October 1, 2015

How can energy companies benefit from the Internet of Things?

Timo Karpola

Head of New Energy Services, ICS, Tieto

The Internet of Things provides a huge opportunity for companies in the energy industry to reinvent themselves. But how can energy retailers and distributors utilise the overwhelming amount of available data to gain a competitive edge and retain customers?

Connections between physical devices and the Internet (collectively referred to as the Internet of Things or the IoT) have already started to reshape the energy business. New opportunities will arise through the Internet of Things for both energy retail companies and distributors—but what forms will these opportunities take?

In a series of two blog posts about the Internet of Things and the energy sector, we will look at the benefits to energy companies—for both retailers and distributors. This first blog post focuses on energy retailers.

PART 1: How can energy retailers benefit from the Internet of Things?

Energy retailers today face some of their biggest challenges yet: the competition for customers is extremely fierce. Both finding and retaining customers has become extremely difficult. Energy prices are at an all time low, slashing profit margins.

As a competitive edge cannot be found in selling energy, it must be found elsewhere. But what could the future hold in store for energy retailers? 

Many retailers are already considering innovative ways to develop their customer service both offline and online. This is, however, just the first step—and certainly not the full extent of the benefits of the Internet of Things. The real value of the Industrial Internet lies in its facilitation of new business models that increase revenue and profitability. The Industrial Internet, enabled by the Internet of Things, may help reinvent the energy business entirely.

In the future, there will not be energy retailers as we know them today. Rather than selling just energy, they will focus instead on superior customer experiences. In practise, this means that automated intelligence will analyse data and utilise it to improve the customer experience—this is the only clear way to gain a competitive edge.

Energy companies already have huge collections of data—intelligent home devices such as hubs, connected lights, thermostats, TVs and refrigerators are quickly becoming commodities. This means that a new kind of real time, precise and minute-to-minute data will be available soon—temperature, humidity, air conditioning status, who is home and when, what devices are being used and how much energy they consume.

But retailers must discover how to utilise and analyse this customer behaviour information to retain customers and improve profitability. Future energy retailers will thrive based on the new products, services and automated optimisation systems they will provide to end-users. These offerings will depend on data gathered from customers through intelligent devices. In the future, just retaining the vast customer data will be a key part of the business.

How can retailers benefit from the Internet of Things in practise? Here are two concrete examples:

  • Intelligent homes: Today, one can already buy a hub and attach lighting, stereos and refrigerators to the Internet, making these simple devices intelligent. But this is merely the start. Energy retailers could offer entirely new products as part of their services. Intelligent hubs can monitor energy consumption from all devices in real-time. All-inclusive mobile interfaces can function as remote controls for all the devices in their homes and summer cottages, permitting temperature adjustments and alarms to be set remotely.
  • Intelligent hubs would be especially beneficial at times of peak energy demand—such as Saturday nights in Finland, when the entire nation decides to take a sauna. At subzero temperatures, this energy consumption peak is enormous, making energy even more expensive. Accordingly, consumers could be automatically advised to take a sauna at another time to optimise their energy bill. The loss of such helpful services could make consumers think twice before switching to another retailer.

Simply put, the Internet of Things is poised to shake up energy retailers by helping them compete to improve the lives (and budgets) of consumers. Homes are rapidly becoming remarkably intelligent, as existing devices can be instantly transformed into intelligent hubs and firms like Google, Samsung, Sony and Cozify have begun to focus heavily on developing new intelligent devices.

As consumers use intelligent hubs and mobile apps, companies will simultaneously collect an enormous amount of data about consumers and their behaviour, enabling the optimisation, improvement and creation of countless new services.

In order to stay in business, energy retailers must take advantage of new business models and technologies. However, this is a win–win situation: the customer gets new services and the retailer gets extraordinarily abundant, accurate and detailed data.

The next blog post in this series will be published in October. In this post we will look into the even more expansive opportunities presented to energy distribution companies by the Internet of Things.

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