New PwC research shows the legacy model of the global energy utilities sector will be unrecognisable within a decade. With a huge amount of value up for grabs, Australia’s utilities need to reconfigure themselves around human needs, not historical advantage.
Australia’s energy utilities face a profound change that requires them to redefine themselves and the way they operate. New PwC global research demonstrates that, within a decade, the lines we use to classify global industries will bend and reshape beyond recognition.
The long-established value chains that fuel our world are evolving, as climate change forces a fundamental rethink—and technological innovations create new opportunities. Demand for conventional utilities services is set to plummet as smaller customers invest in their own generation and storage, and ‘super-users’ form direct purchasing agreements with generators. Long-term value won’t be created by efficiently providing energy but by delivering services that address human needs including how we make, build, feed, and fuel and power.
Energy utilities that evolve their business models to capitalise on these emerging ‘needs-centred domains’ will be perfectly poised to address a USD $2.47 trillion global market opportunity.
Figure 1: Energy utilities Value in Motion opportunity
A prime example: mass market energy retailers
For different players in the energy sector, entirely new forms of value are emerging. This applies across the energy value chain, from generators and networks to mass market retailers.
Let’s zoom in on the latter, to illustrate this. Retailers are currently creating value by supporting their customers’ energy transition goals: providing services to establish customer solar/battery systems, electric vehicle (EV) charging and demand management schemes.
The energy transition within Australian homes is well underway. Solar is already installed in more than 4 million1 of Australia’s 10.8 million2 homes. The federal government’s Cheaper Home Batteries Program aims to proliferate home batteries from 1 July 20253 and ‘community batteries’ will extend benefits to those for whom ownership is impractical or unaffordable4. Meanwhile, EVs are set to bolster available ‘edge of grid’ storage capacity with Australia forecast to have 300,000 ‘vehicle-to-grid’ capable EVs by 2030.5
This rise in ‘consumer energy resources’ (CER) presents a future where energy generated and stored in our streets exceeds demand. With little opportunity to derive value from mass-market energy sales, energy retailers will compete on price for the right to aggregate and control CER with ‘dollar-per-month’ offers that approach zero.
Which poses a kicker of a question: How can retailers create value and achieve profitable growth when mass market customers are investing to reduce consumption of their products?
Riding the fourth wave of innovation
It’s time for a rethink. Energy retailers need to enable human-centred services that cater to customers’ budgets and preferences. They can do this by generating a ‘fourth wave’ of innovation and differentiation that leverages the power of artificial intelligence (AI), connected appliances and consumer energy resources.
For energy retailers, this fourth wave forms part of a logical evolution:
- Wave 1 (2000s) price and product differentiation
- Wave 2 (2010s) service optimisation and bundling
- Wave 3 (2020s) energy transition
- Wave 4 (now) service integration
Wave 1 (2000s) price and product differentiation
New energy tariffs and competitive pricing enabled by retail contestability and digital metering.
Wave 2 (2010s) service optimisation and bundling
‘Multi-utility’ products made available from a single provider; with digital tools to manage accounts, monitor usage and pay bills.
Wave 3 (2020s) energy transition
Consumer energy resources and plug-in electric and hybrid vehicles coordinated to reduce bills and support decarbonisation goals.
Wave 4 (now) service integration
Services that use AI to meet human needs (e.g. e-mobility, health and security monitoring, cooling/heating, appliance replacement/upgrade and sustainability insights) considering budgets and behaviour, grid conditions and energy market prices.
Wave 4 manifests as new energy-dependent services that cater to peoples’ lifestyles. For example:
- A subscription-based EV service identified as an emerging acquisition option in PwC’s eReadiness Study, that bundles energy, insurance, roadside assistance and finance to address the human need for mobility.
- An individualised carbon footprint report with targeted improvement opportunities, addressing the need for social responsibility.
- A home temperature management service that bundles energy with reverse-cycle air conditioning.
- Services to coordinate customer’s energy resources ahead of anticipated energy demand and prevailing prices, enabled by intelligent Virtual Power Plants
A variety of these services can be packaged to offer customers certainty in the costs and outcomes in their energy needs.
Consumer protection can build trust
Utilities companies perform an important role in protecting more vulnerable consumers who don’t own a home or car and have older appliances. So, too, governments who support these customers with bill relief and rebates. Wave 4 presents an opportunity to use data to advise customers as to how they can optimise energy use, minimise bills and take advantage of available rebates.
All National Electricity Market customers are expected to be equipped with a smart meter by 2030.6 This will provide granular energy consumption data that can be used with AI to suggest behaviour changes and alternative tariffs. This could help customers save money or help identify inefficient equipment (e.g. lighting or a hot water service) that may be eligible for replacement with a government rebate. By playing their part in these solutions, energy utilities can support and build more trust with the Australian community.
New growth arising from Energy Democratisation and Digitisation
Beyond the ‘fourth wave’ of innovation, access to energy insights and the proliferation of CER will see the democratisation of energy; wherein citizen’s energy needs will be largely met at a community-level and utilities will create value by providing human-centred services which use that energy. In particular, they will add value by converting electrons into bits, addressing the growing need to connect and compute in data centres, places of work and homes.
Finding the answers within (and without)
Demand for needs-based services will blur the lines between industry sectors including transport, real estate, utilities, healthcare and retail—and that will require energy utilities companies to reinvent their business models. Along the way, they’ll need to rethink conventional notions of what energy retailers, networks and generators actually are and, who future competitors and partners might be.
To design and deliver such services, energy utilities leaders should investigate three crucial questions:
- How do we ensure we have differentiated capabilities (in-house or via partnerships/acquisitions) to enable these services?
- How can we offer services with simplicity, meeting customer lifestyle needs without complicating their lives?
- How do we protect vulnerable customers and establish trust to give all Australians confidence that we’ll deliver affordable and reliable needs-based services?
Addressing these questions will require energy utilities companies to transform how they create, deliver and capture value. If they succeed, they will no longer be defined by what they produce, but by the problems they solve for customers and society.
Value in Motion
See where the energy utilities sector is headed
