Smart meters, renewables, energy storage, interconnectors, and a greater choice of energy suppliers… there’s no denying that the energy market has transformed in recent years.
Despite this, customers continue to face confusing tariff pricing structures, unclear tariff names, and high costs, Current News recently discussed.
But could the energy sector be on track to put the customer back at the heart of everything it does? With new tech disrupting how energy is produced and delivered to homes and growing customer frustrations, it is becoming increasingly clear that the traditional energy system won’t work in the future. And this will, fundamentally, change how the costs of energy are calculated.
Speaking to Current News, commercial director at Open Energi, David Hill, explained: “[Of] all the component pieces of the future energy system, most don’t have a variable cost to them with usage and so, therefore, the marginal costs of producing energy doesn’t vary too much with production.”
So, what will the future energy model look like? Similar to what we have seen in other sectors, the energy industry will turn to a customer-centric approach called Energy as a Service.
Energy as a Service focuses on charging customers on how they use energy, instead of how much they use. It’s similar to models adopted by mobile phone contract agreements, with a fixed bill covering a set amount of texts, minutes, and data.
As Current puts it: “Rather than paying for the number of kilowatt hours consumed, you will instead enter into an agreement where you could pay a monthly subscription at a competitive fixed price, rather than a cost per kWh.”
Not only could Energy as a Service lead to savings for customers, it encourages more efficient use of energy.
However, Energy as a Service is not a new concept, according to Tim Rotheray, director at the Association for Decentralised Energy (ADE). He said: “The thing that probably really enables [it], from a conceptual point of view, is the fact that the equipment now exists in terms of the Internet [and] smartphones, which ten years ago were nowhere near where they are now.”
The emergence of tech such as battery storage and demand-side response have also enabled Energy as a Service to become a reality. Forward-thinking companies in the commercial and industrial sector have already begun to take advantage of this new business model.
While it might not be clear yet when Energy as a Service will become mainstream for households, it seems inevitable that the energy sector will have to move that way.
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