Energy transition is driving new models in the energy and utilities
Energy companies implementing a shift to new and sustainable energy models enjoy a 3% growth in customers, according to new research. However, three-quarters of firms do not currently use new energy models relating to clean energy.
While consumers can only play a small role in comparison to world leaders, or global businesses, consumer consciousness around climate issues has grown exponentially, and the public is determined to do its part. For example, fewer than one-in-ten customers now say they are not at all concerned about environmental sustainability when it comes to the products they engage with.
With customers pressuring businesses to make their products more sustainable, many companies might be dreading the costs and challenges this will incur – but they should also be aware this presents opportunities too. Recent studies suggest customers would even pay a premium for products that are more sustainable. For instance, one study found UK consumers would be willing to pay an average of 25% more for sustainable alternatives to their usual products.
As companies scramble to on-board new customers amid the first signs of economic recovery, this could be a key differentiator – especially among Gen Z and Millennial consumers. New analysis from Capgemini has backed this train of thought with regards to the utilities sector. The consultancy surveyed 530 senior executives from energy and utilities organisations in 2021, and found that firms shifting their energy models away from traditional fossil-fuel consumption were seeing a surge in demand.
Around the world, utilities firms which have implemented new-energy models have seen an average increase of 3.7% in customers. This was highest in Canada, where firms enjoyed a 5.6% boost, while the UK was more or less average at 3.6% growth, alongside Spain.
While the UK and Spain were far from being leaders in terms of attracting new customers, though, the market also showed how firms could thrive with new-energy models even if they didn’t rake in huge amounts of new support. Globally, Capgemini found that new-model firms achieved an increase of 6% in revenue due to new-energy models and expect a further 11% increase over the next three years. However, organisations in Spain came out ahead of this, having seen the greatest increase in revenue at 7.5%, while organisations in the UK anticipate outperforming the market in the future, with revenue set to increase by 12%.
In spite of this potential, many firms are still slow when it comes to adopting new models of energy production. Alternate fuels are at present the most popular line in use – with only 16% of utilities firms having no intent of deploying them, and the highest number of 37% having already done so. But other more rapidly profitable modes of production are still widely being overlooked.
According to Capgemini, renewable power facilities generate revenues within three years, leading to higher profits compared to fossil fuel plants which take nearly 10 years to construct with high variability in the fuel cost. This is partly behind Spain’s heightened profitability in utilities, with one example cited being Spanish electric utility Iberdrola’s renewables business. This boosted its net profit by over 270%, to €1.28bn during the first nine months of 2021. At present, only 24% of all energy firms have actually implemented clean energy models involving renewables though.
Peter King, Global Energy and Utilities Lead at Capgemini Invent, commented, “Energy transition is the driving force of the decade. Firms must begin by crafting organisation-wide strategies at scale to ensure the success of an energy transition program. There is also a blatant need for more pace and innovation. Just a third of organisations are operating an innovation function at scale to develop and test new models and industrialise results. It is time for players to adopt a fail-fast philosophy and forge new partnerships, both within and outside existing ecosystems.”
