving the energy market instead of energy suppliers. As this transition develops the true potential of Smart technologies will be realised through the convergence of Smart Retail, Smart Grids and Smart Customers. The transformation of the energy landscape will present opportunities and threats to new and existing entities. Providing the market balances commercial competition with regulation, material benefits for businesses and customers will be realised. The energy industry is transforming. With national commitments to energy decarbonisation, and an increased focus on the security of supply and optimisation of energy costs, the energy value chain is undergoing a fundamental shift. Introduction: The Smart Energy Revolution * National Grid (2015) Future Energy Scenarios: UK gas and electricity transmission (http://fes.nationalgrid.com/fes-document/) Smart@Baringa 1 Generation Energy trading Transmission Distribution Retail Customer Smart@Baringa Smart Grids Smart Retail £ £ Smart Customer Government and Regulator
- 4. 2 2
- 5. We have the largest dedicated energy consulting practice in Europe, specialising exclusively in energy, and we have been at the forefront of energy industry change for the last 15 years – and the next 15 years will be no different. Baringa works across the entire energy value chain, collaborating with our clients to run more effective businesses; launch a new business, service or product; or navigate industry shifts. We have a market- leading track record of clients including regulators, generators, traders, retailers, transmission and distribution companies, investors and technology providers. For nearly a decade we have worked on Smart metering and Smart Grid engagements across UK, Ireland and Europe, building up an enviable track record and insight through engagements including: • working with regulators, government, retailers, distribution organisations and new entities on the design, development and execution of the UK Smart metering rollout • architecting new Smart-enabled products and propositions with retailers including Pay As You Go (PAYG), Time of Use (ToU) and Connected Homes (IoT) • providing economic, regulatory and technical advisory services to regulators, industry bodies and distribution organisations on Smart Grid investment programmes • developing the strategy and managing the selection, procurement and delivery of industry-leading advanced network management systems • working with new and existing market participants to assess the market, business and operating models of the future energy landscape. The energy industry is becoming proliferated with Smart-enabled answers and solutions. Baringa is different – we collaborate closely with our clients to ensure that the questions being answered and the problems being solved deliver value to the industry, shareholders and customers. We look further ahead, helping our clients anticipate the future and steer the right course between opportunity and risk. We connect your vision with the delivery of exceptional results. At Baringa, we live and breathe the energy industry and view every challenge through experienced eyes. We tell it how we see it and roll up our sleeves when we know we can make a difference. Baringa’s role in the Smart Energy Revolution Smart@Baringa 3 We have the largest dedicated energy consulting practice in Europe specialising exclusively in energy, and we have been at the forefront of energy industry change for the last 15 years – and the next 15 years will be no different.
- 6. Challenge The deployment of Smart meters is a unique, national challenge in its scale, complexity and cost. Replacing millions of meters (53 and 40+ million in the UK and Germany respectively for example) is a monumental challenge for the industry and for industry participants. Smart metering is not always “just” a meter re- placement programme. Deploying Smart meters in a cost effective way whilst engaging customers (where market applicable), and repositioning the relationship with end-consumers require businesses to re-architect themselves and operate differently. What will define success? • a coordinated and strategic focus across all market participants and their business functions to manage security, regulatory change, deployment efficiency and effectiveness, and the opportunity to re-engage with customers. Baringa’s role • continuing to build on our proven track record over almost a decade in readying the industry and market participants for the roll- out of Smart meters • supporting regulators to determine policy frameworks and market models that optimise Smart metering opportunities • using our technical and business change expertise to support industry bodies and companies to design and implement Smart- enabling systems and business capabilities, and extract value from Smart metering. Smart Infrastructure roll-out The deployment of Smart meters is a unique, national challenge in its scale, complexity and cost. Smart@Baringa 4
- 7. Challenge Energy retailers have no choice but to change in response to Smart metering. The market is evolving, with progressive players already transforming and simplifying their businesses across their service offering and operational set-up. The existing provision of retail services to energy customers is changing: from the volume and types of work generated by Smart customers, to the products and services expected and needed by the customer, such as dynamic pricing, hourly tariffs and compen- sation mechanisms. Progressive players are developing new and value-adding propositions as well as innovating customer engagement and service channels using digital tools, and leveraging the transition to establish new ways of working. These progressive developments will fundamentally change the relationship between suppliers and end-consumers. What will define success? • an ability to change with the evolving landscape. New players entering the market with new service models will make it a strategic necessity of the incum- bents to compete by exploiting Smart infrastructure and new digital channel capabilities • innovating products and services that are attractive to evolving customer (and prosumer) needs that offset demand reduction and deliver business benefits • leveraging Smart to deliver a step change in operational efficiency, which allows benefits to be passed onto customers. Baringa’s role • defining Smart metering-enabled operating models and processes, and establishing pilot and model offices to help organisations to transition to a Smart business- as-usual state • scaling Smart operations with a focus on cost to serve improvements balanced with customer satisfaction • designing Smart propositions; planning the transition from a legacy, to a Smart portfolio; and navigating the challenges of big data and extracting value from Smart meters. £ Smart@Baringa 5 Smart Retailers
- 8. Challenge Increased pace and scale in grid innovation investment has furthered the revolution of the transmission and distribution networks. However, successful adoption of these technology-enabled services by new and existing market entities will require sustainable changes to the energy market, and evolving business and operating models. Existing entities will have the opportunity to develop into much more than the historical reactive- regulated entity, by leveraging the rapid developments in disruptive technologies and pursuing new commercial opportunities outside the boundaries of the regulated operator. The key challenge for network executives is finding a balance between strategising the future with actioning short- to medium- term business performance improvements by leveraging new technology advancements. What will define success? • a corporate strategy that recognises innovation as integral to the development of the organisation, agnostic of a market leader or market follower approach • an ability to preserve and enhance existing performance by leveraging innovation and disruptive technologies • an appreciation for market variances and the realistic challenges of securing an attractive return on investment. Baringa’s role • managing the risk and opportunities of Smart Grid investments and supporting the prioritisation and delivery of innovative projects • extracting value from Smart Grids by enhancing existing network capabilities and improving business performance • developing future business and operating models and working with new market participants to successfully enter existing and new markets. Smart@Baringa 6 Smart Grids
- 9. Challenge Price remains the primary driver for the majority of energy customer segment movements. Organisations may focus on competitive and innovative products to retain and attract customer numbers, but customers are wising up and taking on the energy trilemma themselves. This set of highly engaged energy customers (dubbed the prosumer) are now operating in the domestic, and industrial commercial markets. In the domestic markets, end users are actively engaging in energy through Smart metering, home energy efficiency measures, and decentralised generation solutions such as rooftop PV. In the commercial markets, prosumers are even more advanced, managing their own energy supply and demand through on-site generation, local community schemes and leveraging their own back-up generators, and as markets develop and mature they are beginning to fully leverage their energy assets to sell services back into the energy system. The advent of the prosumer tran- sition is making many incumbent energy organisations and new market entrants reflect on this group to determine whether they are a real threat or indeed present an opportunity to redefine their proposition. Similar to the cost challenge of “behind the meter” energy sources, in the non-energy connected home market, consumer’s lack of propensity to purchase costly home automation devices (heating, security, entertainment) is presenting the solution and service providers with a very real challenge. If organisations can align future propositions with the values of the prospective energy prosumer and connected home customer, then the cost deterrent may indeed be overridden by a human desire to contribute to society and the environment, whilst enjoying the comfort of their own home. What will define success? • taking a bold market follower/ leader position on the nascent energy prosumer/connected home markets • managing internal stakeholders to ensure that prosumer brand- benefit is assessed equally as the financial business case • ensuring products and propositions recognise actual customer needs including the role of the home in the consumer’s life • industry collaboration and development of universal com- munication protocols and security standards, specifically pertaining to consumers’ personal data. Baringa’s role • leading multi-party projects to architect and develop innovative and leading products and propo- sitions including Smart metering, Smart Grids and consumer- centric digital platforms • validating multi-billion dollar programmes in technology investments by leveraging our industry-leading economic and market modelling capabilities • developing integrated energy strategies for new market entrants, and large industrial and commercial consumer. Smart@Baringa 7 Smart Customer
- 10. About Baringa Partners Baringa Partners is an independent business and technology consultancy. We help businesses run more effectively, navigate industry shifts and reach new markets. We use our industry insights, ideas and pragmatism to help each client improve their business. Collaboration is central to our strategy and culture ensuring we attract the brightest and the best. And it’s why clients love working with us. Baringa. Brighter Together. Baringa Partners LLP, 3rd Floor, Dominican Court, 17 Hatfields, London SE1 8DJ T +44 (0)203 327 4220 F +44 (0)203 327 4221 E info@baringa.com W www.baringa.com Copyright © Baringa Partners LLP 2016. All rights reserved. This document is subject to contract and contains confidential and proprietary information.