Globally, organizations across all industry segments are under pressure to contribute towards long-term sustainability, with focus on reducing carbon emissions. Several organizations have been reporting and declaring their carbon footprint through the Carbon Disclosure initiative. Over the last few years, the spotlight is on the energy industry that is experiencing increased pressure from their customers, regulators and shareholders to take necessary steps to reduce carbon emissions. This implies a radical shift in the way energy is sourced, transmitted, and consumed. Coal footprint in energy generation is a very large component of the emissions. Similarly, the transportation sector contributes to more than a quarter of all carbon emissions and the shift from fossil fuel vehicles to electric vehicles (EVs) or emerging fuel cells is equally important.
Beyond selling energy
For many years, energy companies have been driving energy efficiency programs to reduce the energy consumption through behavioral changes and incentives. Some have experimented with a partnership model with white-goods manufacturers and ran campaigns to help their customers switch to energy efficient appliances. With developments in IoT and advanced analytics, energy companies are able interpret the energy consumption signatures and determine the type of appliance and amount of energy consumed by these appliances. This has created interesting business models around monetizing this data, though many are still in the pilot stage. Maturing renewable technologies such as Solar Panel/storage along with falling prices have created a conducive market place that saw the emergence of new entrants with innovative Electric Vehicle (EV) and Behind the Meter solutions (living services). These help customers reduce consumption, decarbonize their personal transport and participate in the energy economy through feed in tariffs, community batteries/nuanced demand response programs.
Getting the strategy right
Traditionally, energy companies have been ambivalent about promoting zero carbon options given the anxieties about protecting their traditional revenue streams. Energy companies are looking to shape a future where de-carbonization makes sound economic sense, beyond being an altruistic goal. Energy companies, through a combination of partnerships, acquisition of niche platform companies or through internal innovation initiatives, have also incubated and launched similar solutions. Typically, it was set up as a separate business unit to push new products and services and as a reactive strategy to compete with the new entrants. However, scaling has remained a big challenge. Having a separate business unit also resulted in missed opportunities for cross-sell and up-sell and optimizing their cost to serve.
In our Energy 2020 blog series, we have been discussing the energy transition and how it impacts the customer mind-sets and preferences. Customers have come to appreciate the dangers of unbridled exploitation of the environment more than ever. They are eager to play their part in building a cleaner world. As we look into a future where ecology fuses with economy, we examine how energy companies can reimagine their approach to help their customers de-carbonize using Energy 2020 transition as a springboard.
A customer led approach to de-carbonization
Fundamentally, energy solutions beyond energy commodity are key enablers in reducing the carbon emissions and as such should be treated as product offerings to help their customers to reduce their carbon footprint. Energy companies have, for several years, reported their carbon emissions through a framework that has been defined by the regulators and/or voluntarily through the Carbon Disclosure project. Energy companies can leverage such a framework and evolve their product offerings to help their customers de-carbonize, capture the carbon displacements achieved for their customers and where appropriate, leverage such displacement to fulfill their goal of achieving NetZero goal. Energy organizations can also structure their portfolio of their products and services aligned to the customer segments covering B2C and B2B with an intent to de-carbonize as depicted below.