As 2023 draws to a close, energy providers know it’s been another pivotal year in the industry – and 2024 is expected to bring more challenges and opportunities. Continued cost increases, regulatory pressures and technological advances are affecting energy providers in regulated and deregulated markets alike. The results are greater competition and slimmer margins while simultaneously responding to customer demands for affordable, sustainable energy. Not to mention, energy providers are a crucial part of the energy transition movement that is taking hold globally.

That transition is not always straightforward, however, as a recent survey of 150 energy providers in the US and UK showed. This data, gathered by ESG, a leading software provider for energy companies, and Utility Dive’s studioID, confirmed that cost pressures and competition are the biggest challenges facing energy providers today. 

Yet survey respondents also recognize there are key benefits that come from implementing customer-centric, data-driven technology and data management capabilities. These capabilities include better integrated customer systems, meter data management systems, and next-generation billing or CIS. Survey respondents cited three leading benefits of adopting these innovations:

1. Analytics-based decision-making in a timely manner
2. Higher customer retention
3. Protection against rising costs

Bridging the gap between business pressures today and making strategic investments for the future    

Survey respondents reported that their C&I customers are taking steps to increase sustainability and move to greater renewables use, but upon closer inspection, there seems to be some “wish fulfillment” happening. For example, a surprising 73% of energy providers said their C&I customers use some form of solar or photovoltaic energy source, but that doesn’t necessarily correspond to observed conditions in the market, which is still hyper-focused on cost. “What do customers want first when it comes to energy? They want the lowest price,” says Young Kim, Principal with Energy Research Consulting Group.

In another survey response, while only 1% of survey respondents say they use AI or machine learning today to support internal business processes and analytics, 71% say they plan to implement AI/ML in the next 12-24 months — a very rapid technology adoption rate given the number of ongoing business imperatives these energy executives face. 

With energy consumers and executives both hoping to accelerate the adoption of advanced technology and sustainable energy — while still optimizing costs and profitability— what are some practical suggestions to get from where energy companies are today to being a next-generation energy leader tomorrow?

“We saw that 100% of survey respondents plan to increase their technology spend in the next budget cycle,” says Karen Tegan-Padir, Chief Product Officer with ESG. “It’s vital — and a great opportunity — that energy providers make these investments wisely and approach this process in a step-by-step yet strategic fashion.” She adds, “Energy providers shouldn’t let the sheer size or complexity of these investments deter them from getting started, nor should they think future mandates are so far in the distance that they can put off taking strategic steps today.”

As the saying goes, you have to crawl before you can walk, and that’s exactly the approach energy providers should take in the new year:

Step 1: Establish clear metrics that align with your business imperatives.

Defining and implementing a large-scale technology strategy can be overwhelming, so rather than feeling stuck confronting something so complex, start with the foundation. For example, identify how technology can help reduce your cost to serve or improve critical  operations around the customer experience:

• Select a technology platform that allows you to operate and grow amidst varying and complex market, regulatory and business rules. 
• Implement platforms that streamline billing processes and provide customers with the right bill at the right time.
• Ensure systems have a smooth customer engagement process by using digital events to communicate throughout the customer lifecycle.
• Utilize AI- and machine-learning-driven tools to segment your customers so you’re prepared to offer them relevant products.

By focusing on key goals such as a better customer experience or streamlined internal business operations, you can increase retention of high-value customers. At the same time, you’ll decrease churn and costs for customer acquisitions and renewals.

Stage 2: Offer innovative products to the right customers.

Having powerful analytics and data-driven customer segmentation enables energy providers to      offer relevant products to customers based on their specific needs. “This step appeals to providers in deregulated markets who are looking for ways to differentiate themselves, but this capability also matters for utilities, municipals and co-operatives thinking about resource constraints,” Tegan-Padir says. Energy providers with a strong technology foundation can offer innovative products that appeal to energy consumers, such as:

• Time-of-use plans so customers can take advantage of creative pricing.
• Load forecasting and energy efficiency information to drive choices around energy consumption.
• Carbon footprint analysis for customers interested in green energy options.

Greater operational efficiency will lower costs for providers and improve their margins while also building customer loyalty.

Step 3: Implement advanced technologies and solutions.

ESG’s survey results showed unequivocal interest in advanced technology such as AI and machine learning solutions. With a strong technology foundation in place, energy providers can expand into these advanced technologies to derive data-driven insights:

• AI-powered tools layered with machine learning algorithms can drive business decisions that improve profitability and operational success.
• Advanced analytics can identify customers who may be interested in behind-the-meter solutions such as solar panels or battery storage.
• By supporting analytics-based decision-making in a timely manner, these tools can set energy providers up for ongoing success in the future.

Step 4: Don’t go it alone in 2024.

Even starting at the first step may seem intimidating for energy providers, so they should find an expert partner in data management and technology. “Providers must focus on their core competencies rather than try to build platforms and systems themselves,” Tegan-Padir says.

Find the right technology partner who can assist in every step of the way. That will allow energy providers to focus on what they do best — serving their customers — and improve their market share and profitability.

Contact ESG about optimizing your CIS, billing and meter data management. Unlock customer insights with our new Customer Engagement Portal.