I was honored to represent SAP and speak at "Vilnius Energy Forum", a high-profile event organized in Vilnius, Lithuania on November 7-8. The main theme of this gathering of more than 500 executives and professionals from energy industry was "Independent energy - strong economy". I had the opportunity to share my point of view just after Minister of Energy and CEO of Ignitis Group, the biggest utility company in the country.
Big energy exporter turns into importer of expensive energy.
Energy sector in Lithuania is a bit different from markets we know in Europe or in other regions. In the 1980s 70% of domestic demand was supplied by Ignalina Nuclear Power Plant which also allowed for exporting 42% of its production to neighboring countries. Lithuania's accession to European Union dramatically changed this situation, because it required shutting down of both units of Ignalina NPP which was very similar to the one in Chernobyl. The second unit was shut down in 2009 and this is when Lithuania became dependent on energy import. Today nearly 70% of energy is imported, mainly from Sweden, 90% of natural gas is being imported from Russia. Energy prices in Lithuania are among the highest in Europe. This situation encourages a lot of political and business discussion aiming at the same goal - energy independence.
Ceasing the opportunity.
Putting aside all political discussions and "big business" decisions on import prices, Lithuanian energy sector has unique opportunity to build a market which will rely much more on renewables, energy storage and other technology driven innovations which will let the country become energy exporter again. It will not be exporter of energy as such, but rather of innovations, business models and solutions which will be invented and developed in Lithuania then sold and adopted internationally. I could notice that innovations is a really big and hot topic during the conference.
Advanced technologies enabling innovations.
During my short presentation I focused on three areas which may be worth further exploration and when addressing them with proper attention and technologies, they can contribute to successful transformation of energy market in Lithuania and other countries.
Energy generation democratization
Changing market landscape
Energy generation democratization
This term is usually associated with renewable, distributed generation which supports decarbonization initiatives and are triggered by fast decreasing technology cost. Basically, it is the move from big, central generation plants which are either nuclear or fired with fossil fuels towards smaller units which serve local communities and use solar or wind energy. It can be also completely disconnected from the grid, small “power generation kit” addressing basic needs for power of small households in regions where access to electricity remains a luxury.
Technology systems which will support democratized production will have completely different role than the ones managing centralized power generation. They will no longer CONTROL, like they do in systems we know – static and predictable. They will COORDINATE many systems, different types of interacting and interdependent systems. Firm and well define STRUCTURE will be replaced with AGILITY as the main capability.
Internet of Things, predictive analytics, artificial intelligence are among key technologies which will be applied to make these systems running in real time.
In traditional model which existed for decades, a customer was asking utility company for new connection and then had to wait long time to have it done (or not). Multiple visits, phone calls until the service delivery was started. Many utilities improved these core processes and started to offer new, non-commodity services and products, we call it transition model. Although in this model utilities already go beyond selling commodities only, customer is still the one who initiates contact, he is searching for available services and products. It was observed on very mature markets that this model is not very successful for utilities, they are not satisfied with value of additional revenue and profits coming from selling non commodities. This is mainly because of reactive approach taken by utility company and lack of full understanding of customer preferences.
Utilities and other market players need to do big marketing effort to gain trust of prosumers and be able to take a leading role in interacting with them. It will be much more proactive, addressing specific needs of small customer groups or event very well profiled individual consumers.
Utilities need to deploy omnichannel platforms which will allow them to collect customer related data from different internal and external sources and interact with prosumers through their preferred channels.
Advanced analytics will allow for well targeted marketing campaigns, commerce platforms will support new business models which will go beyond selling commodities.
Changing market landscape
No matter if energy market is regulated or deregulated it is already being disrupted and incumbent utilities are challenged by new players which would not be considered as competitors some time ago.
Individual energy consumers and bigger communities disconnect from the grid, because it became feasible, cheaper and simply more reliable than being part of costly network. Energy related products and services are being offered by well-known retailers who have never been associated with energy sector, e.g. IKEA, Google. And last and maybe most important group of new market players consist of Oil and Gas giants looking for new opportunities coming from energy transition. They focus on developing products and services based on energy data, rather than selling "electrons". Shell, Repsol, Total and others make bold statements regarding future direction and it's already backed up by acquisitions of companies dealing with e-mobility, energy storage, solar generation, smart home solutions.
Utilities need to build new capabilities to stay relevant on their traditional battlefield, they need to be able or at least improve the way they LSITEN to their customers, UNDERSTAND them and ACT accordingly. Building these capabilities can be achieved with technologies allowing to capture customers' feelings from physical conversations, interactions with chatbots or emails. Combining experience data with vastly available operational data will allow for clear understanding of what customers want, what they need, what works and what does not. Once this understanding is built, proper action needs to be executed either as immediate response to customer's input or as structured, well evaluated improvement to existing process or service.
Energy transition is a great opportunity for Lithuania and other markets to become independent, not only from traditional suppliers of fossil fuels, but also from big energy companies.
It requires openness to innovation and advanced technologies. It also requires authentic focus on delivering great customer experience.
Traditional utilities must change to stay relevant and competitive. They need to close the experience gap not only when it comes to customers but also employees