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The energy sector opens up: Opportunities for innovation with the CDR

Key takeaways

  • The Consumer Data Right, which allows customers to access and give permission for businesses to access their data has already been applied to the banking sector and will soon come into effect in the energy sector.
  • For energy retailers in particular, the ability to meet compliance obligations will need to be addressed sooner rather than later.
  • Beyond the mandated changes required, it will create opportunities for innovation, differentiation and customer loyalty, offering exciting new paths to innovation.

In May 2018 the Australian Government committed to establishing a Consumer Data Right (CDR), transforming the way customer data is collected, shared and stored. CDR brings in legislation that will allow consumers the right to access and control data held on them by companies. It was first mandated in the banking sector in July 2020, through open banking, but will expand to more sectors in 2021-2023. Next in line is the energy sector.*

By opening up their data, energy retailers will enter a new world, not just of compliance, but new competition and innovation in the market. There will be significant opportunities to lead the way with industry-disrupting products and services, innovative business models and for the first time, to expand into multi-sector alliances. With implementation and impact expected over the next 12 to 24 months, preparation and planning — and making the decision whether to comply or innovate — needs to begin now.

The what and why of CDR 

CDR does more than allow customers to access their data — it also aims to encourage innovation. Current provisions within the CDR enable customers to ‘open’ the data stored on them to accredited, authorised third parties with the intention of fostering industry competition, inspiring new products and reimagining the delivery of services. 

Proposed changes take this a step further, allowing third-parties to write, edit or even share data amongst themselves, opening up the possibility of new intermediaries and even more disruptive products and services. This will expand the risk of big energy market players being at a competitive disadvantage.

In the banking sector, most institutions focused on compliance in the first instance. Nearly a year on, while many big banks have made great inroads, not all have bedded down their future innovation plans. Smaller institutions and fintechs, on the other hand, are already ahead of the curve and innovating in the market. It could represent a lost opportunity for some, and coupled with continuously evolving CDR rules, has the potential to lead to costly and reactive gear-shifting down the road.

The appeal to customers is easy to see, but for organisations forced to share their tightly held competitive edge the benefits are murkier, and their trepidation is understandable. In open banking, for instance, third party applications provide customers with the ability to view their financial data across institutions, maximise their investments, suggest ways to save money or even look for better deals. With further ‘opening’ up to more third parties and sectors, it will be a constant challenge for traditional banks to protect their turf. 

So how do energy retailers address the CDR when it’s their turn? The answer depends on what role they want to play in the future. From compliance and enhancement through to innovation, here are just some of the roads they could take:

1. Compliance first 

No matter how innovative a company plans to be, all energy retailers will have to meet some non-negotiable CDR compliance obligations. They will need to undertake a definite set of no-regrets actions such as assessing the type and extent of data that they hold, performing a readiness assessment of their technology landscape and datascape, and bolstering their data governance and security, as well as privacy and identity controls. Additionally, gateway access, and authentication and consent controls will eventually need to be enabled to provide third party access to held data. All of this requires significant time, effort and investment that needs to be planned for now.

It’s certainly possible, and in the short-term, less costly, for a retailer to simply meet these mandated obligations and leave it at that. But in a world that will be primed for greater competition and enhanced customer satisfaction, this option certainly won’t provide much in the way of future-proofing.

2. Enhance capabilities and initiatives

Taking a step further, retailers can choose to be slightly more proactive. In this option, businesses should view their current investments in capability and innovation programs in the context of the myriad opportunities from the CDR. Doing so will advance their CDR agenda ahead of time and ensure all ongoing investments are geared to take advantage as it is implemented.  

The power of data is already well acknowledged and leading energy players are already well and truly engaged in modernising their approach. With more accurate and granular data expected to be delivered by the CDR, there is an immediate opportunity to think about using it not just for uplifting analytics capabilities internally, but also to deliver new revenue streams. 

With draft CDR rules for the energy sector expected to be released soon, it is time to get ready if pursuing this option. Retailers should check their readiness by assessing all data and customer experience initiatives against proposed energy-specific rules. Review not just technology, but processes and policies in light of opportunities. This means thinking not just about protecting your patch, but expanding it. Potential initiatives to build a firmer base from which to innovate could include:

  • Creating a CDR response strategy 
  • Technology-proofing existing systems for a CDR future
  • Developing an open-API strategy 
  • Re-aligning data-sharing capabilities
  • Agreeing on cross-sector market strategies (and testing them)
  • Planning for partnerships with new market entrants (fintechs, energetechs)
  • Enhancing and bolstering clean energy agendas

3. Differentiate, innovate and disrupt

With further investment, retailers willing to think beyond the norm, and indeed, the sector, will be well placed to proactively address emerging CDR opportunities and seek first-mover advantage. This is where the most exciting opportunities are, and with defensive, focused innovation, businesses going down this road could explore the creation of ground-breaking products and models, intra- and inter-sector partnerships, multi-sector aggregation play, and customer/community-led idea incubation. 

It is also worth noting that the Australian energy market is at the juncture of a transformational clean energy shift and there will be numerous innovative use cases to explore. Cross-sector plays and opportunities for economy-wide initiatives will be too good for leading market players to pass up. Planning for bolder innovation involves out of the box thinking and disruptive use cases. Some potential ideas:

  • Subscription and energy-as-a-service in areas such as battery storage and heating, or bundled services like EV + home storage
  • Innovation of tariff structures using data from more detailed customer/household profiles
  • Appliance and equipment-level electricity monitoring to nudge customer behaviour (or bundle into insurance packages)
  • Cross-industry aggregation and bundling across industries such as banking, telco, healthcare, EV and security management
  • Carbon savings roadmaps to help small and large businesses manage their sustainability targets

Lighting up the future

It goes without saying that the way forward will be different for each retailer. While all will need to ensure that they have met the basic compliance requirements, which of the more proactive options best fit a particular retailer’s circumstances will need to be approached more strategically. 

What remains true is that with the influx of new data sets of greater granularity, accuracy and frequency, combined with changing customer expectations, an evolving regulatory landscape, and pressure from new entrants, the future of the sector is destined to change. Resisting such forces is not a viable option, but even more so, the opportunity to spearhead exciting new products and services should inspire transformation, rather than require it.

*Followed by telecommunications.

For more information on the challenges and opportunities facing the energy sector, visit PwC Australia’s Power & Utilities site.