June 4, 2016

Major changes in the energy industry. Is it about time?

Krister Koen

Marketing Manager, Tieto

The energy industry is entering a period of change with higher requirements and new rules of play.

For the past 20 years, Norwegian energy companies have largely gotten by without any noteworthy innovation. Now the whole industry is entering a period of change with higher requirements and new rules of play.

What challenges await them? Offhand I can think of the following:

  • Expectations of low power rates, high investment levels, and less support from the government will result in new and higher requirements for efficiency.
  • High average age in the industry and low attractiveness among the young may turn knowledge and skills into limited resources.
  • The market will be opening up over the next two years, and customers will be demanding new and improved solutions. The power companies must, therefore, turn more outward and focus on the end customers and customer satisfaction.
  • Advanced measuring and control systems, central data hubs for metering information and market processes, and central invoicing, as well as household batteries, will contribute to making the consumers more aware of their energy consumption, and this will give the end users more power than before.

Most energy companies tend to work the same way

Going forward it will be a time of increased restructuring. Corporate and functional barriers mean that the energy companies will have to focus on their core functions and work more efficiently on what they are best at. The industry needs standardized solutions to achieve streamlining. Then they all can take advantage of each other’s experiences.

Mergers and economies of scale are also natural themes that the many small energy companies should be thinking about. If several of them got together and worked toward a shared goal, it would have benefits both for the development of those companies and for the delivery to the end users.

Changes and insecurity can lead to something new and exciting

Most energy companies view restructuring as a challenge, not least because changes represent something uncertain, and therefore make them feel insecure. However, the uncertainty does not have to represent something negative; it could also represent something new and exciting. And to comply with the new requirements, the industry will have to change its attitudes.

It’s situations like the one we’re in now that give rise to innovation. Increased competition, limited resources, and increased requirements are all factors that tend to contribute to creating innovation. This is how it works:

  1. If a company operates without competition for too long, the rate of innovation plummets. Competition is healthy. It means that you can never slack off, but it also means that you can take advantage of the innovations of others. You can view it like a relationship whose spark is gone because each party has taken the other for granted. It can be hard to reignite that spark, but if you succeed it will be even better than ever.
  2. Innovation doesn’t just arise from big companies that have invested a lot in it. Quite the contrary. Innovation is about thinking anew, and if you have all kinds of resources available to invest in a new project, you don’t necessarily see the issue with fresh eyes. A company with limited resources, on the other hand, has to spend those limited resources appropriately and is forced to look at the issue in a somewhat different light. Boeing, for instance, created a separate team called “The Moonshine Shop” that was tasked with increasing efficiency in the company, all without a budget. The result? They succeeded beyond all expectations.
  3. Higher requirements can be a burden, but they also make it easier to think outside the box. Is it difficult to comply with new requirements when the company is working the same way as it’s always done? Look at the situation with fresh eyes and make the whole process subject to evaluation. It can be hard to break old habits and established routines, but such dependency on the old ways is one of the greatest threats to a company.

It’s time to take action to turn the changes into your advantage

Today there are technologies that can streamline how energy companies work, but they still remain untouched. Technologies such as cloud services, big data, the Internet of Things (IoT) and machine learning. It’s about time that the energy companies embraced technological development and saw the potential for streamlining.

The competitive situation has been easy for a long time, maybe for too long, and the energy companies have gotten by without new innovative solutions. But the world is developing, with our without today’s companies. If the industry is going to keep up with the best in the future, it has to take action now.

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