The energy industry is in the process of transforming to what is called a Smart Grid. This means a more efficient way of managing the supply and demand of electricity, using innovative, lower-carbon energy. This shift is typically accompanied with a large infrastructure investment and is also frequently associated with government policy.
Britain is likely to be seeing the larger shift towards smart energy anywhere in the world. This means, 26 million homes will be connected by 43 million smart meters
by 2019. North America, in comparison, is predicted to roll out 95 million smart energy meters by 2015. Smart meters are the foundation on which the Smart Grid connects to the home, as they connect directly with the utility. It gathers current information usage and sends it back to the utility for billing, but it also permits the supplier to transmit information like tariff rates directly to the home.
However, previous events in other industries suggest that the infrastructure change may not be enough. Success may only be viable when the infrastructure investment is combined with customer innovation. Only after this occurs, can the industry offer attractive services at a fair cost and guarantee mass customer adoption. The mobile market, for example, has only seen a modest growth of 7% between 1985 and 1995. Back then, the service was marketed to high end consumers and the industry failed to see the potential in marketing to the average customer. A range of handsets, various packages and financed marketing campaigns sped up the process to achieve a penetration rate of 46% by 1999.
Dial-up Internet had a similar story, achieving only 5% in its first 8 years, as modem installation was complicated, material was limited and it was too expensive. It’s not until Freeserve offered a pay as you go tariff that it became a mass-market sensation. And the same goes for broadband in the beginning, it was pricey, externally installed and designed for premium, computer literate customers. Only after a piece of regulation opened up the BT network, could other companies enter the market offering a larger range of products at competitive prices to appeal to a wider variety of consumers. Consequently, the average cost of broadband per month halved, from £30 to £15 a month in 2004. With the demand increasing providers invested in developing faster Internet and bandwidth to meet the increasing needs of more experienced users. As a result, broadband usage has risen from 7% to 40% between the years 2003 and 2006. This led to additional progress, a vaster quantity of content and also caused a boom in e-commerce and digital economy.
The transformation of digital TV has also came a long way in the past 5 years and developments in TV hardware and programming have assisted the transition into widespread use of digital TV and enabled it to reach a staggering adoption rate of 96%.
The accumulative progress of the UK’s communication infrastructure in the past 18 years has paved the way to a brand-new digital economy worth $130 billion (of which $72 billion emanates from e-commerce) in Britain alone. Nowadays, the UK is one of the leading countries in the business-to-consumer digital economy and has a GDP rate triple the international average within the online business-to-business environment. Subsequently our economy benefits, with £5 in revenue for every pound spent in connectivity.
Similarly, the energy industry must have both customer innovation and infrastructure in order to revolutionise the marketplace. Consumers today belong to an eGeneration which is ‘smart’ in every manner. They are able to connect with all aspect of their lives: family, friends, shopping, work, various media channels and many other things, all except their homes, and the energy market has to take a large part of the blame for this. Furthermore this group are short of time and money and also heavy internet users who are accustomed to having information at their disposal at any given moment. Therefore, the energy market should cater to its customers’ needs with better access to levels of electricity usage in their own home, and a clever operation system which is more economical, easier to use and makes the house feel more homely. And with the volume of individuals with access to broadband and smartphones, technology can be used to inform and empower consumers from practically anywhere and with just the touch of their finger.
Britain is set to invest approximately £11 billion in smart meter roll out, however the market should play their role in guaranteeing a return on this investment. According to Boston consulting, 60% of the enterprise cause for smart meters can be profited through operational efficiencies, with an additional 40% in consumption related. What’s needed are simple services that appeal to consumers while giving them usage data, fair prices and an uncomplicated operating system to assist them with their energy monitoring. These measurements should fulfil consumer demands using fewer resources.
In order for the service to work, it needs to be sensible to the consumer, it should be a friendly and easily adopted, but most importantly, it should match their lifestyle. More than just giving accurate information about energy consumption, it should help run home devices with greater efficiency.
Innovating the smart home is a great investment, with potential benefits in various markets. By 2015, 15 billion devices are to be connected to our home and by 2017, Industry Analyst Strategy Analytics predict that 20% of homes in the UK will be operated in a smart fashion, yielding £1 billion in digital income. The pace at which the smart home will grow is dependent on how well energy suppliers, technology firms and device manufacturers will collaborate with one another. Consumers stand to benefit a great deal from this opportunity, and by building an innovative digital economy, so does the energy sector. Not only will they make a profit on their investment, they will be doing it while fulfilling their commitment to customers.