TALKING NEW ENERGY

Episode 8: Time-of-Use Optimisation - changing electricity tariffs

Jon Slowe, Director, Delta-ee

Charlotte Blou Sand, Founder and CEO, True Energy

Simon Schmitz, Founder and CEO, aWATTar,

Charmaine Coutinho, Head of Consultancy, Delta-ee

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We’ll be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

In this episode we’re looking at time of use electricity tariffs. In most markets residential customers are used to paying a fixed rate for electricity, regardless of when they use it. The varying costs of expensive and cheaper times are smoothed out for them by their electricity supplier, that’s now in the early stages of starting to change across Europe. In some Scandinavian countries hourly tariffs have been available for some time, in other countries they’re just emerging and in some places they’re still a while away but with smart meters, connectivity and electrification of transport and heat developing fast, we’re now seeing more and more tariffs where prices change every hour. I’m delighted to be joined today by two people who are at the leading edge of this change, helping to enable a more flexible electricity system. My first guest is Charlotte Blou Sand, founder and CEO of True Energy in Denmark. Hello Charlotte.

Charlotte: [01.23] Hello Jon, thank you very much for inviting me.

Jon: [01.25] Thanks for joining us. So Charlotte, can you tell us in a nutshell what are you offering customers in Denmark or if I'm in Denmark what can I buy from True Energy?

Charlotte: [01.36] Yeah True Energy is an electricity supplier and we sell electricity at hourly rates. What makes us different from other suppliers is that we have developed an app that integrates to electrical vehicles. And through the app we smart charge the car, meaning that we will automatically charge the car during the hours of the night where electricity is cheapest or during the hours where the production of electricity has the lowest carbon emission. And we are also working on integrating to chargers and heat pumps and freezers and also household appliances. So we will be able to automatically optimise their energy consumption through our easy to use app.

Jon: [02.24] And how long have you been doing this Charlotte. How long has True Energy been about?

Charlotte: [02.29] Just for one year.

Jon: [02.31] And what brought you into this area or what's your background?

Charlotte: [02.37] Yeah our background is from software development. We want to apply the knowledge that we have from that business to optimisation and user behaviour in the electricity industry.

Jon: [02:50] Okay. Let's now introduce my second guest, Simon Schmitz from aWATTar in Austria. Simon, what can I buy from aWATTar if I'm in Austria?

Simon: [03:05] Yeah hi, we also offer a sort of dynamic hourly tariff that basically passes on the hour prices from the spot market to the end customer which has been a completely new concept in Austria when we started in, back in 2015, and we're now also rolling this out to Germany and it's still a totally new concept there as well. So we are trying to really push the envelope in enabling the demand side flexibility in that sense and we are also offering different kinds of services to help customers automate the load shifting and we're partnering with quite a few hardware manufacturers to achieve this.

Jon: [03:57] Okay, and you've been at this a bit longer than Charlotte but what's your background and what brought you into this area?

Simon: [04:06] I was actually working for a big energy supplier in the UK and Germany before I founded aWATTar and it just became apparent there that, you know, there was a big problem with renewable energy storage. It was really being recognised that the big suppliers, especially the power generation side of the big suppliers, didn't really seem to have an interest in, you know, enabling the customers to be part of the solution. And yeah that was sort of at least part of the inspiration to start our own energy supplier.

Jon: [04:40] Great, so you decided you might as well do it yourself.

Simon: [04.45] Yes.

Jon: [04.50] Great. Now my third guest, welcome back to Charmaine Coutinho, a regular, someone who's been joining a number of these podcasts, a colleague here at Delta. Hello Charmaine.

Charmaine: [05.02] Hi Jon.

Jon: [05.04] Charmaine, can you help us with a couple of points to, subtle points but important points about this topic. First of all the difference between a static time of use tariff and a dynamic time of use tariff, subtle but important difference.

Charmaine: [05:23] Yeah, yeah for sure. It is very subtle but very important, so a static time of use tariff is where you’ll have different rates for your kilowatt hour, for your energy, across the day but they’re fixed periods so you may have two or three periods across a day where the pricing is different. And sometimes that changes between the weekday and the weekend. But mostly it's two or three a day. And that's that profile it’s called is set and the pricing is agreed in advance and the customer is very familiar with that. So some countries call it peak off peak it's very present in most countries to have kind of two or three rates in the day. And that's very much kind of a very simple static version, so it doesn't change every day.

Jon: [06.07] So essentially the expensive times are always at the same time of the day and the cheap times are always at the same time of the day.

Charmaine: [06:14] Exactly, which is why you might get a bit of difference between the weekday and a weekend because of the cost of power generation typically changes across the week. So it actually changes across a day, which is, and that's where dynamic time of use tariffs come in. So that's when there's many more time periods across the day where the price will change. So rather than having two or three you might have 24 or 48 and that's really quite new to the market. It's based on, it could be every 15 minutes or every half an hour or as the guys have said before every 60 minutes. And those are the key kind of key differences.

Jon: [06:51] Okay. So static is, has been around for a long time but dynamic is newer. Second point, the difference between settling on actual load profiles as opposed to settling on standard low profiles. Now this may sound a bit like electricity industry gobbledygook to some, it's an important distinction so without this turning into a course on electricity low profiles can you summarise why, what this is and why it's an important issue for dynamic time of use tariffs.

Charmaine: [07:27] Sure, so if we talk about settling its simply when a supplier, an energy supplier, buys enough energy, in this case electricity, to provide for the amount that their customers have used and they have to do that every 15, 30 or 60 minutes depending on what electricity market they are. So at the moment most of those are based on assumed daily pattern and that's what's referred to as a profile. So there are a number of different profiles that customers use but it's all assumed and estimated.

Jon: [07:53] Okay, so every residential customer or every type of residential customer would just assume to use energy at a certain, a certain amount of energy at certain times.

Charmaine: [08:03] Exactly and then the energy supply can measure that on a daily basis at the moment and they scale the volume up and down and then multiply it by the number of customers they have. And that gives them the amount of power that they need to buy. And so when Simon talked about the generation that's an important input because obviously in reality what's going into the system is very different based on the half to half hour basis. So that's what kind of settling on standard low profiles means, when you actually get into actual usage and this is where smart meters really come in, you can measure how much is being used every 15 minutes or 30 minutes or 60 minutes and be, you can buy and provide pricing for electricity on a much more accurate smaller time period.

Jon: [08:47] Okay. And this is new in most markets to be able to buy an electricity supply basically buying what customers actually use every half hour, hour. That's not common today is that right?

Charmaine: [09:02] Yeah it's not common today, I think the real enabler of this has been the rollout of the ability to see what energy is being used every half hour or hour and that's really down to smart metering.

Jon: [09:13] Okay. So maybe that's one reason why we haven't seen so many time of use tariffs but as the market moves more from settling on standard low profiles to settling on what customers actually use every hour or half hour then we see a lot more time of use, dynamic time of use tariffs.

Charmaine: [09.34] Yeah precisely.

Jon: [09:36] Okay. Now it's quite easy for us in the energy sector I think to get very excited about time of use tariffs and forget that most people have got better things to do with their lives other than worry about switching things on and off every hour in response to changing prices. So Simon and Charlotte what's your views and experience on this do customers care and how do you engage them and how do you make this easy for them. Simon let's start with you.

Simon: [10:06] Yeah well maybe to start with a kind of a positive example of the few people who are actually very excited about this and we do have some customers that charge their Tesla only in the windiest times and also the windiest days and we can see really staggering savings that they can make. But they definitely are the minority and the majority of customers simply expect that when they plug in their car or they run their heating system at home that basically the device sorts out the timing by itself and it's really a quite a key to success in this area. And we've been taking the approach of taking a modular approach of very simple help that we can give people to just have a price API so we actually publish our prices the day before in the internet they can be read there and basically read by different kinds of energy management systems, totally open. And we also then go certain steps further with actually offerings of optimisation sort of APIs and in the end we also cooperate simply with manufacturers who are taking this job on by themselves for example a charging cable that would automatically find the right hours to charge in when the customer just puts in the number of hours they want to charge and when they want to leave again. That really makes a difference.

Jon: [11:50] Yeah, so there's some geeks out there who will look every day at the prices but most customers want this automated and that's what you're enabling them to do. Charlotte, how about your experiences, is your experience in Denmark similar or different to Simon?

Charlotte: [12:10] Yeah it's kind of similar. I know the geeks that you're talking about Simon but basically we believe that it has to be automatic. So our app will every afternoon receive updated prices of electricity and forecasts of carbon emission. And the app also automatically fetches information about the battery level and the charging capacity of the vehicle. And of course the user can set his preferences in the app, so when does the car need to be ready in the morning. And then the app does the rest, it calculates a charging plan and it carries out the charging automatically by starting and stopping it in order to place the hours of charging during periods with the cheapest electricity or the lowest carbon emission. […] It has to be super easy and convenient for the user, otherwise it won't work in a busy everyday life.

Jon: [13:09] And that, the way you've both described it sounds to me as a putting myself in as a customer, quite a simple and clear proposition. How hard is this to actually do though, to automate that response, because I guess that's where the real smart aspect of what you're doing is, is to put the price signal out there and to automatically have the car charge or the heat pump run during those cheaper hours. Simon has that been straightforward or has it been hard to do?

Simon: [13:48] Well I definitely say that it's hard, you know if it wasn't hard maybe someone would have done it already very elegantly but it's I mean these things are starting to emerge but the, I guess the challenges I see and that we've also been through, one is with hardware compatibility so that, you know, you have to somehow get the signal when to charge onto the ground and some, the end, some hardware has to be able to understand that signal. So for example not all old wall boxes today are even connected to the internet. And then you may have to go through other things like gateways and so on. And then the other challenge I see is them not just the breadth of different types of manufacturers and so on but also the breadth of different kinds of scenarios and conditions that the customer is in. One simple example is that you know the kind of wall box optimisation of one of our partners works really well. As long as there isn't a PV panel also to be taken into account as soon as you add the PV panel you know things get a bit more tricky and the decisions that are taken don't always ring true. So these are the kind of things one has to grapple with.

Jon: [15:12] Okay so and how is that something you were able to do today so could you optimise or help a customer optimise differently or for if they've got a PV panel and electric vehicle compared to one with just an electric vehicle.

Simon: [15:27] Yeah so I mean we're just working on integrating you know the kind of PV energy management systems with also the with the sort of smart pricing system. I mean some of our partners have already found some reasonably good solutions to that. And I think these things will be offered soon on the market but at the moment we're not fully ready with that. Also to integrate you know batteries with the cars and with the heat pumps, if a customer has more than one device you know it is a bit tricky.

Jon: [16:02] It will get complex quite quickly here. Charlotte, what's your experience been of trying to automate if we assume automation is necessary for most customers. What's your experience of being, of trying to get this automation running smoothly with different electric vehicles for example.

Charlotte: [16:23] Yeah the concept is quite simple but in reality it's quite a lot more complicated. First of all because all the car brands are different so it’s a lot of work actually to be able to communicate with each car and get access to relevant data. And when we continue with integration to heat pumps and freezers that’s going multiply this challenge. And secondly people behave differently so we have to implement all kind of rules and exceptions into the app, for instance, yeah, what if, if you have to charge right now even though it's the most expense hours or what if several people use the same car but have different preferences.

Jon: [17:09] Okay, so when you start to get into this it quickly becomes more complex than it might seem initially. Charlotte presumably you've got to, if every car manufacturer’s different does that mean you've got to have commercial arrangements with every car manufacturer or you've got to have bilateral discussions and agreements with all the different manufacturers?

Charlotte: [17:36] There are various ways, so some of them we have discussions with and others […] but it depends it's more like a case by case position.

Jon: [17:48] Okay, Charmaine let's come back for a look across Europe. So this concept of automating the customer's EV charging or heat pumps or whatever in response to the time of use tariff. We've got quite a lot of examples of time of use tariffs across Europe but how common is automation of EV charging or electric heating with the time of use tariff?

Charmaine: [18:18] Yeah, I would say at the moment it's not very common and I think you can see from the kind of examples and experience that Charlotte and Simon have just described why that's the case. It's really very difficult to integrate multiple bits of hardware as well as the, having the right software that has to go through multiple gates or stages and to actually to get this automation. So when time of use tariffs first came on even, you know, static time of use tariffs they provide very specific signal to the customer, it's more expensive here, it's less expensive now but the automation we've discussed a bit seems to be the key thing to making these tariffs work. And I think it's really hard to do that really. It's, there’s so many multiple things that are changing. We're talking about early adopters now. But what happens when behavioural preferences change if it goes to the mass market. So it's really, really, really very complicated. I would say that at the same time, so away from time of use tariffs specifically, the level of automation and machine learning and artificial intelligence that's going on in the energy sector is rising. So those capabilities are coming in from both external to energy and within energy. But in other areas of energy as well. So that will help.

Jon: [19:29] Yeah. It strikes me that this is two companies and we’ve had others on the podcast as well which are as much software companies, Charlotte that's your background, as they are energy companies.

Charmaine: [19:41] Oh yeah. I mean it's interesting that Charlotte is from a software background and Simon’s from an energy background. Two key skills but then yeah let's not forget about the hardware, right.

Jon: [19:50] Yeah. I want to ask a quick question, Charlotte and Simon, about risks. So the risk of expensive and cheaper times has been warned by electricity suppliers before. For customers it's great to have cheaper hours but the con of that is they have more expensive hours. So do you see that as a, is that something customers are worried about or what's your experience been about the more expensive hours when they happen and how happy or unhappy customers are with that. Charlotte you want to share your views on that first?

Charlotte: [20:27] Yeah I think an important point is that we have to admit that due to the system of taxes and network charges, the final price for the individual consumer, is not that different from one hour to the other. So that's why we focus as much on saving carbon emissions, saving money when we communicated our app and smart charge.

Jon: [20.50] And what's the interest from customers in carbon or money in your experience, are you getting a split some focused more on the money some focus more on the carbon?

Charlotte: [21:01] The good news is that very often low prices also mean low carbon emissions because when the wind is blowing and the sun is shining then electricity production costs are cheap and so are carbon emissions. So that's good news. But when people have to pay our traiff, at the moment we see like 50/50 percent split on our taxing […].

Jon: [21:26] Okay interesting. Simon, what about you, what about this issue of risk and expense hours as well as cheaper hours.

Simon: [21:34] Yeah I mean we've gone through a sort of a spell of a very cold winter in 2017 with some nuclear plants in France sort of basically not running properly and so on so we had a difficult January then and the spot prices went up a lot. And we actually started thinking a little bit more about the risks too after that. And so we introduced a new tariff which is not just called hourly like the classical spot tariff but hourly cap. And so that price actually fixes a kind of general price level for the calendar year and if you manage to get a better price than the standard low profile would on that day you get a bonus. It's more like, it's kind of a different concept but we do see quite a good take up of that especially also among the heat pumps because of the winter issue. And also the people who have a solar panel quite like it because they normally consume from the grid during the winter and yeah they, you know, basically was quite happy to have this risk issue solved. On the other hand they can then not use the negative prices so it's kind of a trade-off.

Jon: [22.54] Okay, so you're allowing different customers to take different amount of risk. And if I guess some customers might be put off by, attracted by cheap hours but very worried about expensive hours and you're helping manage that not worry for them.

Simon: [23.08] Exactly.

Jon: [23:10] So we've talked about where you're at what you've learned, it's a fascinating topic. Let's now move and look forwards and as always bring out the Talking New Energy crystal ball. So I've got two energy, two questions for my guests in the next years looking ahead at the next years. First question, do you think dynamic automated tariffs will be the norm in five years’ time. So are you both pioneers that the wider industry will follow and second, what are your top, what's your top challenge or your top challenges for the next years ahead. Charlotte, shall we start with you.

Charlotte: [23:55] Yes, well we see electricity consumption will increase during the coming years due to increased numbers of electrical vehicles, heat pumps etc and at the same time people get more aware of the climate crisis so we are certain that these two trends mean that consumers will pay more attention to prices and look for an easy and automatic ways to optimise their own electricity consumption. So we expect to see more...

Jon: [24.24] And your biggest challenge?

Charlotte: [24.29] The one is the lack of […] standards, where as it is now […] many cases to be carried out one by one and that is time consuming and expensive.

Jon: [24:44] Charlotte, do you think those standards will come or do you think you'll have to keep going one by one manufacturer by manufacturer.

Charlotte: [24:54] I think it might come but not in the very close future, there's too much competition going on between the car producers and other producers. But one day it’s going to come and then there’s going to be some kind of integration tools.

Jon: [25:15] Okay. Simon how about you. Will what you're doing become the norm in five years’ time and what's your biggest challenge?

Simon: [25:24] I think it will become somewhat the norm. I mean it's really one of the things holding it back apart from the lack of willingness on some big players is really the infrastructure so that we need the smart meters, we need the settling on actual profiles. That's always a bit slow. Even though we've solved it in Austria and we are seeing competitors move now in this direction so I think it just makes sense and it will happen but there is also another variant where basically the customer still has a fixed price but the energy time of consumption is optimised in the background. And maybe you can then offer slightly cheaper fixed rates. We don't necessarily prefer that because the customer is not so engaged but I think that will be a variant that we’ll also have.

Jon: [26:10] And your biggest challenge?

Simon: [26:14] I think I mean the challenges are basically for us a lot because we are also one of the first, you know, to do this is. It’s about communication and communication of benefits also for the environment so solving this storage problem, you know, why does a dynamic tariff solve that. It shifts consumption to the times when it's very windy and sunny you otherwise have to throw away the energy. But many customers don't understand that yet. And I think the second challenge would be to make sure we can roll this out to more countries and to reach a good scale and because you know the target audience is probably not the whole electricity market in each market. But yeah, those are the challenges.

Jon: [27:02] Okay. And Charmaine your view looking ahead. Are we going to see these sort of models popping up everywhere in the next years do you think?

Charmaine: [27:11] I think that they’ll be much more normal than they are now. Certainly you know there are elements of the customers and end users that will benefit and like to use them because they'll be engaged but I do think and the two challenges are one around kind of getting people to understand what it really means, so that level of engagement in energy vocabulary even very basic energy vocabulary which some people don't have or you know aren't interested in which is fair enough. And I think the second piece is to make all these work it needs a lot of personalisation for users and that level of personalisation we've not really seen, or we've only just begun to see it in the energy market and I think that's a big technical challenge really.

Jon: [27:52] Okay. So I think you all agreed that we're going to see a lot more of this in the next years but it's been fascinating to hear about the learnings and the successes but also the challenges that you're having to overcome. So, thank you to all my guests, Charlotte thank you very much.

Charlotte: [28.12] Thank you Jon.

Jon: [28.14] And Simon thanks for joining.

Simon: [28:17] Thanks very much for having us.

Jon: [28.19] And Charmaine thanks as always for sharing your expert view on the topic.

Charmaine: [28.25] Thanks John.

Jon: [28.26] And thank you to our listeners. Now this is the last episode of our first series but if you've enjoyed the first service don't worry we're only taking a two week break and then we'll be back with series two on the 10th of June. So thanks for listening and look forward to welcoming you back in a couple of weeks. Goodbye.

Episode 7: How is the energy transition unfolding? Digitalisation, a shift in value, and the battle for the customer relationship

Jon Slowe, Director, Delta-ee

Andy Bradley, Director, Delta-ee

Charmaine Coutinho, Head of Consultancy, Delta-ee

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

Today we’ll be talking about how the energy transition is unfolding across Europe, what’s going on in different parts of the energy sector? Are companies charging full steam ahead or being dragged along? And frankly, do customers care? What’s in it for them? To answer these big questions, I’m joined by two of my colleagues here at Delta-ee, who are working with companies across Europe on their journey from old energy to new energy. First, hello Charmaine and welcome back to the podcast.

Charmaine: [00.52] Hi Jon, very nice to be back here.

Jon: [00.55] Charmaine, can you just remind our listeners as to your background, where you’ve been before you came to Delta.

Charmaine: [01.03] Yeah of course, so before I came to Delta, I’ve been at Delta for about two years now, I worked for a small challenger UK supplier and it specialised in renewables but before that I worked in product development for a PV company based in the UK but servicing clients internationally.

Jon: [01.20] Great, thanks Charmaine, and my second guest is Andy Bradley, hello Andy.

Andy: [01.25] Hi Jon.

Jon: [01.26] Andy, I’m being slightly cheeky here but you’ve got a bit of a different background to Charmaine haven’t you?

Andy: [01.31] I have got a bit of a different background yes indeed. I’ve just recently realised that I’ve spent over 30 years in the energy sector, the first 20 of which were in the old energy world, so really in the sort of, mainly, in the downstream oil and gas industry and for about the last ten years I’ve been in the new energy world which is the opportunity that I got when I joined Delta in 2010.

Jon: [01.53] So, a nice mix of perspectives and we’re all passionate I think, even you Andy now, about the transition to new energy but to look at the questions as to how its unfolding across Europe and to guide our enthusiasm and passion, lets focus the discussion a bit. Now we had a bit of a debate about whether to focus it around technology, and if we’d done that we might have been talking about smart homes, heating, electric vehicles, storage perhaps but actually we’re going to structure it around three themes that cut across technology and are more fundamental about the transition to new energy. So we’ll take one theme each and my theme is the shift in value towards the timing of demand rather than only the quantity of demand, so really a shift from how much you use to when you use it, so that’s mine. Charmaine, what’s yours?

Charmaine: [02.56] So mine is around the impact of digitalisation and I think everyone can recognise how much that’s happening across all of our lives, but specifically for energy, what opportunities it is enabling in this new energy world.

Jon: [03.09] Ok, so very topical theme for you which cuts across not just energy but as you say, all sectors. And Andy, your theme?

Andy: [03.17] My theme Jon is the battle for the customer relationship, so really thinking about who, which types of company are going to be successful in building, sticking, engaged customer relationships.

Jon: [03.29] Ok, so, who will we be buying our energy or our services or our mobility from?

Andy: [03.37] Indeed.

Jon: [03.38] Ok, so, we’re going to take these one by one and spend a bit of time talking about each trend. So, the first one is the shift in value from timing to quantity of demand. Now, the couple of drivers around this. The first one is the cost of electricity, the marginal cost of electricity, is moving towards zero or to become very low. So what, the best example of that is a wind turbine, once you’ve built it, there’s really no extra cost to generate electricity, bar a little bit of maintenance. Whereas with a gas powerplant there’s always a cost of the gas to produce your electricity. So we’re moving to a future when the marginal cost of electricity production will be close to zero. Secondly, that’s, we’re going to see much greater challenges in balancing the electricity system, so making sure supply and demand are always matched and a lot greater opportunities to use demand side resources to do this. So, those are the big factors and in terms of what’s going on, Charmaine, what do you, would you say the train has left the station with this change from shift to timing to quantity yet, are we just thinking about this or are starting to see this gather pace and interest and activity?

Charmaine: [05.11] So it’s interesting that you said that there’s more opportunity on the demand side, cause I think potentially that opportunity has always been there and there’s just more of it now and I wonder whether that opportunity, and this comes from doing some work on the PV side, there’s huge, kind of, change in how people think about their energy as well, so if the marginal costs of and profit along energy changes that significantly, where are companies going to make their money and actually people have gone towards thinking about the times where it’s most expensive to generate or consume it, so the peak times, the peak times of demand and what happens if we focused time and resources on that and that peak demand just moves somewhere else, I don’t know if that’s something that you’ve been thinking about as you thought about this section of the podcast?

Jon: [06.05] I think you’re right to a degree that that opportunity has always been there, but the way I think about it there are three big ways to shift demand about, one would be shift electric heating and cooling, the second would be to shift when an electric vehicle is charged and the third probably to use a stationary battery to shift production or use of electricity around. And maybe we’ve always had electric heating and cooling but we haven’t had so much of the other two.

Charmaine: [06.42] Yeah, I mean that’s, it’s really interesting, what would, if you had to rank those three Jon, what would be the one, the topic that’s most interesting at the moment?

Jon: [06.51] The one we’re probably most interested about, I would say is the electric vehicles, but actually if you look at the amount of demand that can be shifted then electric heating in some countries is absolutely enormous and that’s where we’re already seeing at the residential scale activity emerging at quite some scale so in France over a hundred thousand homes are having their electric heating interrupted for the benefit of the electricity system, whereas electric vehicles, a lot of interest, and I think it will be big or bigger in the future but obviously not there yet in terms of how many electric vehicles there are.

Andy: [07.36] Jon, I certainly see this as one of the big needs of the energy system and the transition that its going through. But I think the economics is still quite challenging when you look at the cost of battery storage for example. You know, in Austin many cases that the economics are marginal for, in many applications I think still. Costs will come down for sure but increasingly as more flexibility comes onto the demand side, the drivers of the return from investments for example in storage, which high peak pricing will start to soften and so the, they’re not risks that actually some of these flexible solutions will end up being perhaps a cure for the high utility in the energy system and almost cannibalise their own market.

Jon: [08.26] So if you have a huge amount of flexibility, you’ll have no volatility.

Andy: [08.29] Absolutely.

Jon: [08.32] I guess you might say that would be a nice problem to have. It depends on the volume of flexibility doesn’t it, so, at the moment…

Charmaine: [08.41] I mean it does…

Jon: [08.42] Yeah, what do you think Charmaine?

Charmaine: [08.44] Oh no, I was just going to say that precise point presents the challenge that we see in this market, right. How do you develop a long term business case for your service provision in order to service need for flexibility? I think that’s a very key question at the moment.

Andy: [09.00] There was one of the horizon 20/20 projects last year I went to an event, I cant remember the name of the project sorry, but it was a study in Scandinavia looking at the profiles for low energy houses, so passive houses, and one of the conclusions from the study was that a low energy house is not a low power house. So, while you can reduce the energy consumption, the kilowatt hours consumed by a property, actually the kilowatt required, the maximum kilowatt required by that property might still be quite significant, particularly if you have an EV.

Jon: [09.35] Yeah, so I guess that emphasises the shift from kilowatt hours to kilowatt, and that type of house.

Andy: [09.42] Well it throws up, sort of throws up the challenge for the system, the need to produce or develop a capacity in the system to develop, deliver that peak kilowatt required.

Jon: [09.53] Well I think as you say Andy, there’s a long way to go in terms of the price signals around that and therefore you might say well if there’s a long way to go in the price signals there won’t be that much market activity yet. But on the flipside we are seeing some price signals, and where we see them, a huge amount of activity. So if I come back to those questions, I think energy companies across Europe are splashing the cash on acquisitions, they’re developing inhouse activity on aggregators, virtual powerplants built in their own platforms, so I would say the train has definitely left the station here but it’s still early days, but it’s going to gather and gather pace.

Charmaine: [10.33] Yeah I would agree with that Jon and the interest I imagine this conversation gets from inhouse trading teams must be huge, so yeah, fascinating to hear those conversations and see what people are actually doing.

Jon: [10.48] And we haven’t talked about the customer at all, shame on us.

Andy: [10.52] That’s coming.

Jon: [10.55] Ok let’s, so that was our first thing, the shift in value from quantity to timing or kilowatt hours to kilowatt as Andy put it. Let’s move to the second theme which is digitalisation and that’s your, the one you picked Charmaine isn’t it.

Charmaine: [11.11] Yeah, it’s interesting what we’ve just talked about because I think digitalisation is an enabler, well even a prerequisite, for some of the things that we were just talking about. So if you think about the energy sector, and its fairly common for people to talk about it as being old fashioned or old energy, so we even use that phrase ourselves. I think the key point here is that, it was very much analogue, so a lot of the knowledge that we had about the system may have been based on assumptions or estimations of how much power is being generated or how much power is being used, and I think things have changed externally across wider social changes. So hardware and software are much more sophisticated and people often forget about hardware so I think it’s important to note that, but because energy was so analogue, all these digitalisation across the rest of our lives have had a much bigger impact on the energy sector, and I think the best example for me is the transition that we’ve gone from in terms of thermostats, so a thermostat which you can use to manage the temperature of your heating system in your house, used to be a white plastic box on the wall which people may or may not really payed attention to. If you think about smart thermostats, they’re much easier for people to engage with, they’re capturing all this amazing data and most of them are starting to use that data to intelligently inform other bits of your energy usage in your home.

Jon: [12.32] And Charmaine, we look at smart thermostats as an example, the three, three of the biggest manufacturers or companies are tado°, who we’ve had on the podcast, Quby, owned by Eneco, who we’ve had as well and Nest. These three are all effectively relatively recent start-ups, they didn’t exist ten years ago, so is this opportunity, do you think it’s being captured by new entrants or can it only be captured by the energy sector, and if so, are they really engaging in digital as they should do you think?

Charmaine: [13.11] I mean I think the start-ups have an advantage here, at the moment, so maybe for the last ten years they’ve had an advantage in so far as they’re in theory more nimble, so they can react to changes, they can deploy software and software processes so the use of kind of agile development processes much more quickly and easily than a large energy company may have done in the past. Now I definitely think that’s changing, so even the use of the phrase agile in terms of product development within large energy companies is changing quickly, so whether that will last long term, you know, start-ups, they still have to get the money to fund their developments from somewhere and in theory energy suppliers have both the people and the capital to do that but more importantly, large energy companies have the customers in which to test this on and I think start-ups need to get customers so getting that cut through to reach the end consumer in order to capture this data is really important for refining their product. So yeah, they may have, start-ups will have definitely had the head start but I’m not sure whether they will continue to have that.

Jon: [14.19] Well I’ll give you one anecdote, I was talking to someone at an incumbent electricity retailer, I wont say which country, and we were trying to do a skype call, and the person I was speaking to got frustrated because their IT system couldn’t handle skype and said, “ah we’ve been told we’re meant to be a tech company and we can’t even get skype for business working”. So, from what I see the challenges for incumbents are pretty significant to try and do this bit by bit. Andy I don’t know what you think.

Andy: [14.53] Yeah I think it’s a really interesting question this actually, the degree to which being an incumbent is an advantage or disadvantage. I think many of the energy suppliers, the traditional suppliers in the market, traditional players, obviously have well-known brands, they have large numbers of customers, whether they have customer relationships or not perhaps a slightly different question, but they have big customer bases and they have a very advantage position to develop additional added value services to those customers. But they have, also have huge legacy IT systems that aren’t fit for purpose and you know we’ve all heard industry stories and companies struggling to reinvent and reengineer those internal processes and those billing machines and those marketing operations and it is proved very, very difficult for incumbents.

Jon: [15.45] Yeah, whereas if you’re a tech company coming into the space, and we see more and more companies new entrants that I think describe themselves as tech companies, and they are, they’ve got developers, great CTOs, they’re developing new systems themselves.

Andy: [16.01] Absolutely. One of the trends…

Charmaine: [16.03] I mean I think there’s, sorry go ahead Andy.

Andy: [16.06] One of the trends we identified Jon I think a few weeks ago in one of the blogs we wrote, we talked about how we saw sort of a B to C model developing internationally so perhaps in home markets where developers have a strong customer basis and a relationship with those customers, they can develop their own connectivity based propositions with those customers directly but outside of their core market, perhaps a region of a country or perhaps a whole country market. They may shift to a sort of a white labelling or B to B to C approach, but it will enable some of these suppliers perhaps to internationalise their business in a way that they’ve never previously even thought about.

Jon: [16.50] Yeah, without having to grow a brand.

Andy: [16.52] Without having to grow a brand, so you know the strength of their brand and the home market they can leave at that with their existing customers but then monetise the investments they’ve made perhaps in new technology based solutions in other markers by working with partners so I think we’ll see a very, a changing dynamic I think in future.

Jon: [17.11] So Charmaine, has the train left the station, is it zooming along the tracks?

Charmaine: [17.17] Oh yeah, I think the train has definitely, definitely left this station. I think, just to bring you back to the customer, the consumer experience is digitalisation of their life in so many other aspects, from utilities to more kind of maybe more fun services that they get so the expectations are really driving how a customer expects utilities to behave, so yeah, I think it’s gone, I think it’s still a challenge in how you incorporate it into a legacy organisation, if that’s what you’re doing, but yeah, well on the way there.

Jon: [17.51] Great and Charmaine you did what I failed to do which was talk about the customer so well done. Ok, third theme, last but not least, Andy.

Andy: [18.04] Ok, so thank you Jon, the battle for the customer relationship. I mentioned earlier on about my long history in the energy sector and I’ve been at Delta about ten years and actually just saying that reminded me when I joined Delta one of the things I heard, quite often I think in my first years here was that expression that utilities don’t have customers they have meters, and it’s interesting, actually I haven’t heard anyone say that for the last years and there’s been a big change already in the energy sector I think for the traditional incumbent suppliers to move beyond the meter and actually develop those relationships with customers. And many of them have done it quite successfully I think, there’s still you know a lot of activity and work going on there but the industry’s moved a long way I think in the last few years.

Jon: [18.46] So who are they battling against then and what are they battling for if they’re getting those, starting to get those better relationships, what’s this battle?

Andy: [18.53] Well they’ve started to make progress with it but I think within the energy sector what you’re seeing is really a break down within the traditional sort of compartmentalised energy systems, so you know, the transport sector is starting to converge with the generation sector, the heat sector which has always been traditionally sort of isolated is starting to become much more electrified and connected with the energy sector so you’re starting to see this convergence within the energy sector but I think crucially also seeing a breaking down of barriers with other industry verticals so the automotive sector for the first time perhaps is thinking about doing more than just selling a car to a customer. The telco sector in some markets, telco is already retail energy, home services generally I think is becoming a much more active and dynamic space, so there are different industry verticals I think starting to compete for these customer relationships.

Jon: [19.51] My favourite example I think is Volkswagen, and its on the topical EV topic, but Volkswagen subsidy Elli being established to sell not only EVs but energy and energy related services to customers and at the same time we see some energy companies trying to sell EVs to customers. So as a customer will I buy things separately, will I buy the package from my automotive company or will I buy it from my energy company, maybe that’s quite a yeah, interesting question that we can all ask ourselves. What would we do?

Andy: [20.30] Yeah absolutely, so I think you see many different types of company now starting to try and create new types of relationships and you know again its part of a wider trend in our economy I think actually away from products towards solutions and services, you know we see that obviously, really clearly I think in the energy space, you know, all of the energy companies now see that the future is really services and not commodity but I think generally across most industries actually business models and an interaction with customers is moving towards almost a subscription basis for everything. You get mobility as a service, you get furniture as a service, you get almost look at any industry sector I think and see as a service type propositions starting to be developed, you know, a whole area of property tech, prop tech seems to be a word I see, you know, becoming more and more frequently used and I think that’s a convergence area with the energy sector, so I think this battle for the customer relationship is starting to become very complex, multifaceted, different types of company, you know, which is creating obviously huge challenges for the incumbents because they have a lot to lose but also I think huge opportunities to work out the types of partnerships and collaboration which actually can add value to your own customer base.

Jon: [21.46] So lets come back to the train analogy Andy, if the train being in the station is it the battle is really yet to start or the train zooming down the tracks means that this battle is well underway and is really fierce, where are we?

Andy: [22.01] I think with this one the train is still firmly at the platform for me because I think fundamentally, you know what, a lot of customers still don’t care and I think until customers really care about something the engagement is always going to be a struggle and, you know, that’s why I think E-Mobility is really interesting in the energy space because the electric vehicles are a better car and actually when the price point drops further and they become, you know, more financially viable perhaps for more customers, actually customers I believe will want one of these as their next car because it’s a better product and I think if you get that type of engagement then you’re pushing an open door and the companies that can maximise that will, I think, have an advantage in terms of getting those sticking customer relationships, until you get that kind of pull from the customer I think it’s quite challenging, ok so train in the station, Charmaine your train was off down the tracks already.

Charmaine: [22.58] Yeah, long gone.

Jon: [22.59] Long gone, and my train I think was just starting to pull away from the station. So yeah, three big changes that are in various different stages of development across the energy sector. Thanks both Charmaine and Andy for sharing your thoughts in this stepping back and looking at the energy sector, thank you to listeners for joining. This is episode seven of the first series, so we have one more episode next week, that’ll be episode eight, and then we’re taking a two week break and we’ll be back in June, so thanks for listening and speak to you next week. Good bye.

Episode 6: The Business of Being an Aggregator

Jon Slowe, Director, Delta-ee

Alastair Martin, Founder and Chief Strategy Officer, Flexitricity

Jan Aengenvoort, Senior Chief Communications Officer, Next Kraftwerke

Pieter-Jan Mermans, Co-founder and co-CEO, Centrica Business Solutions and REstore

Philippa Hardy, Principal Analyst / Flexibility Research Service Manager, Delta-ee

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

In this episode we’re looking at the business of being an aggregator. We’re at a tipping point in how electricity systems are balanced. Traditionally supply and demand have been matched by turning large power plants up and down, with the occasional very large industrial customer, like a steel works, containing its demand to help balance the system. But over the last ten years we’ve seen a new breed of businesses called aggregators bringing together hundreds and even thousands of distributed assets to help the electricity systems stay balanced. Today I’m joined by three aggregators that have played key roles in developing this new and emerging market and our resident expert on the topic here at Delta-ee, Philippa Hardy. So, lets introduce our first guest, Alastair Martin, who’s founder and chief strategy officer at Flexitricity. Hello Alastair and can you give us a few facts and figures and a brief introduction to Flexitricity.

Alastair: [1.23] Certainly, hello. So Flexitricity was born as a company in 2004, operationally live since 2008, we’re a 24/7 demand response business, we’ve got a control room in Edinburgh, we’ve delivered over ten thousand demand response events, mainly to national grids in the GB market, we’re operating around 400 megawatts of customer connected assets ranging from flexible industrial load to combined heat and power generators to standby generation to merchant developments like energy storage large batteries and we’ve been in the business over ten and a half years operationally and in that time we’ve discovered a huge diversity of requirement for demand response and a huge diversity of interest in it from the customer side.

Jon: [2.15] And Alastair, those 400 megawatts, across roughly how many customers are we talking, tens, hundreds, thousands?

Alastair: [2.22] So individual customer sites, in terms of active, real, live connected customer sites operating with us its about a hundred and fifty.

Jon: [2.31] Ok, ok, thanks very much. My second guest is Jan Aengenvoort, chief communications officer at Next Kraftwerke joining us from Cologne. Hello Jan, welcome and can you give us a brief pen portrait of Next Kraftwerke.

Jan: [2.53] Hi Jon, thanks for having me, yeah Next Kraftwerke is a company, is a virtual powerplant that was founded in 2009, initially by two PhD students that met at university and today we are at around hundred fifty people working for us and we have aggregated seven thousand megabytes of mostly generation over the last couple of years. They all come from decentralised assets like solar, wind, but especially dispatchable renewable assets, hydro, biogas and in the last couple of months and years also, couple of electrolysers, batteries, classic demand response customers as well, water pumps etc. So we have a pretty, pretty diverse portfolio of decentralised assets which we use to deliver balance and reserves to several European TSOs in four countries with a prequalified pool of around one thousand five megabytes and the non-dispatchable assets we are, like solar and wind especially, we forecast on an intradaily basis and trade the generated power on different European spot markets, and we as well are the balancing responsible party for those power generators.

Jon: [4.17] And Jan, you mentioned four markets, Germany your initial market, the other three markets?

Jan: [4.22] I mean, there were four markets where we are control reserve party basically where we deliver control reserve to European TSOs, this is Germany, this is Belgium, the Netherlands and Austria. We are also active in Poland and France and Italy but, and Switzerland and we are only traders there, so we don’t have a prequalified pool of, yeah, of decentralised assets there to deliver control reserve to TSOs.

Jon: [4.49] Ok thanks very much. Our third guest is Pieter-Jan Mermans, also co-founder and co-CEO of REstore, which is now part of Centrica Business Solutions. Pieter-Jan, welcome and can you give us a brief introduction to REstore please?

Pieter-Jan: [5.10] Yes Jon, thanks for having us. So REstore was founded in 2011, today we have about 1.5 gigawatts of reliable TSR capacity under management and we have, over the past years, established the TSRs techniques in around ten TSO areas.

Jon: [5.34] Ok.

Pieter-Jan: [5.35] So that’s obviously UK and Belgium and have then further extended in Holland, Germany and France, in Europe, and more recently we have added Japan and the United States to the business and in the US that’s specifically [Kyso, Urcup and PJM].

Jon: [5.54] Ok.

Pieter-Jan: [5.56] Our portfolio is about couple of hundreds of CNI consumers maybe and therefore historically we have mainly focused on fixable capacity from pure demand on top of fixable capacity from battery so that’s really a clear, our sweet spot. And last but not least, we have, today, around 40 granted patents in both United States, Asia and Europe.

Jon: [6.28] Ok, and can you remind me the date which you were acquired by Centrica?

Pieter-Jan: [6.36] Yes, so we were acquired late 2017 by Centrica, and that is Centrica Business Solutions more specifically which is the digital and solutions part of the business to be distinguished from the commodities side.

Jon: [6.55] Ok, thanks Pieter-Jan, just on ownership, Alastair, Flexitricity is also part of an energy company if I remember right?

Alastair: [7.05] That’s right, so we’re wholly owned by Alpiq which European energy market watchers will know as the major Swiss utility with a presence in quite a few European economies.

Jon: [7.18] Thanks and Jan your Next Kraftwerke has a number of investors that are still independent, you’re not wholly owned by anyone, is that right?

Jan: [7.29] That’s correct, yes.

Jon: [7.31] Ok, but you count some energy providers amongst your investors. Ok so thanks for the introductions, and three fascinating businesses, looking forward to talking more about what you’re doing, what you’ve learnt and where you’re going. Before that my last but not least, introducing Philippa Hardy, or Pip as you’re known to many people. Pip you’re looking across Europe at this market, how wide spread is the business of aggregation? We’ve got three companies here on the podcast, are we talking several tens, hundreds, thousands of aggregators.

Philippa: [8.09] Hi Jon, thanks for the introduction, we, I mean you’ve heard from one of the very earliest aggregators that established the market in the three we’ve got here today on the show and I think the earliest date we heard there was 2004 so really since, over the last what 15, maybe 20 years aggregators have started the businesses and today aggregators across Europe, we’re looking at around 60, 70, some are more concentrated in certain counties where the markets have been more established for a longer time, for example UK, Germany, France and a number of other Western European markets.

Jon: [8.47] Ok, so a lot of companies active in the space. If we think of the traditional hockey stick curve of growth, where are we on that hockey stick curve in the business of aggregation do you think, are we, have we hit an inflection point yet, are we miles from it, are we past it?

Philippa: [9.08] I think the guys on the line would agree as well, I think we’re still in a really early stage of the market, there’s been significant developments in terms of the businesses, you know, starting from start-ups and really gaining traction in this market, there’s been a lot of changes in business models and so much has happened and so much development is still happening, but I would say we’re still at a really early point in this market when you compare it to the retail model for example, so energy suppliers, those business models have been going on for as long as you can remember so in comparison it’s a relatively immature market still.

Jon: [9.44] Ok so maybe we’ll see, in a minute, if Alastair, Jan and Pieter-Jan agree with you on that. Last introductory question, can you help us to break down the key elements of an aggregator business? What are the, what essentially are the three, four different things that they do?

Philippa: [10.04] Sure, yeah. Hopefully the three people on the line will agree but it probably helpful for us, audience as well given that an aggregator business will be pretty new to everyone, so to make it really, really simple, on one side we have assets, so whether its generation or consuming assets, these are typically aggregated so bought together by an aggregator company, most of which develop their own hardware and software to bring together these assets into a pool that can be traded in a flexible way. So the aggregator will typically find the customer and have that customer relationship, then install the hardware, they’ll use their own software and ultimately they’ll monetise, so make money, out of the flexibility and share that back with the customer. So lots of different parties involved and lots of different interactions going on that they have to manage.

Jon: [10.53] Ok, so a lot to being an aggregator but you could break that down into part of the business based around customers, part of the business are based around aggregating those assets on a platform and part of that business being based around the monetising that the interface between those assets and the electricity markets.

Philippa: [11.11] Yeah, exactly.

Jon: [11.14] So using these three elements as customers platform and electricity market interface, lets come back to the three aggregators, and what I’d like you to do is pick one of those three elements that you consider the most challenging to get right, or looking back over the years where you’ve been helping to create this market, which one of those three elements have you learnt the most lessons in? So asking you, I guess, to share a bit of your secret sauce with us. Lets start with Pieter-Jan from REstore stroke Centrica, Centrica Business Solutions. Pieter-Jan how, of those three elements what have you learnt or what’s the hardest part of that business?

Pieter-Jan: [11.57] Yeah, I think that platform is one of the three elements, and one of the lessons learnt for us is that quite early on we have started to invest a lot in the platform, in the software as such but also in the methods behind the software that we have started to patent. And I must say that certainly between 2010 and 2015 there was a lot of criticism on that among starters from the VC community which initially saw the sector as a sector of intermediaries, aggregators have a simple intermediary between consumers and transmission system operators. However, over the past couple of years with the decentral energy landscape exploding and the complexity of decentralisation people have started to recognise that electro properties, really one of the key drivers.

Jon: [13.08] Ok, so the criticism was around you just being an intermediary but your argument is that it actually, it’s a lot of sophisticated technology to bring together these assets and coordinate them in the right way. Does that mean you would view yourself as a technology business or a software business, or, how would you describe your business in terms of software, hardware, customer brand, traders?

Pieter-Jan: [13.38] Yeah, that’s a good question. I think definitely we have, a big part of our team is our software developers and so-called quants which are PhDs in physics or in mathematics, and who work on the optimisation algorithms so that’s definitely a big chunk of the business where a lot of values created, that’s right.

Jon: [14.02] Ok, Jan lets look at Next Kraftwerke now, in terms of those three elements, customers, platforms and interface with electricity markets, tell us a bit about your experience and where you see the biggest challenges, or where you’re proudest of your biggest achievements.

Jan: [14.24] Yeah, I think it’s a very interesting question because, I mean, when we set out to establish an aggregator business, a virtual powerplant, we were very focused in the beginning, of course, to find a solution to technology issues, I mean, how do you build this platform to optimise thousands of decentralised assets with real life data, every five minutes for example, or even on a live basis. So, and then the other question was what will the, you know, what will the customers say, will they give us in a way, some kind of power over their assets so that we can optimise and steer them, you know, from control, from Cologne, from our central control system from our headquarters. But interestingly enough, I mean, when I now look back at the last eight or nine years since we really went operational, you know, the platform side of things and the asset side of things is something that you can steadily work on, you can improve it, you know, day by day, you work on it, you hire the right people, you solve the equation but you know the other thing, the markets and the monetisation side of things is something that’s prone to very sudden change, so, especially in flexibility markets, so you cannot really trust that the business model that you had last year and which generated a lot of profits will keep on being exactly the same next year and so you have to adapt your business model all the time in a suddenly changing environment, especially then again with the regulatory framework that also is something that new business models, like aggregators, are known to basically so if you go to another country and establish a business model there you sometimes have to wait a little and to see how markets and regulations will evolve and if they will let you enter the market basically.

Jon: [16.13] So Jan, effectively you’re saying the technology and the customers, you have to get right but you have an element of control over that. The monetisation of that flexibility is less within your control because that’s down to the market structures and regulations, so, yeah, how do you manage that because your revenue then, your costs and your customer base is fairly fixed, but your revenue is quite uncertain I guess.

Jan: [16.48] Yeah I think one thing that we’ve learnt, definitely, is what, that you need something what we call flexible flexibility, sounds like a pun but there was something deeper behind it so you have aggregated this, you know, a couple of hundred, a couple of thousands of megabytes of flexible, of dispatch let’s say, and now what you’re going to do with it, and now you have those changing conditions that I mentioned earlier, sudden changes, and so you have to find a way that you, that your organisation and your traders, and also your platform itself will be able to dispatch that flexibility to different markets where it is most valuable at the moment, under the given circumstances, and for, this is what we mean with flexible flexibility. Another thing is, so, I mean, to put it into a nutshell if, you know, if prices on control reserve markets for negative secondary reserves are collapsing or whatever, you will find a new way in intraday trading, in optimising schedules for intraday delivery and spot markets for example. Another thing is…

Jon: [17.47] So you’ve got to stay pretty nimble then and you’ve got to be able to respond to those changes. I’ll come back to that in a minute, lets turn to Alastair at Flexitricity. Alastair, customers, platforms, interface of electricity markets, challenges and achievements, what would you highlight?

Alastair: [18.09] Yeah I would a hundred percent agree with Jan’s several comments there, the phrase flexible flexibility is a key one for the future going forward. I probably would, sort of trying to cut between the two different descriptions the importance of platforms there between Jan and Pieter-Jan. It’s probably true to say that you will see in the market the full spectrum of high tech and low tech, it is possible that it has been done I believe to start a demand response business with a telephone, and its not a nice way to do it and I don’t recommend it but it’s been done. Another company started something a bit like a demand response business by moving a caravan onto a site and living in it. So you know there are lots of low tech ways that this has been done, none of them are nice and so you do have to move into the technically competent platform pretty soon and you’re going to, you’re never going to stop improving that and yes you have to be adaptable to regulatory changes, that means your platform has to be as well, but there are two things that are, I would say are more important than that. One of them is an aspect of platforms and that’s about settlement, when your TSO or your DSO pays you for a service that you’ve delivered, using a number of customer assets, how do you actually work out what all of those customers are due to be paid? That turns out to be a phenomenally complex puzzle that you have to work out for every minute of every day and the creation of a system or that aspect of the platform that works that out is mandatory and it is quite easy for a company to choke on a project like that, so that’s crucial. But the other side of it, which is your first point, is customers, if you don’t understand the customer sites, and every customer site is different, they will not stay with you. If you can’t tell the difference between a data centre and a tomato farmer and a water treatment works then your customers are not going to stick with you, so customer interaction, getting that understanding right and teaching your system to behave in the appropriate way for each customer type, that to me, is the most important aspect of success.

Jon: [20.27] Because on one hand the proposition for the customer is really nice, you’re going to give them some money or share some value for them, in theory, without interrupting their business or their operations. But on the other hand there’s a lot of trust involved there, effectively you’re saying, let us as an aggregator despatch, influence, run, turn on, turn off certain assets and in return for that, well give you a bit more money.

Alastair: [21.00] I think that, sorry Jon, I think that’s crucial and I think that you have to embed that within your operational culture, within the 24/7 controls room and so forth, but you also have to be able to teach your platform how to distinguish between the needs of different sites. If you have a district heating site that is at risk of heat dumping then that site doesn’t want to participate today and your system needs to know that and opt it out. These things are site specific and you have to catch them.

Jon: [21.28] Yeah, ok, and you’ve all got large numbers of customers and megawatts, even gigawatts on your platform so that needs to be automated I guess. Would any of you like to comment on automation and how much of this, once you’ve got the customer load connected, is manual or are we talking a hundred percent automation now?

Pieter-Jan [21.50] Yeah Jon, I’d like to step in here, it is Pieter-Jan speaking, there is one element here on the interface between what Jan said then Alastair which is interesting. Both on the understanding of verticals of different industries within CNI consumers as well as there is quite some possibility on asset reserves this market. So what we have found out is that there are a lot of economies of scale of growing internationally because many of these issues are fixed cost related i.e. you have to invest to obtain a certain level of knowhow into the steel industry, into the chemical industry when you’re talking about CNI sites. But also regulation, yes it’s a bit different from UK versus Germany versus France but yes there is also a lot of commonalities, and so one of the ways forward for us has been to grow that geographic scope.

Jon: [22.04] Yep, ok so if you understand a sector, if you broadly understand how to interface with the markets then you can scale that internationally. Let’s look now in the last part of the discussion about where this industry’s going. So bringing out the Talking New Energy crystal ball as we always do at this time in the podcast. I’m interested in how you think about what type of companies you’ll become and, I guess, Alastair and Pieter-Jan, you’re already part of a traditional energy company, do you think that aggregators will continue to exist as standalone businesses, or will aggregation just become a function of every energy company in the future, what do your futures look like? Let’s start with Jan from Next Kraftwerke.

Jan: [24.02] Yeah, it’s also a very interesting question and I think, I mean basically, my answer is yes and yes. I think both will be there. We will still see independent aggregators, either in niches, basically, where you have a small but highly complicated, lets say, customer base that needs to be, or that wants to be, aggregated and needs access to market and where, you know, an independent aggregator that is very focused on that customer group is perfect. On the other hand and especially in liberalised energy markets because as we are all talking from a vantage point of liberalised energy markets we see a lot of liberalised and small, independent aggregators in Europe. But we have also, you know, taken the road to other continents now and look outside of Europe and we will of course see that not all markets are liberalised and sometimes even the role of an aggregator is not something that is possible, mainly, of an independent aggregator in other market structures. So it will become a function of most energy companies and utilities I’m very sure in liberalised markers but also in non-liberalised markets and why? Because, I mean, all utilities have the same problem, how to deal with the variety of solar and wind in terms of forecasting, trading, balancing, whatever, and the VPP is just a technical solution, an aggregator is just a technical solution to that question, one solution, there will be others of course to go along, and that regardless of the good level that we are talking about, is it DSO level TSO level, both need flexibility. So I think in some instances independent aggregators will take over the role of balancing the fluctuations, in other instances utilities will do that. So this is one reason why we for example have also seen that we will not probably not become an independent aggregator in all of the countries of the world so we also, you know, become a software and services providers and give our platforms basically to utilities, license out our platform to utilities that want to build up their own virtual powerplant.

Jon: [26.10] Ok, so you’ll have, you’ve got a foot in both camps, a foot of being an aggregator and a foot of helping utilities become an aggregator.

Jan: [26.17] I think so, yeah.

Jon: [26.19] Pieter-Jan from well originally REstore, now Centrica Business Solutions, now I’m guessing you might think this will be a function of every energy company rather than independent aggregators but share your thoughts with us.

Pieter-Jan: [26.35] Yes, so, obviously we have made a choice by the end of 2017 in joining Centrica Business Solutions and one of the main arguments behind the choice, was that we think that there’s going to be this tendency towards creating a one stop shop across different types of digital energy solutions to, for example, CNI consumers. And one specific example there is, the conversions of the battery world and the demand side response world were, we think that industrial consumers, after a couple of years of discovering a niche, increasingly now want to talk to parties that offer a slightly bigger portfolio of services. So that’s one element, the second element is that we start to see these days a lot of utilities as well as large oil companies making acquisitions in this space, with, for example, Shell buying Limejump recently and Shell buying Sonnen and etc. etc. There are other examples too, so there is quite a lot of movement in the sector, but that’s not to say that, a successful independent VC backed, venture capital backed or private equity backed growth company cannot be, no longer be successful on the contrary, so I think we will have a landscape of different types of players in the near future.

Jon: [28.17] Ok, thanks very much and last but not least, Alastair, your views, independent, part of utilities or energy companies or a mix of both?

Alastair: [28.28] Well every time I look at the large suppliers active in the UK, I ask myself when there’s going to be core activity in demand response, and the answer sometimes they’re going to go in and out and obviously Centrica buying REstore has essentially said well somebody’s already doing it, we’ll have that. The large energy companies developing and involvement in this space themselves have done very poorly, I can only think of one example where its worked, where they inhouse developed their own aggregation outfit and they did that by essentially tracing a little village within that company that they essentially labelled as a separate demand response outfit, that worked for a while, while they were doing it. Otherwise I think its probably true that aggregators inside large utilities probably still see themselves, in many ways, like independent business units, and that is necessary because one of the features of this is that you have to avoid competing with your own customers. It is essential, in order to represent those customers megawatts into the power markets, that you’re representing those customers megawatts and not your own megawatts. So this is crucial to everybody. On the one stop shop side I think that there are certainly some customers who want that approach, there are other customers who want nothing of it and what you’ll find there is there will be a spread of style of demand response participation that reaches all the way from, I’m going to get it all in one place to I’m a sophisticated customer, I’m going to make my own choices about each individual element. And finally what we’ll see, we’re still seeing, is little start-ups appearing and some of them gaining traction, they’re addressing very specific element of the package. There’s an interesting move, very recently in domestic scale frequency response that’s come into the market, none of the people on call were involved in that particular venture and you know every time you take your eye off this someone else will pop up with a new idea, so there is, it is absolutely not the end of small start-ups coming up with new ideas.

Jon: [30.45] So coming back, well before I come back to you Pip, I guess one comment there Alastair to pick up on is that, it depends in a way what customers want and who customers want to deal with to some degree. Pip, your characterisation was that we’ve still got a long way to go to in terms of the sector developing, its emerged, we’ve got three sizable companies on the call, they’re established, been doing business for several years. When you look in the crystal ball, what do you see in the next years Pip, what, do you want to pick out one or two.

Philippa: [31.18] Yeah, sure. I think Alastair’s last comment on there’s more start-ups, you know, we’re seeing them all the time, that’s precisely what our research shows us as well, we’re constantly learning about new players, this market is extremely dynamic and there’s start-ups popping up left, right and centre. A few other things I can see from our research is that it’s not just people new start-ups but there’s lots of movement within the current, existing companies, so we’re seeing partnerships, whether informal or formal, lots of investments, like a lot of investments, especially with oil and gas companies, energy companies, yeah, venture capitals etc. and acquisition as well, and I typically see four types of companies and I think these exist today, and they’ll probably exist in the future as well, so we have energy utilities, or energy suppliers, their either doing it themselves, and as Alastair mentioned, probably not as well as aggregators, but they’re also buying aggregators so that they can have this function. Energy service companies are becoming more interested, so we’ve seen some buying aggregators, some partnering and some new start-ups being like a new energy services or energy management company offering software. Others trying to be technology providers, so offering software as a service, so they don’t want to be aggregators they just want to provide the technology to whoever wants it, and then last but not least aggregators. So at the moment I see all four, some are more nascent than others and I think that space is just going to keep blossoming, more people are going to be coming out, there’s going to keep being much more movement within that as well.

Jon: [32.53] Ok, so lots more to see in the sector then, I think we’re past the tipping point of this being a distinct sector in the energy market, it certainly is, and lots more action and development over the next years, and we haven’t even touched on the topic of demand response from residential customers today or only very briefly, so thank you to my three guests, thank you Alastair, thanks Jan, thanks Pieter-Jan, thank you to Pip and thank you for listening. We look forward to seeing you, or talking to you on the next episode. Good bye.

Episode 5: Smart Thermostats - What business models and opportunities are companies pursuing?

Jon Slowe, Director, Delta-ee

Christian Deilmann, CPO, tado°

Wicher de Groot, CCO, Quby

Matti Kahola, Senior Analyst, Delta-ee

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

In this episode we’re looking at the topic of smart thermostats. Google paid 3.2 billion dollars for Nest some five years ago, catapulting smart thermostats into the limelight. Since then, hundreds of millions of Euros has been spent growing and acquiring smart thermostat businesses here in Europe. So where have smart thermostats got to and where are they headed? What business models and opportunities are companies pursuing? And are they products or service businesses? Smart home or new energy businesses? Or indeed all of these? In this episode we’ll hear from tado° and Quby, two of Europe’s leading smart thermostat businesses, together with Delta’s expert in this area, Matti Kahola. So, hello to everyone, hello Christian, welcome to the podcast. And Christian, where are you joining us from today?

Christian: [1.17] Yeah, hi, thank you very much for the invitation. I’m joining here from Munich in Germany.

Jon: [1.23] Great and hello to my second guest, Wicher from Quby. Wicher how about you, where are you based?

Wicher: [1.31] Hi Jon, thanks for having me, I’m based in Amsterdam.

Jon: [1.35] Great, nice to have you on the podcast. And last but not least, sitting next to me here in our Edinburgh office, hello Matti.

Matti: [1.41] Hi everyone, good to be on the discussion.

Jon: [1.44] So, thanks to my guests, and lets get into the discussion on smart thermostats. Matti lets start with some simple questions I hope. First of all, how do we define a smart thermostat, what is a smart thermostat?

Matti: [2.01] So, smart thermostats are effectively internet connected heating controls that replace your existing central heating controls. So typically they offer the user the ability to more conveniently control and schedule their heating, typically using a mobile app, mobile phone app, anywhere where they are and this is effectively, kind of, the minimum functionality of a smart thermostat, of course then there are loads of additional smart features that can vary quite a bit by the different smart thermostat and the, what the manufacturers offer.

Jon: [2.33] Ok, and where’s the market at today? Are there hundreds of thousands, millions, tens of millions of these being sold and installed across Europe?

Matti: [2.42] We’re still in the millions range but today around the end of 2018 we estimate that there’s around five million households with some form of start heating controls, primarily smart thermostats. And if you look at the number of households that installed smart thermostats in 2018, that’s around 1.5 million, so still very big growth in that area.

Jon: [3.05] Ok so established but still quite some way to go in terms of penetration into European households.

Matti: [3.12] Yeah, that’s a good summary and if you want to get a bit of sense of scale, there’s around similar amount of 1.5 million gas boilers installed every year in the UK, so still loads of room for growth.

Jon: [3.23] Ok, and the biggest players in this market? Or are there a few that stand out? Is it very fragmented?

Matti: [3.30] Yeah, it’s fairly fragmented. I think there’s, kind of, three different types of big players. So first of all there’s energy suppliers, so there’s Centrica with Hive and Eneco affiliated with Quby and then there are several different start-ups, one of them you mentioned is Nest, which is owned by Google, but then also local players like Netatmo from France and tado° in Germany. And then of course the big giants from the heating industry like Bosch or Honeywell.

Jon: [3.57] Ok so some companies that you could almost classify as smart thermostat companies, a few leaders in this space, which we have two on the podcast today. But then a lot of other types of companies coming from different directions.

Matti: [4.12] Yes definitely, and there’s some other companies in other verticals like connected TRVs that would, we should probably mention like EQ3 is very big in Germany. But overall I think there’s, a handful of the companies I mentioned probably make up 80 percent of the market all together.

Jon: [4.25] Ok, well that gives us a good picture overview of the smart thermostat market. Christian, turning to you, you’re a founder at tado°, if I’m right, and still manging director or still driving the company forward.

Christian: [4.45] Yes, absolutely.

Jon: [4.47] And can you help us understand, what’s your customer proposition as a homeowner, as a household, what can tado° do for me?

Christian: [5.01] Yeah, absolutely. Maybe I start a little bit from the beginning. So we founded the company in 2011 because we saw that around 30 percent of the world’s energy is used for heating and cooling of buildings. We know that when we connect all these heating, air conditioning systems to the internet through a smart thermostat, these households can save up to 31 percent on their energy consumption while also increasing comfort and convenience at home and this is why we have founded the company and this is also why we strongly believe that soon any building will be heated and cooled intelligently and we offer basically three stacks of products. On one hand, the smart thermostats which connect to any heating or air-conditioning system from any manufacturer also on a digital and modulating level. The second stack is our apps, and our third stack is our data driven services, so boiler and energy-based services.

Jon: [6.11] And as a customer what, roughly, give me a feel for what the cost or price of this to the customer is, how much as a customer do I need to pay for this?

Christian: [6.24] So a starter kit to connect your heating system at home, around 200 Euro or Pound.

Jon: [6.32] Ok and are customers generally buying this directly from tado° or are you going to market through other channels or combinations?

Christian: [6.43] Basically, so its around 50/50, so 50 percent we do direct to consumer, where retailers like Amazon or special retailers in the DIY stores in multiple countries, so all across Europe. And, so the other 50 percent of our sales, we do together with energy companies where we bring bundles into the market.

Jon: [7.11] Ok that’s interesting to see that 50/50 split. And an idea about key facts and figures, how many have you sold, how many are you selling, revenues, can you give us an idea of the scale of your business.

Christian: [7.28] Yeah, so we have a couple hundred thousand homes which are using tado° on a daily or weekly basis and over the last years we have been growing our business hundred percent, over a hundred percent, year over year, around 200 people now, mainly be it out of Munich but we also have offices in other European countries and in order to build the company we have raised more than a hundred million US dollars in venture funding.

Jon: [8.01] Great, thanks very much, that gives us an excellent feel for tado°. Wicher can you tell us a bit about your position at Quby and in a nutshell as a customer what Quby could do for me as a householder?

Wicher: [8.18] Yes, of course. Well first of all as a customer you can work with our products at home on a daily basis. We also have more than 400 thousand households using our products and its mainly the smart thermostat, well in the Netherlands its known as Toon and in Belgium with Engie its known as Box in other countries, in Germany and in Spain it’s also known as Toon so we have notable brands so people listening to the podcast may not know Quby but they certainly know those brands. Yeah, first of all, it’s, our product is not only about heating, so we have a little bit wider scope, we really focus on transformation of [unintelligible] model and for instance the energy inside the business and the services you can drive from that is really core of our public, so it’s not only about heating but also about comfort and also about insides in what you can do as a home owner to improve, yeah, your energy footprint.

Jon: [9.19] Oh ok, and in terms of your focus of Netherlands, you mentioned Belgium, Germany, other markets. How much has come from the Netherlands, which is your core market, and how much of your activity is now beyond that?

Wicher: [9.38] Well I think it’s interesting to see that different countries have different speeds in their liberalisation and also the market is a little bit different everywhere so I think its clear that our core market, the Netherlands, is the biggest one because Eneco also invested heavily to work with us in bringing this to market, we’ve bundled products also with commodity contracts and then other countries we see even a steeper growth with Engie so yes the base in the Netherlands is the biggest but the growth we see in other countries and also the business model for the German market seems also very promising.

Jon: [10.16] And Christian how does that compare with tado° in terms of Germany being your home market, in terms of activity in Germany and other markets?

Christian: [10.27] Yeah, so, Germany is our home turf, that’s where we come from, so it’s still our largest market, so roughly 25 percent we do here and the German speaking countries, another 25 percent in the UK and then the rest splits across multiple, mainly European countries.

Jon: [10.51] Great ok, so both very much international businesses today. Wicher just coming back to your route to market, you mentioned going to market with your parent company Eneco in the Netherlands. Is your model always to go with a utility channel company to get to customers or are you ever going direct?

Wicher: [11.16] Well we always look for a good partner to go to market, yes, so yes we are also in retail but [unintelligible] our partners and that’s, I need to emphasize that not only utility partners, so we for instance also work with an insurance company in the Netherlands to bring other products to the market as well, so we find different channels, but mainly those are utility channels because our model is not about, you know, making margin and business on the products themselves, but more helping our customers to transform and that’s why our core capabilities is and we believe that our platform can grow in a good way in this manner, not only by going to the market ourselves because this also means a lot for your, go to market and your branding for instance.

Jon: [12.02] Ok and you mentioned there being a platform, or having a platform, that’s an earlier, broader than smart, broader than heating controls. Christian do you view your product as being a platform in a similar way or do you view it a bit differently?

Christian: [12.21] So we call it intelligent climate management, so we really help our users to enjoy an affordable climatised home with all aspects attached with it, attached to it out of one hand, so it’s maybe an analogy can come from the mobility space where in the past people bought a car, had to insure it, they had to repair it from time to time, they changed the wires from it twice per year and so on, and now many people go to a mobility service and pay per minute of driving, and the similar thing we’re trying to achieve in heating to really deliver warm room out of one hand, and we do this direct to consumers, but also, very important, so similar to what Wicher says as well, is that we help energy companies to transform into this direction, so moving away from being a commodity provider to really be an energy service provider and being able to offer warm room, so heat or cooling as a service.

Jon: [13.35] Ok so moving towards heat as a service. Matti lets come back to you now, so you’ve got a nice position of looking across the market and talking and working with various companies active, or looking to be active, in this area, when you look across that what do you see as the big issues, the big challenges, what’s on the energy industry’s mind and heating industry’s mind at the moment with smart thermostats?

Matti: [14.04] I think what I hear is actually quite well reflected by what Wicher and Christian just said there. It’s around the challenge of the business model and profitability of this, as mentioned we’re still in the kind of early stages of market but a lot of growth to be had, but if smart thermostats remain just a purely product sale business there are a lot of challenges involved with ongoing costs related to maintaining the connectivity, providing updates to the user. So this has allowed companies to explore how they get [unintelligible] and revenue also these connected home products and smart heating controls.

Jon: [14.36] Ok so on that topic, Christian and Wicher, I’m interested to know how you describe your businesses in terms of are you a product business, a service business, what, a smart home company, we used the term smart thermostats in the title for this podcast, but how would you describe the type of company that you are? Christian do you want to start with that?

Christian: [15.09] Sure, I mean just looking from our development team for example, so we are around 60 developers which are working on the software and we are around three developers which are working on the hardware so from a company perspective its clearly software driven, from what customers see at first glance is a hardware product, but the magic is really happens in the algorithms, it happens in the software, it happens in the apps, it happens in the user experience and the services on top of the data and the customer relationships, this is where, really where the music plays, so we consider ourselves as a software and service business and yeah.

Jon: [16.02] And Wicher, same for you? Or how would you describe Quby in terms of hardware, software, products, service?

Wicher: [16.11] Yeah I think it’s very much alike if you have the anchor system software, we also, yeah, really look at what can data bring to the B2B companies and to the consumers but we tailor made it to the needs so what is important, and I think very interesting, is that we look at trends in the market as well, for instance, in Belgium, we see that both areas are growing, yeah, growing dilemma, to have enough water and to have it available at the time you want it and at a cost you want it. And people, they are getting more conscious about that, so commodity is stretching away from only having gas and power insights, and act on that, but also [unintelligible] so we launched a campaign with Engie, for instance, and we really see that growing in other markets like Spain as well. So it depends on the market, where they need this, and then we can work with the utility to build a proposition there. But yes it’s about software and it’s about services, I completely agree. 

Jon: [17.11] Matti, in terms of the ability to drive revenues with services and maybe the confidence in the market to do that, is that something that people are succeeding with at the moment or experimenting with would you say? Or what patterns are you seeing?

Matti: [17.28] I think there’s some early success in the market but a lot of it is still in the experimental phase. I think much of the challenge comes from that within this energy transition a lot of the energy companies themselves, they are struggling to engage with customers and now they’re introducing new technology, but they also need to introduce new ways of working with their customer, providing their customers with services. So there’s a lot of steps to be taken for the customers to have confidence in this propositions, but we are seeing some early examples, for instance, in the UK, Centrica does a lot of work with Boiler IQ which is remote monitoring of heating systems and has already quite impressive customer numbers on that.

Jon: [18.07] Ok so lets pick up that energy supplier channel at the moment that you mentioned Matti. Christian you mentioned about half of your business is with energy or through energy companies, Wicher most of your business is through energy companies. How easy or hard are your energy company partners finding it to really grow revenues from your products and services? Wicher do you want to start this time?

Wicher: [18.39] Yes of course. Yes well that we have a proven business model the last five to ten years with Eneco in the Netherlands because we see that the base is still growing and people are paying a monthly recurring revenue for it, a recurring fee, so the business model in that way is quite unique, that they have the first move of switching away from commodity only to a paid services model. But the real challenge of course, and I have to be honest, to add more services on top of that. So I just heard a Boiler IQ, we call it boiler monitoring, that’s a service we also add on top of the services, but also solar insights and some other services. So in total we have almost two petabytes of data of our customers, so that’s gigantic number of data, actually we are the European market leader in getting data from ten seconds electricity and gas so, yeah, imagine what you can do with that, so we are really focusing on, you know, giving more insight and adding services on top of that. But yes it’s a struggle to really transform the utility because sometimes they also need to, you know, change their organisation as well, its not only having Quby on board brings you the software you need but it’s a complete transformational program so that’s where we see the most joy together with them.

Jon: [19.55] Ok so there’s lots of different types of data, sources of data, and your challenge with your partners is then turning that data into services that deliver value to customers and revenue to you and your utility partner. Christian, in terms of your experience in the half of your business that’s with energy companies, what are the challenges alike with these channels to market?

Christian: [20.27] So what’s really great to see that the many of the important utilities in Europe, they understand that transforming the heating space really starts with basically the smart thermostat, with connecting the heating system and connecting the customer. So the smart thermostat becomes really the centre of the transformation because on one hand you get all of the real time data about energy consumption, about what’s happening in the boilers, how is it running, are there any error codes and so on. And on the other hand you have this real time customer interaction on their smart phones, where people interact with their warm room at home, cranking up the temperature in the child’s room or using some of the automation and seeing how much they saved last month and so on. So this is really a crucial part for the transformation and so what it actually helps, on one hand, when you install a smart thermostat on the wall, when you screw it to the wall and you put in the cables, you get a monthly report showing you how much energy you have saved, it becomes a very long-lasting customer relationship, so you have a very, very long customer lifetime, significantly longer, so five or six longer than a normal energy contract, so this is one element that when you bring this in a bundle to a household and you keep this customer for much longer time. And second by having the strong customer engagement you can really upsell additional services to these customers, like a boiler cover, maybe a new heating system, maybe a better energy tariff because you have the data, you have the customer relationship. And the third value which you’re getting as a utility is through this remote monitoring functionality, similar to what you said about Boiler IQ from British Gas, and when you really know what’s happening in the boiler then you can remotely fix a lot of the issues and even if you can’t fix it remotely then you already know which spare part to bring, how much time to plan for your [unintelligible] force, and thereby really drive down your operating expenses and make your cover business significantly more profitable and also increasing customer satisfaction because they only have to wait once for an installer, for instance. So this is really, the smart thermostat becomes the centre of the transition in regard to the heating and cooling of homes and of buildings.

Jon: [23.24] And Christian how does that work if I, as a customer, buy a smart thermostat from you for 200 euros, I’ve not necessarily got an ongoing monthly fee I’m paying to tado°, but I’m expecting ongoing service from tado°. So are you, is that a challenge for you, because me having a tado° product in my home there’s an ongoing cost for you in terms of managing the data, the insights etc, the updates, the app versions. Is that challenging for you to position it as a service business with customers rather than a product business?

Christian: [24.07] I think therefore it is, I mean, this customer lifetime, I mean, our average customer lifetime is around 20 years, based on the data which we have from the last seven years and so of course if you operate your servers and so on for a lifetime of 20 years then you have ongoing costs, so therefore it is important to bring additional services on top of a hardware to really make it worthwhile to be in customers’ home and to deliver your solutions for a period of 20 years. And these services, we have, yeah, multiple services in the area of boiler repair maintenance heating systems, energy services, mainly together with utility companies and also we have a premium skill for advanced automation which people can activate in the app, which is called Auto-Assist it costs two Euro 99, so basically three Euro or three Pound on a monthly basis and a lot of our customers are using it so it’s really crucial to bring services on top of your hardware to make it a great customer experience and also a good long term business.

Jon: [25.43] Ok so what I’m hearing from both of you is that your only the product effectively is a small part of your business, you’ve both very much data and software companies and the prize or indeed the challenge is growing additional services that customers are willing to pay maybe a few Euros a month for. Keeping an eye on time, which as always on the podcast is getting the better of us. Lets get out the Talking New Energy crystal ball and look into the future. So each of you, one view about where you’ll be or you think the industry will be in the next three to five years. Matti lets start with you, from your observations, in three to five years will we be talking about smart thermostats or how will we be talking about then?

Matti: [26.35] I think in five years’ time smart thermostats have probably become the norm for new heating systems, so we’ll still be talking about smart thermostats but they not be anything surprising or new. And then kind of move towards electrification of heating and also transport increasingly, there is a more of a need for kind of wider home energy management and of course connected home will have to play a big part in this transformation, so I think that will be something we’ll be talking about in five years’ time definitely.

Jon: [27.06] Ok thanks Matti. Wicher from your side, what do the next three to five years, where will you be in that time frame?

Wicher: [27.14] Well if I look at the larger trends I see two big trends, at least, so people are getting older and want to stay longer at home so I really see an opportunity also for assisted living propositions which are nonintrusive because you are in the home, you can help people with assisted living products, so I really see the market going there as well so it’s cross sectoral and also decentralisation is of course ongoing in the energy market so the home energy systems that Matti described is also the trend we really see and we really want to grow in as well as Quby.

Jon: [27.50] Ok thanks Wicher and last but not least, Christian.

Christian: [27.56] I think in five years’ time, hopefully something like half the households in Europe will be smartly connected, this is our ambition, and with all the benefits which come with it like saving energy, enjoying more comfort, easier use and of course also things which you guys mentioned and Matti mentioned is integrating into the energy grid especially in regards to electrification of heating but also in the air conditioning systems not only to be using less energy but also using the energy when there is an excess of energy and energy is cheap so bringing basically a demand response into reality and the heating space, maybe based on agile tariff, this is our vision also for the next five years.

Jon: [28.59] Great, well if we look back to when Google bought nest a number of years ago, the sectors developed, it’s now firmly established and I think all three of you have pointed a similar view of the future that’s more based on services, more based on energy management around the home, some interesting opportunities around elderly care for example. So thank you very much to the three of you for sharing your time and insights, thank you to the listeners and there’s a nice link from the description around demand, response to our podcast next week which will be about the business of being an aggregator, so we look forward to you joining us then.

Episode 4: From running a utility to investing in emerging contenders: In Conversation with Ian Marchant

Jon Slowe, Director, Delta-ee

Ian Marchant, Former CEO, SSE

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

We’re in the midst of a transition from old to new energy. The transition’s messy, its disrupting utilities, creating opportunities for new entrants, bringing in big established companies from other sectors and enabling product manufacturers and tech companies to extend their position up and down the value chain. I’ll be exploring these issues with Ian Marchant this week. Ian served as chief executive officer with utility company SSE for 11 years and has been highly active in the energy sector ever since stepping down from that position. Hello Ian.

Ian: Good morning John.

Jon: So Ian you’ve got a very interesting perspective surplus CEO and then a variety of other positions since then. Tell us a bit about how you see the energy transition unfolding at the moment.

Ian: I’ve always thought that this decade will mark the tipping point between the old energy economy and the new energy economy. And if you think, the old energy economy was defined by carbon intensive, big IM analog solutions. Whereas the new energy economy is rapidly becoming a silicon based distributed, digital energy environment. And essentially my own career in this decade has transitioned from the old world, the big company, you can’t get much bigger in the utility context as SSE involved every bit of the energy value chain to a much more plural and decentralised career that I have now.

Jon: And how long ago since you left SSE?

Ian: Its frightening to think its nearly six years.

Jon: Wow. And you’ve not exactly been putting your feet up and sailing off into the sunset have you?

Ian: No, I do a variety of different things. I chair a couple of boards. I chair Wood Group up in Aberdeen which is the energy services company, and Thames Water, so I’ve ventured into a new sector. I’m on the board of Aggreko as the temporary power generation, the big companies I’m involved in. But then I’ve invested in many, many start-up businesses, most in the energy and clean tech space through my company Dunelm Energy, so again my career is currently straddling big and small.

Jon: So you’ve got 31 hundred board positions and you’ve got advisor and investor too, entrepreneurs.

Ian: I think the smallest company I’m involved in is probably about 3 people, and the largest is about 70 thousand so a fairly big spread.

Jon: And you’re having fun?

Ian: Yes, it is a fun, I like the variety, I like the change, I like the fact that every day is different, and I’ll probably be dealing with, on any given day, between 5 and 15 different companies and organisations. And I throw in the old curve ball into the mix, I’m also honorary president of the royal zoological society of Scotland, Edinburgh zoo to most people. So that’s a bit of a curveball.

Jon: Yeah ok, that sounds like a busy but fun and stimulating way to spend your time.

Ian: Indeed, yeah.

Jon: And coming back to the energy transition then. When you stepped down from SSE what were the big issues at that time on your plate or what big issues did you hand over to your successor.

Ian: Well I think in this transition point that one of the things that’s really struck me as I was in SSE and as I’ve left is that the big utilities really struggled with disruptive innovation. Because the big utilities have at their heart and DNA that public service ethos of always keeping the lights on 24/7 and a strong safety culture. And that’s not conducive to trying things that wont work to pushing the envelope to being a bit innovative and creative.

Jon: Do you think you could say that’s the case at any incumbents in any sector or even more so for energy because of that safety and public service?

Ian: I think it’s probably acute in the energy sector, it’s not unique but acute, because you’re always on, you can’t take your factory offline for a day, you can’t switch the lights off for a day and try something different. So your ability to trial and test things is harder but it’s the same for any 24/7 industry and culturally I think therefore that sort of need for robustness and resilience is a real struggle. That was something I struggled with as a chief executive. How to get the organisation to test and learn stuff, the whole idea of launching minimum viable products which is one of the big things in the digital world is just complete inanimate to a utility. It’s got to work and it’s got to work in all circumstances. 

Jon: And is that changing now from the outside in relationships you still have, because they are, to be fair to utilities, they are trying I think in many ways.

Ian: Yes and I look at what we did and what is being done and your trying to do that but there is inherit tension between that need for resilience and robustness and the need for innovation and creativity and utilities are trying different things to do that. I think you described the transition as bumpy and that’s the reality that these companies will struggle with that. The other thing that incumbents, and I see this in all sectors, is all large companies, large organisations are effectively bureaucracies, they have to be, they have to have procedures, they have to have delegated authorities and therefore getting the organisation, any organisation, to move at speed is a real challenge and a typical start-up company’s turnover, speed turnover, is a fraction of what it is for a large company and that tension on timing is a real, you know, while we’re interested in your product an we’d like to order a few it’ll take us six months to get you through the procurement system, by which time the start-up will have run out of cash. Those are the tensions, and utilities try different ways of dealing with it but bureaucracies struggle with disruptive change and no different in other sectors.

Jon: So is it, would it be too strong to say, you’re pessimistic about utilities ability to transform themselves or is that too strong.

Ian: That’s probably a little too strong. If you take the UK as an example, we have effectively seven big incumbents the six energy suppliers at national grid. They will not all succeed, you’re going to probably ask me which ones will but that forces the challenge, I don’t know but the realities in most periods of disruptive change, in most industries, not all incumbents survive. Some will, some will manage the change, some will struggle and will cease to be relevant and will sort of disappear.

Jon: So from the other side of the fence, the start-ups you’re involved in, the emerging growing companies, are they going to carve out some of that for themselves. What’s your perspective on life as a start-up or new entrant?

Ian: Firstly, I’ve invested in over 70 companies, not all in the energy and clean tech space, and I probably to date had seven or eight that have failed. I’ve had a couple of successful exits and a couple of less successful exits, but not failures. So the reality is in the start-up world, you will get more failures than successes, that’s why you invest, that’s where you develop a portfolio because not everyone will succeed. However some absolutely will and they will succeed in broadly there are one of two paths. They will grab a slice of the market for themselves and grow and become a relevant and key part of the environment. And if you think about retail as an example, Amazon was a start-up once. So that’s one route that these companies will go through. The other is…

Jon: And that is about growing a brand, growing a customer brand or?

Ian: Growing either a brand or a piece of technology or a place in the value chain that needs you to survive as an independent entity. The other is obviously exiting to a player, it could be one of the incumbent utilities or it could be somebody who’s looking to stretch their market their services into the utility space so the two exits end up both being too, well one was actually to another venture capitalist who wants to roll up the money and thinks they can make a return on a large, and the other wants a trade player. So when you’re looking at these start-up companies, you’re looking at both potential, can they stand on their own two feet and generate a return on revenue or are they clicking an attractive proposition but other players will want and you actually will see both across the board.

Jon: What surprised you with these 70 companies, you know, from a big incumbent utility to having exposure to these 70 companies. What have you learnt or what have you been surprised by?

Ian: Well I think the biggest surprise that I’ve had is how many start-ups there are because I’ve invested in over 70, of which about probably about 50 are in the energy clean tech space and I’ve passed on more than that so there are, there’s a lot of things going on and what has surprised me most to see is the amount of entrepreneurism and innovation that is happening out there and all bar about three of my companies are UK, so it’s very much a UK statement, and I’ve been surprised and I was at one the universities I’m connected with doing a talk to their energy society last month and you would get questions about careers and noticeable difference than even ten years ago. The questions were more about joining a start-up, starting their own business than joining the large incumbents. So it was interesting even at the undergraduate level there is that interest in this whole sort of growth economy.

Jon: Yeah, we’ve been staggered at Delta by the number of start-ups across Europe. When we just look at aggregators pouncing on often really small price signals and really small value ports, more than 70 aggregators across Europe, so no shortage of ideas and energy and passion but sometimes a shortage of money, revenues?

Ian: Well you’re looking, when I’m looking at a start-up company, you’re looking at effectively four things you want to see the company route to. There’s a route to technology. Now quite often these companies are software companies and obviously a big theme at the moment is artificial intelligence, machine learning, data algorithms. Where is their route to that technology that they want to use to exploit that value opportunity, so that’s the first one, route to technology. The second is route to resources, people. They’re connected those two obviously, say you want to go and recruit data societies but actually so do everybody else, so can you actually get them. The third is, people talk about routes to market, I’m actually thinking its routes to sales and this is where the relationship with the large companies comes in. One is a small start-ups route to sales and I’ve been realistic about how long it will take to convert a nice bit of interest at a conference to an actual purchase order. And then the last one is route to capital, money. But obviously that’s what I’m interested in providing some of so I, someone’s got to get through the first three hurdles before I start on that one.

Jon: So route to tech, route to people, route to sales and route to capital.

Ian: Yes.

Jon: My perspective Ian, will probably be that, well, the route to sales is often the, to avoid being piloted to death.

Ian: Yes.

Jon: That route to sales is possibly the most challenging.

Ian: I would say that most businesses fail on that one, but they might be failing on that one because they haven’t got the right people or they haven’t got the right tech. But the reason why companies don’t succeed, generally, is they don’t convert interest and pilots to enduring sales orders quick enough and they run out of capital and the providers of capital, people like me and other agent investors, just lose patience. I’ve heard for 5 months in a row that this orders about to arrive and now you’ve run out of money, I’m sorry. Yeah, so yes I think for most start-up companies the key bit in the second phase, in the first phase it is around establishing the technology and defining where you are in the market. The second phase is about sales and frequently the, I’m finding myself giving myself more and more advice to the founder CEOs who say “I need to go and get a head of sales or a head of marketing”, you’re the best head of sales or marketing for this organisation. Maybe you should go and recruit someone who can take some of the other stuff off of your agenda so you can get out cause you can develop the first few orders. Once you’ve got the first few orders then the next ones follow.

Jon: Let’s get back now to your utility experience and that as you’ve described rather conservative, risk averse, public service type organisation. You tried to instil a new, not a new culture, but some new thinking within SSE. Tell us a bit about the challenges that you had at that time in doing that or the successes you had in doing that.

Ian: Well the first thing that, and I think all organisations, small and large, have to recognise is, innovation is actually a product of three different stages. You have invention, improvement and implementation. And you actually need to take any idea through those. Now an inventor is the person who comes up with the idea, who spots the opportunity. An improver is the one who takes that spark and moulds it and adds things to it and then the implementer is the person that actually delivers it, gets it done and gets it sold or whatever. I’m by nature an improver, the trick in the large utilities is, was identifying the inventors, where are the entrepreneurs in a large company because they tend to select out and how did you link those three phases together because within a large company the real skill usually lay in the implementers because it was the people who are implementers who can get the machinery of the organisation to work.

Jon: There’s no shortage of ideas is there, there’s in some ways, the innovation departments or the bc departments of utilities are like kids in a sweetie shop. There’s so many things you could choose from.

Ian: One of the things I did in SSE was I created a license to innovate so people would pitch their ideas, initially to me, and if I thought it was worth pursuing I would give them a license. Literally a piece of paper with a signature to spend 5 -10% of their time pursuing that idea because everybody has a day job and in a keep the lights on culture that day job is critical and it was about convincing their manager to allow this person to have some time to frolic off on their own as far as the manager can see. It was about me running a bit of interference for people with a spark of an idea and pushing. Now many of those were not market facing ideas they were business improvement ideas but being able to celebrate and protect innovation, it was also about making people aware of what was actually going on outside, now you have to remember I’m talking about events now maybe of ten years ago when the whole app development movement was in its infancy. How to convince a company like SSE that apps have a place in their, well actually the real way was find a good used case, develop one, put it out there and see it happening. The other thing we did at SSE was investing in some middle stage companies, not the early stuff I’m doing but the sort of the growth company stage through the ventures unit which was pretty successful, some failures some successes.

Jon: And I guess if you look at a company like Centrica they’ve spent quite a lot of money acquiring those sort of mixed stage companies.

Ian: That would be the third, if you like the third stage, what SSE did was venture invested where you might go and buy 20% of a company, well Centrica have then gone and bought the whole thing. Hive being the classic example, used to be a company called Alert. Centrica effectively said having watched and learned about that company and said we would like to buy the whole thing in.

Jon: How much does leadership matter because what you did, what you’ve described at SSE sends quite a strong signal in some ways that this is important to you as a CEO

Ian: In almost every aspect of large organisations, the leadership has a disproportionate impact, you are not just one person and if the organisation knows that you’re interested in innovation and creativity and new ideas you’ll get to hear them. If you are known to be the sort of person who likes to say no to everything people will stop coming. So it’s the same if you are going out on a visit to a remote location and your first questions are about the money and not about the safety and the people that sends a signal to what’s important to you. So your behaviours and the questions that you ask and how you lead conversations, what you spend your time doing sends signals throughout the organisation. Innovation being no different than anything else.

Jon: For you then that was just a balance between your focus on that and your focus on the day to day, the more immediate issues.

Ian: I was fortunate and I had chief operating officer, a guy called Colin Hurt, who for nine of the eleven years worked for me. His main focus was keeping the lights on and my main focus was external ambassador stuff, shareholders, regulators, politicians and change, innovation, future. Now I say main because we both had to cover the other’s side but it is very difficult, these large organisations, for any one person to keep in that, the tension in their head between the today and the day after tomorrow.

Jon: Lets finish by looking forward now, the next years, we’ve talked a bit before about the disruption that electric vehicles will bring for example. What’s, if you fast forward, well maybe you said that this decade, the decade we’re currently coming to the end of, was the tipping point how would you characterise the next decade?

Ian: I think the next decade, generically in some fields is going to be the decade of mass deployment. So ill give you two examples where I think that is true and then one where I still think were in tipping point mode. I think that in vehicle transport it’s mass deployment, I think in 2030, if we take that, I don’t think there’ll be any cars sort of sold that haven’t got battery in them. They may be hybrid still, but it will be the norm, and if you want a pure petrol engine car, you’ll have to buy a classic car

Jon: You’ll be a bit bored.

Ian: Well no, you might still want to do it but it will not be the when you’re going to the showroom, you’ll be buying classic cars or what we’ll see. So I think there we’ll see mass deployment and were already seeing in electricity mass deployment of technologies down into the home. I think we’ll see many more batteries and homes becoming prosumer and smart for around electricity, so I think that’s another area we’ll see, sort of, the accelerated deployment curve. The one that I still struggle to know what the solution is, is heat, and it’s not rural heat, because in the rural world I think the combination of heat pumps and biomass can solve rural heat. The challenge is going to be urban heat. We’re sitting in a relatively small city, of, like Edinburgh, population around 600 thousand, actually how do you heat Edinburgh in a low carbon or zero carbon way, very, very difficult because you cannot import enough biomass because we did that in the 1800’s and we ended up with smog and all those sorts of things and there isn’t enough land to do all the drilling for the heat pumps, so you have to find a way of decarbonising urban heat and I’ve mentioned Edinburgh, I mean think Glasgow’s an order of magnitude bigger, then London is well seven, eight million. So I think the next decade in urban heat is around testing business models, testing technologies, it’s not about 2050, that’s the decade after.

Jon: So implementation for electric vehicles, implementation for prosumers, demand side response, assets on the customers side of venture, heat, still a bit open. And in terms of winners and losers, not asking you to name them, but to give an example, Volkswagen has launched a subsidiary called
Elli that will be as much a mobility and energy company as it will a manufacturer of electric vehicles. There’s questions too as some cynics say this is just positioning, this is greenwashing. My own view is that the five to ten years’ time, as you said, some of the incumbent utilities might not exist, might have been bought, might have faded away. Will we see Amazon, Volkswagen, companies from other sectors being as much energy companies as incumbent utilities?

Ian: I think we will see this, this boundary of what an energy company will change and in ten, fifteen years’ time we won’t be thinking about it the same way. You know, is Amazon a retailer or a data analytics company or a software services…

Jon: Or a logistics company.

Ian: Or a logistics company, we, companies will have their history in their DNA, but there will be more companies playing around with the provision of services to the home. And some of those will lead with energy, some will lead with insurance.

Jon: Or mobility.

Ian: Some, you know, in 20 years’ time we probably won’t own our own cars, we will be using mobility as a service and we’ll wake up in the morning and order our driverless car to it comes to our front door in half an hours’ time and its parked on the edge of town, it’s probably all electric and we specify what sort of car we want. Now who’s doing that? Is it the vehicle manufacturer, is it Volkswagen, is it…

Jon: Is it Uber, a technology company?

Ian: Is it Uber, a technology company, is it energy company that’s worrying about the provision of power to those vehicles, is it a car hire company like Enterprise, is it the local transport company, Lothian Buses here in Edinburgh, or is it a company that you and I have never heard of?

Jon: Does it exist?

Ian: Or is three people in a garage somewhere dreaming it up? And the answers probably all of the above.

Jon: A bit of all of it yeah.

Ian: In different places so it’s one of these things, I can predict there will be winners and losers, I just can’t say who.

Jon: So it will carry on being messy, it will carry on being bumpy, there will be winners, there will be losers. If you had to pick out one thing that will characterise the winners both from I guess your experience with start-ups, with FTSE100 companies, what would your advice be in sort of keep ticking front of mind?

Ian: It’s the quote, and I can’t remember who said it, but it goes along the lines “the best way to predict the future is to invent it”. And I think it’s the companies who get ahead, think ahead, think creatively, meet the customers needs and create the future that will be the winners.

Jon: Ok so not sitting waiting for the answer but helping to craft out what the answer is. Well lets hope some of your start-ups that you’ve invested in are amongst these.

Ian: Yes indeed, it would be nice to think I’ve got at least one Amazon in the list.

Jon: Well thanks for your time, it’s been fascinating as always talking and we’ll maybe talk again in a while and see how things are unfolding and what’s surprised us and what has rolled out in a way we thought it would.

Ian: Ok, thanks very much Jon.

Jon: Thanks Ian and thank you for listening and look forward to the next episode.

Episode 3: Heat as a Service - selling comfort to the customer

Jon Slowe, Director, Delta-ee

Michael Verger, National Technical Director, Engie Home Services

Matt Lipson, Consumer Insight Business Lead, Energy Systems Catapult

Charmaine Coutinho, Principal Analyst, Delta-ee

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

In this week’s podcast we’ll be talking about heat as a service. Thomas Edison, in the world’s first electricity system, sold light, not kilowatt hours. He provided customers with electricity and electric lamps, effectively selling them lumens. Then, with the advent of meters and cheap light bulbs, customers bought units of energy and light bulbs and have done that ever since. Are we about to come full circle with heat, with customers buying 21 degrees comfort instead of buying kilowatt hours of energy and heating appliance separately? With other industries, from Netflix, to the automotive industry, moving from selling products to services, leases and subscriptions is becoming more common. Will the energy and heating sectors meet one of our most basic needs, that of comfort, in this way too?

In this episode I’ll be talking with three guests to shed some light on this question. So, let me introduce my first guest, Michael Verger. Michael, Engie is one of Europe’s biggest utilities and you work for them with a wide range of activities. Can you explain a bit about your role at Engie and give me some facts and figures about the part of the business you work in – the heating services business in France?

Michael: [1:40] Thank you Jon and in a few words Engie Home Services is a subsidiary of the Engie group and we are the number one for the maintenance of the heating system of the residential market in France. We have about 1.5 million maintenance contracts and 4,200 employees – mainly technicians or engineers. And we are covering 100% of the French utilities through 200 agencies. So to give you other figures maybe, each day we enter in our customers’ homes 40,000 time and we are making about 70 million kilometres a year.

Jon: [2:28] So a big business and your role in that business is around the technology, is that right?

Michael: [2:33] Yes mainly.

Jon: [2:42] Now your business has been based on what I call the old model or the current model of selling boilers and selling maintenance and breakdown insurance. This model’s starting to change, isn’t it? Can you tell us how that’s starting to change?

Michael: [2:59] That’s right Jon, you are absolutely right. It’s starting to change and the question is more about the speed of this change that we don’t really know today. And the other method you describe is eventually dead and gone. Not only Engie has now adopted a new strategy line, but we already have developed and begun to sell a new offer, based on the comfort as a service concept. This offer, called Edelia, includes a full package of technical, energetical and financial services. Our customers can now, by signing a single contract, have a new boiler along with maintenance and breakdown insurance, and expect a financial at 0% offer, which allows them to save money, in fact with Edelia. It is also important to say that it is combined with our 200 technical network centres in France. Because technology is there to support our technicians, to maintain and increase the relationship with our clients. At the end, our customers have to pay a single monthly fee, about 44 Euros per month, and just forget about anything else. But enjoy friendly, good, well heated environment: this is what we are looking for.

Jon: [4:39] So much more like a subscription model than the old model? Now let’s introduce my second guest, Matt Lipson. Matt you work with the, slightly grandly named, Energy Systems Catapult in the UK. In a nutshell, can you tell us what the Energy Systems Catapult does and what your role is there?

Matt: [5:00] Yeah, hi Jon and thanks for having me on the podcast. The Energy Systems Catapult is a not for profit set up by government to help the energy sector innovate and my role there is I head up a team that focuses on consumer insight and we are a hybrid kind of market research, digital design consultancy type offering, specialises in trials, real world experiments, to help other parties move forward from idea to impact, faster with less effort. And we work with others across the Catapult, to use sensors, to see beyond what people say, so that you can understand what they’re actually doing, because with energy in particular people often use it unconsciously without thinking so it’s hard for them to explain what they’re doing and describe that in accurate detail. And we also work with people who have modelling capability, the building area and national scale, to relate the behaviour we see to the rest of the energy system. The important things matter.

Jon: [6:07] And you’re using this to innovate around providing comfort to customers, rather than providing kilowatt hours to customers, aren’t you?

Matt: [6.18] That’s right Jon, so we got asked to do some work for the UK government and a bunch of larger energy players around six years ago, and they asked us to look at, you know, how can we decarbonise heat, which is one of the perhaps more challenging aspects of meeting our climate change commitments. And we realised that the smart home offered unique opportunities, both to consumers, to get, kind of, better experiences from energy, but also across the entire energy system. So we started to upgrade homes around the country in the UK to the 2020’s level of data and control and we gradually discovered that if you show people information about the cost of heating their home in different ways, so you can imagine, whole home, all day, one price, or part of your home perhaps just slightly lower temperature just for part of the day for a different price, it is completely transformative, so you find bill payers who aren’t particularly interested in energy, maybe they switch, perhaps not, become discerning customers, the life blood of any market, just by seeing these two options, because they then realise which they prefer and they start asking you about, well what would it cost me to have that room a bit warmer or that one a bit cooler. So starting from there we realised that there was something quite powerful here, potentially, that might enable us to tackle this challenge. We took it one step further and we asked consumers whether they might prefer to buy a warm home rather than units of fuel, which is not a new concept to people who work in the energy sector, we might call it heat as a service, part of an energy as a service offering, which is just one business model amongst many, but this capability for consumers to decide what outcome they want and what thing they get and get a fixed price for that is at the heart of lots and lots of different business models. So we took that little bit a bit further and started to think through, in detail, how might you do that in the real world and designed a starter for 10 energy as a service offer which we would expect the sector to move forward, so just to reiterate, we’re a not for profit, we’re not trying to set up a business, we’re trying to learn how to accelerate other people’s business ambitions, and I can tell you a bit more about that if your interested.

Jon: [8.46] Great, so is that one-way Matt, like you strategically were setting up in this direction but in another way, that by listening to customers, you allowed customers to steer you to this type of trial and project, looking at selling comfort rather than kilowatt hours. How much was listening to customers, or combination of both?

Matt: [9.11] Yeah, I think that’s a great point. What we realised early on is that at the end of every pipe and every wire sits a consumer and if they don’t like what’s coming out of the pipes and wires, or they can’t use that stuff to get the things that they want, they won’t be very happy to pay for energy today but also for the infrastructure overhaul that’s required to decarbonise our energy system. So we realised early on that we really need to understand what consumers need, want, value if we are to design, you know, a low carbon system that they actually want and without their support it’s going to be difficult to drive the change that’s required through. So we just applied, what is actually a standard approach in many sectors to the energy system and maybe it’s a bit less common in the energy sector.

Jon: [10.05] I think you’re right there, the energy sector’s probably not famous for being customer centric at the moment, although it is moving more in that direction. Matt we’ll come back to some of the details of what you’re doing but now lets introduce my final guest, Charmaine Coutinho, principal analyst here at Delta. Welcome back Charmaine. Now the concept of heat as a service is banded around a lot at the moment, you see it on PowerPoint slides, you hear people talking about it. Can you break down that concept a bit for us Charmaine and just make it a bit realer rather than a grand aspiration of heat as a service.

Charmaine: [10.43] Thanks Jon, and it’s great to be back. So in our research here at Delta we’ve identified three different types of business models associated with energy as a service, and I mean that’s an interesting point to start with. We’re talking about heat as a service specifically but we do see energy when you’re incorporating electricity and heat as other different types of business models in this area. So, on the kind of less complex end, we have, effectively, what is an asset leasing model, so, a product or service that is fundamentally financed by a third party, now that’s offered to customers with a finance package. Additionally we see that model developing to our second model which adds on maintenance and servicing aspects, and that really focuses on making sure that that product or asset within a customer’s home is performing optimally and talked about some of those elements in the way that energy is doing that. And then the third, more complex model is really based around the provision of an output or an end goal in itself, so comfort, heat, and that really incorporates the element of fuel. So if that asset is usually to electricity or gas, incorporating that into a package for the end customer, and it really looks at what is the customer getting at the end point rather than what products and services can we or one as a service provider put forwards to our customer.

Jon: [12.13] Ok so, starting then with asset leasing or some form of asset subscription then adding maintenance then maybe adding energy supply and through to providing an outcome or a service.

Charmaine: [12.26] Yeah, exactly that, and I think heat is particularly interesting because you can power a heat product either by electricity or gas so last point is be critical about what you do with your energy and fuel supply provision.

Jon: [12.39] And what we’re seeing at the moment is a number of projects on this spectrum popping up across Europe, so I think it’s a fascinating time to be talking about this, lets come back to Michael, to Engie. So, I’m interested in what’s, you’ve talked a bit about what’s driving Engie to change its model, you used to sell boilers and maintenance separately, now you sell the, or offer the monthly fee for boiler and maintenance combined. Are you changing this because you’re having to or are you changing this because you really want to and see a big opportunity?

Michael: [13.26] That’s a good question Jon. I agree our model was good anyway, but times are changing and our business is undergoing profound and rapid changes brought on by logistical, technological and economical development. To say that, in fact Engie Home Services is to adopt a new and clever position in the market, in fact our goal is now to be recognised as a comfort provider, it’s a little bit more ambitious than a simple heater as a service offer because we strongly believe that our clients would prefer to see Engie Home Service as a comfort partner rather than technical operator of heating system. Let’s say, piece of mind as a service. That means a lot of things for us of course, that means we have to develop a new range of reliable, efficient equipment with economy rates contracts. Our customers are waiting more and more for all in one solutions for their heating system, not only technical solutions but package offers. Specifically designed so that it can be used as a convenient, secure and consultable solution.

Jon: [14.56] So, are you seeing pull from customers for this Michael? Are you seeing customers actively interesting in this or are you having to push this to customers would you say?

Michael: [15.10] In fact we are making both, we are pushing and we are hearing our customers, they want something and we are the first to provide it, so where to find a good way.

Jon: [15.28] I guess a balance between educating them or explaining a new type of offer to them, that takes a bit of time.

Michael: [15.37] You get the point, it is exactly that.

Jon: [15.41] Matt if we come back to your project, so you’re running some trials at the moment, can you help me understand a bit about what the customer offer actually is. If I’m a customer and you’re offering me comfort what can I choose or what am I buying? I’m a customer how would you explain the offer to me?

Matt: [16.05] Yeah, sure Jon. So, we’ve done lots and lots of different bits of research over the six years on this topic for ourselves initially and for government, more recently for different parties who are exploring how to enter this space. The start of our journey as I said earlier was just exploring with helping people understand the cost of heating their home in different ways. We then realised, actually there’s something very important here in terms of giving them control over the outcomes they get, and there was no language of service. So we decided to create a starter for 10 and design something from scratch, I expect the sector would move it forward very rapidly, but what ours involved was offering consumers the chance to buy warm hours instead of kilowatt hours, we did lots of cocreation with consumers to define what we meant by warm hour and then changed it loads during the course of those interactions with consumers but in the end warm hour was an hour when any of their rooms was warm, that’s what they expected it to be, so they’d be nought to 24 hours a day. And we sold them a heat plan which is a fixed price for a certain number of warm hours which creates a kind of hence a warm hour, kind of miles begun if you like for the home. And what we found in our cocreation with consumers is that they could really quickly get their head around that and that they started to compare themselves with one another, so one person might say to another, how come I’m paying 20 pence her warm hour and you’re only paying 10 pence per warm hour. And very quickly they would realise that it costs more to heat, you know, a big old home than a small new one.

Jon: [17.54] Ok so, Matt the warm hour then is a metric, that’s what you’re selling, you’re selling a warm hour and the price her warm hour will be different for different customers based on their house and how well insulated it is for example.

Matt: [18.09] Yeah, I mean, I think the price a business chooses to charge for a warm hour or for a heat plan with a certain number of warm hours is a commercial decision but the cost of delivery definitely does depend on the building physics but also on the weather and various other characteristics. And in our plans, a bit like a mobile phone contract, you know, they were, there was set number of hours within a plan and you could buy extra hours if you wanted to and then there was a certain amount of freedom consumers had. The way we did it, what we were doing was using smart control to help consumers discover how many hours they wanted, what temperatures they liked, which rooms they wanted warm, so that they can buy the right plan for them

Jon: [18.55] Ok, and you’ve got how many customers on these sorts of plans at the moment or how big is your trial or the project?

Matt: [19.02] So the first time we’ve done looking at this in the real world was last winter, so it finished a year ago almost, and when we offered a hundred homes the chance, just under a hundred homes in the end, the chance to buy one of three plans. There were three, so there was the cheapest plan was a fixed plan which came with a certain number of hours, the hours in their schedule, and it was the cheapest because they weren’t able to adjust their schedule, they could change, they could add hours by buying extras but they couldn’t adjust their schedule. There was a mid-price plan, which was a flexi plan, which came with a kind of bundle of spare hours in their plan, and it was flexible in the sense they could move them, reschedule them whenever they wanted. And then there was a premium plan which was our unlimited offer. And each of those plans was priced using data for each of the homes in our trial so give them a bespoke centre of three plans and with three bespoke prices.

Jon: [19.59] Ok, so we’ve got now, if we come back to that spectrum Charmaine you described at the beginning, Engie are on the selling subscription or monthly fee for a boiler and the maintenance included, so piece of mind around your heating system for a monthly fee. The Energy Systems Catapult are at the end of the spectrum in terms of offering comfort. Can you characterise a bit, across Europe, how much activity we see at various parts of this spectrum or what we’ve heard about common place at the moment or is this part of an emerging trend?

Charmaine: [20.36] Yeah, for sure Jon, I mean you referenced it earlier in the introduction there are so many thought pieces and PowerPoint presentations about energy as a service but what’s really nice about this podcast is actually its two really excellent examples of commercial business actually putting something out into the market. So obviously not for Catapult but Engie doing their offerings and the Catapult with their partners and one of the things that is really interesting is we haven’t seen, to date, many examples of the more complex heat as a service offerings. So there are many examples of the asset leasing and financing models but with the additional services and with the heat element to provide that comfort level its very, very few. So a lot of interest across Europe, but very few commercially available models we see, and I’m not really sure why.

Jon: [21.28] Something we could see a lot of in the next year Charmaine?

Charmaine: [21.30] Yeah, I mean, for sure, I think, I definitely think there’s been a pace of change in terms of launches in the last six to twelve months, we’ve seen more people announcing these type of propositions and they’re very complex to do, its not an easy task, that’s one of the reasons why there probably isn’t many of them around, and It’s definitely the direction of travel, we see many types of energy companies looking towards.

Jon: [21.56] On that not easy to do, lets turn our attention a bit now to the risks, so you could think of technology risk, performance risk. Lots of different types of risks involved in doing this. Michael could we start with what you’re doing at Engie and can, I guess you’re taking the technical risk of the boiler and taking responsibility for that, can you tell us a bit about how you see the risks and how you’re managing these?

Michael: [22.29] Yes, in a few words, its risk on the control, we are facing new technologies and we know that we have to continue to learn by working, clearly. If we have a long history as a service provider and operator our teams have a deep knowledge of how markets, to be clear, the be part of the group like Engie, so with digital is part of the strategy, obviously, besides Engie Home Service has invested amount of money in two main points. The first one is one we have to develop and secure solid technology and two to upgrade the skills of our technicians, its very important. And then the third point is to build a strong back office. So for, in terms of risk, I’m very confident, but one challenge for us consists to help our clients to accept this kind of new services at home, we talked about that before, and this will take time, we know that, and we are just at the beginning of the history, that’s why we need for one small, reliable and first steps, even knowing where we want to go but we have to go in that way if we want to secure the approach.

Jon: [24.06] So you can help to manage some of the risks through technology for example, we’ll see more and more connected boilers in the future across Europe where you can use remote diagnostics, but also your strategy is to be quite pragmatic and take small steps, learn the risks, understand the risks and learn by doing. Matt in terms of the risks on your model, I can imagine risk managers at companies tearing their hair out and thinking what if the customer opens the window or what if the heating appliance doesn’t operate as efficiently as we think it would. How do you think about risks and the industry partners you’re working with, what’s your perception of their attitude to these sorts of risks?

Matt: [24.58] Yeah, I mean our role is to accelerate a market by showing the art of the possible so there are risks here, but we believe they’re manageable, and that’s why we’ve done things in the real world to demonstrate that they’re manageable. I think there’s three kinds of risks, if I was to categorise them at that more complex delivering, in our case, heat as a service or if you added cooling and comfort as a service. Risk is really about understanding consumer expectations, so that you know what service they want but you’ve also perhaps shaped their expectations so that they understand what’s not possible and you’ve banded their expectations so that they’re clear on what’s included and what’s excluded, in our case what the concept of the extras is all about. The second one is really about pricing the cost of meeting those expectations and doing that in a way that’s attractive to consumers but also affordable to business. And then the third is the consumers are going to need protecting in this, kind of, smarter new energy world and unless industry can find a way of doing that, regulators will impose something I think. So those are the three challenges and I guess we take different approaches to kind of thinking through how to manage those, perhaps you’d like some examples?

Jon: [26.16] I would love examples Matt but I’m also keeping a beady eye on how time is rushing past us so what I think we’ll do now, well the common point I’m hearing from both of you actually and from the work we do at Delta is that technology is the attitude to restrict important, the learning by doing, the understanding the risks and then technology helps to manage some of those risks through things like remote monitoring or censors in homes or understanding heat loss in buildings through measuring temperature at different parts of the home. So the risk seems like a big question but unless you explore it and work out ways to manage it, then it’s going to be hard to move forwards. So we’ve got just a couple of minutes left, what I’d like to do to finish with is ask each of you where you think your heat as service type resource will be in the next few years, so if you had to look forward into your crystal ball, Michael how big a part of Engie’s business will this be? Matt what do you think will happen in terms of industry adopting the sort of models you’re working on at the moment and Charmaine, across Europe in three to five years, will this become widespread? So maybe starting with Michal, where will this be in Engie in the next few years do you think?

Michael: [27.47] Do you want me to give some explanation but what our customers are waiting or do you want me to go through directly to the forward three to five years?

Jon: [27.57] Yeah more to the three to five years I think, let’s look at that.

Michael: [28.02] Ok, so in fact we don’t know exactly a time where and what could be the big numbers anyway, we know and I do believe that customers are waiting for that kind of solution, we are sure that and they don’t care about technologies they want services. So by 2020 we are thinking that we will reach at least 20,000 services-based heating offering, at least, and in the meantime it is very important for us, we will continue to develop new lines of connected products so we don’t, heaters or the main lines, product lines, and technical analytics to keep the key maintenance, to have more efficient services. We are continuing to move, for instance, we could open new services or other items. Why not heat pumps or electrical vehicles or batteries or voltage? And at the end we could manage a whole energy as a service in the same time of energetic transition.

Jon: [29.20] Yeah I guess ok so picking up Charmaine’s point about heat as service just being one aspect of energy as a service or service-based energy models. Matt, from your side, in your crystal ball, how widely has this been adopted in the next five years.

Matt: [29.40] Well we see lots of interest from different players but I’m not really here to tell you what the future will be like, my role is instead to make sure that consumers like the future. There are clearly lots of opportunities for retailers, product manufacturers, networks but I guess one I need to highlight is the opportunity for governments as well. So just very briefly, we know that low carbon is going to need to be as good as, or ideally better than high carbon before it becomes a choice for the mass market, and I think services offer a route for government to decarbonise in a way consumers will support and businesses will support, and that’s because people care more about their experience and how its delivered, so as long as they can get the comfort they want they don’t really mind how that’s delivered, whether that’s from a gas boiler, a heat pump, a district heating system, a hydrogen boiler, a biomass boiler or anything else. After all, if you enjoy a meal you don’t often ask what oven it cooked in.

Jon: [30.36] I like the analogy. So Charmaine…

Matt: [30.42] That opens up a new policy option for government to impose a kind of long term technology neutral carbon target and leave service providers free to deliver service without the carbon but in order to help answer your question, sorry to avoid it initially, of how large that might be, I think it’s a chicken and egg problem, which is how can businesses invest in new business models without understanding the policy trajectory and similarly how can governments, you know, roll out new policies without having some understanding of what business models might exist, but if they could work together, government and industry, they could show how well things could work in practice and give everybody the confidence they need. So in order to kind of help us and learn in the real world we’ve kind of created a living lab from the smart homes we’ve been working with so that the public and private sector can come together to crack that chicken and egg problem and learn how to harness market forces to deliver decarbonisation consumers will support and, you know, and to design high quality, low carbon heating products and services but, of a wide range, all the way from the stuff I’ve been talking about to the stuff Michael’s been talking about and numerable other things that we haven’t even discovered yet, and I think that’s the thing which will make the difference, is a bit of an ability for different types of party to come together to design the future that we all want.

Jon: [32.04] So then I guess what we’ve seen here is Engie is a commercial entity taking some, doing something new, learning by doing. With your work Matt, again learning by doing in a different way. Charmaine, when you look at the heating and energy industry across Europe, how much appetite do you see for this learning by doing and in three to five years is there sufficient appetite to try these new things that we’ll see much, much, many, many more heat a service offerings?

Charmaine: [32.37] Well I think to answer your first question, I think there is a significantly more appetite for learning by doing in small steps, so the way that Michael outlined is, you know, a really classic, agile way of learning for new disruptive and technologies and propositions and how to bring them to market quickly, especially when you’re putting the customer at the centre of that, so actually getting customer feedback throughout the product development process rather than at the end when there’s a fully formed project. So I think that’s really important and I think we see more and more of that, not just around energies or heat as a service but in other types of new energy propositions. I think in terms of how widespread will it be, well it’s kind of obvious that different propositions will lead to different types of customers, one of the guests mentioned the desire to move much more, kind of, service-based propositions and that reflects the wider society changes, so I think that’s an important piece that will drive, from a customer’s perspective, some of these business models. I do also think that there are so many different types of new energy technology, so Michael again referred to this, what about EVs, what about heat pumps. And the fact there are so many technologies that are proliferating, customers will probably want a level of simplification around their energy provision, whether that’s the asset, whether it’s the service, so simplifying all of these technologies and concepts into one as a service proposition is very appealing to most customers I imagine. So from that perspective I think we’ll see a lot more in the next three to five years, especially as people learn, test and learn. Costs come down, all that kind of stuff. So yeah, I think, based on the last six months I imagine we’ll see many, many more.

Jon: [34.21] Great, well thank you to my guests, I think we’ve showed on this podcast that heat as a service will be explored in a passing fashion and likely a significant part of the future for the heating and energy industry across Europe. Many, many thanks to Michael for your time and sharing what Engie is doing.

Michael: [34.45] Thank you it was a pleasure.

Jon: [34.48] Matt, likewise to you from the Energy Systems Catapult and your living lab.

Matt: [34.53] It was great, it was good to talk to other people who are grappling with these challenges.

Jon: [34.59] And Charmaine, as always for your observations and thoughts on what’s happening across Europe. Thanks to all of you, thanks for listening and we hope you enjoyed the podcast and look forward to welcoming you back next week. Good bye.     

Episode 2: Smart Charging - revolutionising the electric vehicle sector in Europe

Jon Slowe, Director, Delta-ee

Alexander Lewis-Jones, Analyst / EVs & Electricity Research Service Manager, Delta-ee

Jorg van Heesbeen, Co-founder, Jedlix

Jordan Brompton, Co-founder, MyEnergi

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

Electric vehicles are set to revolutionise the transport sector in Europe. The recent Geneva motor show was bristling with new models of electric vehicles and car manufacturers are tripping over themselves to announce their future plans to electrify their fleet. This will have an impact, and in many ways a huge impact, on the electricity sector. It will increase demand, maybe not by quite as much as some people think. If you electrify all of Europe's fleet, then that will only add around one quarter onto total electricity demand, according to Eurelectric.

The biggest impact will be around the timing of demand and the majority of charging will take place at home or at work. And if many vehicles are charged at the same time this will create two types of challenges, first, overloading the distribution infrastructure. In many countries the network simply won't cope with many cars on one street charging at the same time. And secondly matching the amount of electricity generated, or stored or provided through demand response, with the timing of demand. Will there be enough generation when millions of cars are charging at the same time?

The good news is that electric vehicles may be able to solve the very problems they bring and also help to solve wider electricity system challenges. They can do this through helping customers as well and helping customers to make the most of the electricity they might be generating themselves. So in this episode, we'll be hearing from three guests, all of whom have got fascinating perspectives on smart charging. First of all, Alex, Alexander Lewis-Jones, our in-house expert at Delta.

Hello Alex, and can you summarise in a nutshell what you do at Delta?

Alex: Certainly. Hi Jon. Thanks for having us. So my role here is the product manager of the electric vehicles and electricity research service. This is a subscription package which offers insights on the EV charging industry and we cover a range of different topics there, but typically a lot of reports and case studies and viewpoints on how the technologies and the EV charging customer is evolving. So that's my role and we work with a team of EV enthusiasts across Europe.

Jon: Thanks very much Alex. So you'll bring your passion and your breadth of looking across Europe to the debate. Secondly, delighted to welcome Jorg, co-founder of Jedlix, a Dutch-based smart charging company. Hello Jorg. And can you tell us in a nutshell what Jedlix does?

Jorg: Yes, for sure. Jedlix is a software company and we develop smart charging software for electric vehicles and with our platform and apps built on top of that we help to integrate the charging of electric vehicles with energy markets and grids in the end to lower the cost of charging and help with the integration of renewable energy.

Jon: Thanks very much Jorg and, last but not least, hello Jordan. Jordan, likewise, can you give us an elevator pitch about MyEnergi?

Jordan: Okay. So MyEnergi, we are UK based manufacturer of hardware, predominantly specialising in electric vehicle charging with renewable energy and smart home devices that self-consume on-site green energy. So mainly the domestic market. We were the first manufacturers to bring out a charger that bridged the gap between somebody who's got solar panels and an electric vehicle allowing them to charge directly off their green power and you know, take pressure off the grid.

Jon: Thanks very much. So we've got Jorg from Jedlix, a software-based company, Jordan from MyEnergi, a hardware-based company, both active and at or close to the leading edge of developments with smart charging, and Alex our in-house EV expert at Delta.

So first of all, I'd like, Alex, a bit of help in breaking down what we mean by smart charging. I guess from a high level I think of it as charging an electric vehicle for the benefit of some aspect of the electricity system as well as for the customers’ needs of filling up the tank so to speak. So Alex, how can you break this down a bit, break this high-level concept down a bit further?

Alex: Yeah. I think that's a good summary and I think with smart charging there's a lot of different terminology out there covering a range of different concepts, but essentially it's about having connected and controlled charging technologies that allow us to shift that time of the charge to accommodate some electricity system benefit so we can look at this on two levels. It could be a local level so there could be some, you know, capacity requirements, that means that you need to shift it away from a particular time or it could be at a grid level to make sure that we are balancing our supply and demand.

Jon: Okay, and how much smart charging is going on? I mean in a way, I guess the EV sector’s in its early days aside from a market like Norway. Car sales are picking up quickly, but they're still relatively small numbers. So is smart charging the pilot or demonstration or commercial phase, how widespread is it?

Alex: Yeah, really good question. And like I said, there's a lot of different concepts and a lot of generations of smart charging out there. So if we have, if we look at a lot of the local load balancing elements, well, a lot of that technology has been commercialised and available for many years and is in this successful in certain segments, but for…

Jon: Alex, by load balancing you mean influencing the timing of charging so you don't overshoot your connection, basically, that your connection to the grid, you have a certain capacity, and that you don't go over that capacity or charging your electric vehicle doesn't cause you to go over that capacity?

Alex: Agreed, yeah, so this is where this can happen on different levels, but maybe you look at some of the larger users of electric vehicles, take an airport for example, and they'll have a limited constraint capacity of how much electricity they can charge from but might have 20 different vehicles wanting to be charged at one time. So you might have to balance the load between the different charges at that particular time. So for those scenarios for the where there's an obvious capacity constraint, we are seeing smart charging solutions coming through and I think the Netherlands is a good example of a market where we do have a, there's a financial incentive at all levels to avoid exceeding your capacity because there are steep charges there. When we move on to other technologies such as you know, the ones that provide the generation matching, so that again that could be on a local level. So with the with solar PV on your roof or what a grid level of renewables that is starting to come in. But yeah, like you say the EV market is still pretty new so it's a series of niches for me at the moment.

Jon: Okay, so I guess trying to sum that up its there's some activity and has been for a while almost at the local site level of either avoiding going over your capacity connection or maximising self-consumption. But integration with a wider electricity markets, that's less widespread today.

Alex: Yes, I think there's the technologies are there but we're waiting to see the electricity markets evolved to accommodate the maximum benefits that we can get from these technologies.

Jon: Okay, and one more question for you Alex before we move on to Jordan and Jorg. You have thought a bit about the different ways in which smart charging can happen, haven't you, in terms of home-centric, car-centric or charger-centric smart charging?

Alex: Yeah, so when we, we did a report on smart charging last year and we look went out to the market, looked at all these different technologies that were out there and we started to see that there were, there were different approaches to where the intelligence was. Where is the smart? Where's the controller? And we wanted to understand that because when we understand where the controller is, then we can understand who might be holding the customer relationship and who might be leading the development of this technology.

So predominantly, we look at the charges, the charging hub where themselves, and what kind of controls are linked with those units and we see that prevailing across the market. Then there are ones that might link in more with the vehicle itself, bearing in mind that there's a lot of new investment and interest in vehicle intelligence. So is there more of a car-centric controlled approach, and of course, you know coming from a you know, the energy side rather than the transport side. What about the home? What about the building? Is the controller going to be in there? So that is how we've kind of defined the market in terms of a charger-centric, car-centric or the home-centric models.

Jon: Oh okay, so three different architectures, I guess, for where that control and communication can sit. Let's now turn to Jordan and Jorg, founders of two companies that are at the leading edge of smart charging and hear a bit more about your companies and how you relate to smart charging in a way that Alex has described. Jorg, would you like to go first and tell us a bit more about Jedlix and how you're enabling smart charging?

Jorg: Yes, of course and thank you for giving me the opportunity to present here. The smart charging use case of Jedlix mainly focus on use cases in front of the meter, I would say it, so helping to keep the grid in balance from a TSO perspective trading on the energy markets together with utility partners of Jedlix and we have done some implementations to support congestion management on the on a DSO or DNO level, where the later one I would say still let's say in a more experimental phase than it's a full commercial phase.

Jon: Okay, so less about load balancing and maximising self-consumption of photovoltaics, for example, as Alex mentioned and more about integration with the electricity system be it the distribution infrastructure, the balancing of the system or the markets. Is that right?

Jorg: Yep, correct.

Jon: And one thing I'm quite fascinated by is your shareholders. Jorg, can you tell us a bit about who backs Jedlix or where you came from?

Jorg: Yes, our history dates back to utilities. Eneco is a shareholder of Jedlix and some of our founders have background there and the company is basically founded by people coming from the e-mobility team and energy flexibility and trading team and last year Renault joined as a shareholder in the company and both companies are still active shareholder and we hope to expand it further this year with more strategic partners on board, to grow the platform.

Jon: So a great sign of the coming integration or yeah integration between the electricity and the transport sectors.

Jorg: Yes.

Jon: And you’ve mentioned that you're focused on electricity systems values rather than customer side of the meter to values. How about the charger-centric, car-centric, home-centric framework that Alex outlined? Where do you fit in there?

Jorg: Obviously the car-centric one. I would say our main USB is to help OEMs build smart charging services based on the connectivity and controls of the vehicle. The most vehicles, about 90 percent of all vehicles being sold nowadays has connectivity on board. We enable that infrastructure for our OEM partners.

Jon: Okay, so the, let's get this right, the car plugs in, the customer says when they the driver says when they want to charge by and then you're communicating through the car if that's right, to influence or control when the charging actually takes place?

Jorg: Yes, this is correct.

Jon: Okay, and how in one hand sounds simple on the other hand implementation is often a lot harder than the simple concept. How hard is this to do? Is it straightforward? Has this been years of effort to get this to work? How hard is the technology to do this?

Jorg: It's it has been quite some learning by doing. So we are engaging with many OEMs car manufacturers on this topic for a few years now and the technology involved is quite involving, lot of cars now also get 4G quite soon 5G connectivity on board. So the amount of data, the controls all the control we have is evolving quite fast, in the end all for the better. But you obviously have to deal with yeah, the servers and integrations with our car manufacturers, with our partners here. So you have to comply with the rules, make sure that everything is secure. So this is just as important as just being able to control the charging and have an integration there.

Jon: I can imagine that's quite some work to do. How many different OEM partners are you working with at the moment or how many can you actually implement this solution with?

Jorg: So we have currently have operations which have been published with BMW, Renault and Tesla. Luckily, they are quite doing quite well in the EV domain as you may know. And we expect to disclose a few more partners over the course of this year and then we have I would say quite the line-up but obviously we hope to have more, yeah more partners on board so we can skill and be of relevance to our to the other side of the platform the utilities and operators there and maximise volume.

Jon: And can you give us a feel for numbers of customers? You know, how many cars are connected to the Jedlix platform. How many customers are you working with talking tens, hundreds, thousands?

Jorg: We do not always officially discuss this but, some things you can find online, but we have most of our activities we have launched in the Netherlands two years back and recently started to test operations in Germany, France and Belgium, but let's say gross most of our customers these are a few thousand.

Jon: Okay, so this is real, it's real business, it's not a concept, it's not a pilot, it's something that you're actually doing. That’s great. Jordan how about MyEnergi? So you're you know, we've already established your more hardware and software compared to Jedlix.

Jordan: Yeah.

Jon: You're coming at this from a bit of a different angle. Can you tell us a bit more about your smart charger and the route that you're on?

Jordan: Yes, so we here at MyEnergi the two co-founders which is myself and Lee Sutton have been in this, in the renewable space, for quite some time and we're Electric Vehicle drivers ourselves. So really the zappi, our charger, came from what we actually needed and wanted as EV drivers and we both have solar panels on our homes and we just found it increasingly frustrating having to run in and out when it was sunny plugging the car in and just doing everything manually and luckily for us we had experience within this sector, so several years of experience, with creating smart products that maximise on-site generation. So we already had a product that we’d sort of brought to market which diverts surplus power to a hot water tank to make the most of it instead of exporting it to the grid and we thought you know, we could do this with the electric vehicle, we could divert the energy to the electric vehicle. So we got about designing it and sort of testing the market because we’re only, it was only a really, really small company, so it was me sending out some tweets, reaching out on forums and saying would anyone want this product, would anybody be interested? And a couple years later we've got eight thousand devices on the market, we're starting to export to other countries. We cleverly built in demand side response and frequency control capability so that we could bring this in in the future because that's the way that we saw the industry might go, which is a lot of talk of it, a lot you know early on at the moment with our, with the UK government and I'm sure it's the same, you know, globally as well, but that talk seems to be, you know, being speeded up. Either we find that it’s still quite an early adopter market when it comes to actual electric vehicles and it's still being quite within it, not electric vehicles, early adopter. Smart charging and all that sort of concept is still, it's not yet mass market is it so, but it's great to see that we're starting to think along those lines and sort of solve problems now instead of flooding the market and then panicking, thinking what we're going to do. So we come at it just from more of a user point of view and trying to solve problems that we had as users.

Jon: And how, similar question to Jorg, how hard has it been technically to do this and I guess you've learned from diverting solar generation to a hot water tank instead of exporting to the grid is it…

Jordan: Oh it's a completely different kettle of fish. It seems crazy the amount that we've had to learn as we've sort of gone because lots of companies interpret regulations different ways. So there's some regs, the European regs, around the market and how to build a charger so that's what we did but then we were the first to sort of take this plunge in Innovative technology with the renewable energy side. And also we've decided to build in a lot of other features just smart schedule charging, load balancing, things like that which then throw up lots of scenarios where different homes have got all the technologies going on in the home. They’ve got batteries or they've got, you know, all the power diverses, they've also all the electric cars work in different ways because they've interpreted the charging regs a specific way that we don't know. So the thing, we are hardware but there has been a lot of firmware and software that we’ve needed to adapt and change to different vehicles, to be able to survive basically, because it's such an interesting new market that it's impossible to sort of not be adaptive basically because we found that the Renault Zoe in particular charges a different way to all other car charges so we had to instead of, you know, we're not going to write to Renault and say you're doing this and we think you should be doing this, we just adapted our software to be able to accommodate the Zoe and it's been the same across the board. So it's been a massive learning curve but our customers are extremely supportive, extremely engaged and absolutely loved the product because it's something that actually it's giving the power back to the customer. So we're very customer focused and you know, we speak very closely with them and just try to create the ultimate product that they would want really.

Jon: And I guess you've got that partly from your own background, but also from, well, one of your shareholders who is very famously customer-centric if you tell us a bit about that.

Jordan: Yes, so I presume you’re talking about Sir Terry Leahy, one of our private investors, yeah, he's the ex-CEO of Tesco and that was, you know, it was just such a natural fit when we met him and spoke to him. I mean we've been approached as a small company, we've got these products on the market that we’re selling well. We got approached from investors left right and centre. But when we spoke to Sir Terry and Bill Curry of the William Curry group, our ethics as founders of the company just sort of all aligned and Terry’s focus is very much the customer. It's the customer, it’s the customer, it’s the customer. At the end of the day they're the ones that are going to drive this whole industry forward, they’re the ones that are doing it already, like I don't think, and I might be speaking out of term, but I don't think the energy providers and the car manufacturers would have been inclined to move as quick as they have been doing if it wasn't for the likes of Tesla and customers responding well to that sort of changing the game and forcing this into action really. So Terry's drive to us, pleasing the customer, perfectly aligned with ours and we've got, we feel we've got, a really nice board to take the company forward as we grow.

Jon: Well it’s great to hear about your progress and putting the customer first and then doing whatever you need to and it sounds like it’s a huge amount of work in the background to deliver on that.

Jordan: You wouldn’t even believe. You wouldn’t believe the amount of work but yeah, thank you.

Jon: You’ve just given me a quick summary of it, yeah. Jorg, can I come to you, your background is with a utility, you've got Renault as a shareholder. Can you tell us a bit more about the customer and how Jedlix works with the customer? What's the customer proposition? What's in it for them? How do you package that up for them and provide them with something that they really want and can use?

Jorg: Yes, well one of the reasons to focus on the car-centric approach is that this allows us to deliver such service fully software-based. So we build upon let's say the communication infrastructure already present at the vehicle. So that's one important thing as part of the proposition and then a reason to join our service from a customer perspective is that it’s basically three fault. First of all, there's financial rewards. We pay our users to join the scheme and where they basically don't have to put in any effort and just do some settings up front and then we work on the background. So money talks and this is also definitely also the case for our users and then second and third depends a bit on the type of person but obviously the more early adopters driving EV are also quite, found that they, with our service, they help with the integration of renewable energy on the grid. So that's definitely also one of the reasons we always see when asking our customers and for that reason to join and maybe last thing also good to mention is that by using our service there's also a bit more insights and control in the charging process. Which in general is of convenience to our customers.

Jon: Okay, so offering the customer more control or a better user experience in charging their car, some money and helping to facilitate, yeah, a smarter energy system.

Jorg: Yes.

Jon: Jordan, how does that compare to your, what you've learnt from customers in terms of their needs, their wants? And then Alex, I'd like to ask you after that, your observations on where, how well the industry is doing in terms of really putting customers at the centre of this.

Jordan: Okay, so we, you know, as mentioned previously just focus on the customer and we like to give the customer the power back. So we bridge that gap, so anybody that's got sort of we're trying to promote the renewable side of it and try and encourage customers to get solar panels. What we’ve found is there's a direct link so people who've got solar out there are now automatically starting to think electric vehicles. Someone that's got an electric vehicle is now starting to think “how can I charge this?” or you know save some money on this so that's exactly what we did as users ourselves, just wanted to maximise that benefit and promote that renewable energy is something were hugely passionate about and I think that moving forward for electric vehicles to really take off until the energy system not to suffer so much. It's a natural progression to promote renewable energy on the homes and give the power back sort of to the customer. I mean, with the price of the technology coming down, the price of Solar coming down, parts of batteries and things like that, it's just towards, it's an absolute no-brainer and completely forward. So we just focused again saving the customer money. It's given them an immense amount of flexibility and control over their charging through their own device and through their own systems, and yeah, just to mirror what Jedlix said really, it's tenfold. Sorry, I'm going off track.

Jon: No, that's alright. I guess at the moment we are that innovators part of the market with electric vehicles to some degree with solar panels as well. So what will be fascinating in the next year's is as electric vehicles become more mainstream and maybe solar becomes more mainstream how we see those customer needs and wants changing. Alex from your perspective the whether we're thinking transport industry or energy industry, how well are they doing with putting the customer at the centre of this you think?

Alex: Well, I think we've got two really good examples of the customer-centric approach and communicating those benefits to the customer. It's not necessarily representative of the of the two sectors completely and I think one of the struggles we are seeing at the moment with the transition to electric transport is it's just helping guiding the customer to understand all these new technologies and understand oh I’m, you know, I'm using kilowatts and kilowatt hours instead of litres that I’ve put in from some petrol station with big neon signs. We're really clearly communicating how much things are costing me. This is, you know, learning a lot of new metrics and a lot of a lot of increase engagement compared to say your monthly utility bill. So there is there's a lot of learning going on on both sides, I think, both for the customer in understanding; okay, this is what an EV means, this is how I interact with energy more if I've got, you know, maybe that, you know, like Jordan was saying maybe I could get solar panels and this, you know, over a few years this could be really financially optimal for me as well as being helping me to be green. From the industry side, from the companies, there, we're seeing them testing out a lot of different propositions and seeing how they act in the market and one of the, I think one of the takeaways we're finding is that convenience is key. We can give customers a lot of options and you can have control and make sure you don't feel like somebody's taking over the control of your car or your home but equally people want whatever, you know, reduces the impact on their lifestyle. So as long as they can drive and they can charge as greenly and as cheaply as possible, they will welcome your system with open arms.

Jon: I think we've heard from two companies that are really are putting the customer at the centre but from different perspectives and let's hope that the energy and automotive sector keep doing that as we go forwards. Time is as usual getting the better of us, so I'd like to ask each of our guests for the single biggest challenge, I guess, Jorg and Jordan for the future of your company in the next years and Alex the single biggest challenge for the growth of smart charging in general. So keeping it brief for time, Jorg, do you want to go first with your biggest challenge for making Jedlix a huge success in the future.

Jorg: Well, one of our biggest challenges is that we try to monetise the flexibility coming from the electric vehicles, and we see a lot of developments at a TSO or TNO and in general the energy flexibility marks being more accessible for these types of flexible assets. But here still quite some work to do in some countries where the market design to operate on these markets and but also the qualification requirements to be able to bid in are still sometimes a hurdle for software-based more charging solution with distributed assets. So this is something we're working on closely with the TSO’s and regulators and they're quite willing to help but there is still some work to do.

Jon: Yeah, well, I guess the electricity sector is rightly conservative, but it has to keep up with the coming wave of electric vehicles it will be seeing in the next years. Jordan from your perspective, the biggest challenge?

Jordan: Honestly, it's gross at the moment, which is a nice problem to have but it's also you just a problem that we never knew we’d be faced with this soon. We just, it's really, really painful growing and scaling up to be able to actually meet the demands that we've got and it's trying to stay focused and not get pulled in all different directions with the amount of opportunities that are out there at the moment. So it's just trying to scale up to meet demands, increase the capacity because as mentioned we manufacture everything on site and it's just trying to find the right teams help take it to that next level. So really it's a nice problem, they are headaches. Growing pains for a reason.

Jon: Well you've done well so far and I'm sure you'll do well going forward. And Alex, very briefly from your perspective.

Alex: So I think yeah, touching on both of those points, as new technologies grow and new electric cars come to market and so many more players get involved, it is about the integration of technologies so that we can, you know, we, all cars can use the right or the same charger, use the same, use the same flexibility markets to access the maximum benefits if we can get everybody talking to each other that would be great and that would deliver the greatest rewards to the end customer and therefore boost the smart charging industry even further.

Jon: Thanks, and I guess that's always a bit messy in the early stages, but it's getting through those early stages into a nice integrated approach as you described as quickly as possible. Well, I think it's been fascinating to hear today about the developments of smart charging. As I said at the beginning electric vehicles are coming and they're going to come I think quicker than some people think, they'll bring challenges to the electricity system, but smart charging, with the likes of Jedlix and MyEnergi, we've seen how they can offer those solutions. So, thank you to Jorg, thank you very much. Thank you Jordan.

Jordan: Thank you so much for having me. I've never really done anything like this, so I appreciate it, I get nervous.

Jon: No worries at all. And thank you Alex.

Alex: Thanks John. Thanks for having me.

Jon: And thank you to our listeners. We hope you found it interesting and we look forward to welcoming you back next week to our next podcast.

Episode 1: Auto-switching - the latest way for energy customers to save money

Jon Slowe, Director, Delta-ee

Charmaine Coutinho, Head of Consultancy, Delta-ee

Nigel Evans, Co-Founder, Flipper

Geraldine McBride, Founder, MyWave

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition.This week we're looking at the topic of auto-switching. Auto-switching is in many ways the ultimate in an efficient market – the ultimate consumer champion. From an energy retailer perspective. It can be quite terrifying – a potential race to the bottom and the loss of the customer relationship. We’ll be exploring how auto-switching is developing and where it's headed.I'm delighted to welcome three guests to this podcast: my colleague Charmaine Coutinho from Delta who's delved into the world of auto-switching across Europe and beyond; Nigel Evans, co-founder, chairman, and a shareholder in Flipper, one of the first auto-switchers in the UK; and Geraldine McBride of MyWave, a New Zealand-based company that's developing a digital personal assistant, which amongst other things can automatically switch you over to the cheapest energy tariff. So introducing my guests. Hello Charmaine and welcome. Would you like to give a quick background to who you are?

Charmaine: Yes. Sure. Thank you, Jon. So, my name is Charmaine Coutinho as John said, I work at Delta on our new energy business models research and I've worked in the energy sector for about twelve years in a product manufacturer but also in an energy supplier. So, I feel like I know the world of auto-switching very well, even though it's not that developed yet.

Jon: And Charmaine you previously been on the other side of the fence has an energy supplier negotiating with price comparison websites, haven’t you?

Charmaine: Yeah, that's right. It was it was an interesting experience. I'll just say it like that.

Jon: Thanks. And hello, Geraldine. Geraldine, you’re based on the other side of the world, so thanks for joining us from from New Zealand today. Tell me in a nutshell about MyWave and your experience with auto-switching.

Geraldine: Well, what we've done is we've developed artificial intelligence technology that helps make industries more efficient and how they deal with their customers. And one of the first time applications of that technology was in energy and this was a how do you go from knowing nothing about customer to matching them to the right energy plan and switching them and our technology can do that in less than six minutes and it's since then evolved to actually helping energy companies deal with their customers much better. So, we've evolved to go even beyond the auto-switching so it's been a fascinating journey we've been on the last few years.

Jon: So you can work on both sides of the fence, then. You can work for the customer switching them between energy suppliers, or you can work for energy suppliers helping them in their relationship with customers. If I understand right.

Geraldine: Exactly. And in in today's podcast, I'd be delighted to sort of let you know the types of ways in which energy companies are moving because the good news is that energy companies are moving and that there's some pretty exciting opportunities that we've discovered based on what we originally started with which was actually just helping match consumers and energy plans together.

Jon: And last but not least, hello Nigel. Nigel, likewise can you give us the elevator pitch about Flipper.

Nigel: Yeah, sure Jon. Flipper, we were set up in 2015 in the summer. It took us about 12 months to get fully up and running and taking customers on, but the vision that we had was essentially driven by our view that simple price comparison wasn't working effectively for customers. It was complicated, very few people had confidence that they really were getting good deals. They were getting locked into deals which perhaps they weren't comfortable with and we just felt why do it that way why not just understand what the customers’ requirements were, find the best deal in the market at the time and switch them and continue to switch them as better deals arose. And perhaps the big change that we had when we set up was we decided that rather than go the commission basis which all price comparison websites operate on particularly in in the UK, we would charge the customers a fee so that we could be seen to be genuinely independent of the suppliers.

Jon: Okay, very interesting. Well, it's going to be fascinating to learn Nigel about the journey you've been on and your experiences and what you've learnt and likewise Geraldine as well. Before we do that, let's take a bit of a step back and look at what auto-switching is and how it works, how widespread it is and what the different variants are. So, Charmaine maybe turning to you. From what you've looked at, what are the different forms of auto-switching or how to think about auto-switching, how to break it down a bit?

Jon: So I I think Nigel’s already touched on this a little… So the original customer need comes from this understanding in markets where price comparison of energy tariffs as not really being fit for purpose. So, people are probably familiar with the principle of comparing prices online for any product or service and in the UK for sure the price comparison initiative has been running since about the early 2000s. So, what that still does though is every time someone wants to switch their energy tariff, they still have to go back to the website, recompare and make sure they're getting the best deal and for customers it can be a hassle. It can be they don't know the right data for their energy consumption and these are kind of some of the key elements are auto-switching removes the hassle from. So very simply, a customer goes on an auto-switcher’s site, they would enter some details around their preferences, but also their energy usage and they would form a relationship with that auto-switching site. And on their behalf that auto-switching site would go to all of the market, check against the criteria for the best deal for the customer and switch them to it. But the critical thing is they continue to do that ongoing. So, the customer doesn't need to go back to a website. It doesn't need to re-enter its details. It really makes it very, very, very simple for the consumer and this is mostly residential consumers at this moment.

Jon: And Charmaine in a world where of smart meters of optical readers on analog meters of smart thermostats, then I imagine the need for customers to enter data in some markets will go down over time and there can be more and more automation.

Charmaine: Yes, we're in a very interesting stage particularly in Europe around the rollout of smart meters and smarter and for some markets where historically meters installed have not been automatic or you know Wi-Fi enabled but the principle is we're getting more data automatically and remotely about what customers use and cleverly using that adding into algorithms is actually really critical, critical part of auto-switchers. And there's two main models that we see one which again Nigel touched on… is there's a commission based model which is very, very similar to the price comparison site where a… every time a customer is switched to a different supplier that supplier pays a commission and that varies from five, fifteen, maybe twenty five pounds or Euros up to 50 or 60, so it really depends. But then the other model, which is the more like the Flipper model, is actually the customer pays so that gives a level of independence to the auto-switcher, which you don't necessarily get when you’ve got a supplier commission involved. So those are the kind of two key methods of revenue generation within this model. So that's really interesting because it's two very different models, but both the achieving the same goal.

Jon: People, Charmaine, often look to the GB market or the Great Britain market as the start of really intense competition in the retail electricity market. How widespread is auto-switching? It's not just a UK thing. Is it?

Charmaine: No, I mean the UK market is interesting because there's so many different suppliers. Although many of them are going out of business at the moment and this within that there's so many different tariffs. So, you have a real potential for confusion for consumers because there's so many choices and the one of the things that we found in our research that customers like is effectively auto-switching, which is curate that choice of them. It takes one thing away from them to do and so that's in the UK. But even in markets where there are is less suppliers, less tariffs, there's still a need for this. I think optimally where you have many tariffs, many suppliers, there's an obvious need. I still think this model can work because it takes away a core kind of pain point to the customer which is thinking about are they getting the best deal for their bill?

Jon: And I know from our research we’ve seen auto-switchers in Belgium and Germany. Interesting in Germany there's more of a shared savings model rather than a commission or fee model so lots of variants, but overall, I think it's still a relatively, new might be the wrong word, but the numbers are relatively small compared to the millions of customers that individual energy suppliers have.

Charmaine: I would definitely agree with that. I think we're probably looking at around maybe 200,000 users worldwide, but the rate of change in the UK in the last year has been quite astonishing and the rate of attention that this model has been getting so I think there's definitely kind of the seeds of growth.Jon: So Nigel, you've founded, co-founded, one of the first auto-switching companies. Tell us a bit more about Flipper. When did you start it? Where are you today? What's your journey been like?

Nigel: Sure, Jon. The company was set up in the summer of 2015 and the initial challenge was to just make sure that we have tech in place which was going to facilitate finding the best deal for a customer. That sounds relatively straightforward, but as Charmaine has already alluded there's a lot of suppliers with many different products and this becomes a non-trivial exercise. So, getting that technology in place was important and making sure that we had effective access to the customer data was also a challenge that we had to overcome. In other words, Flipper has never relied on the customer telling us what their consumption is. We've always gone straight into the customer’s bill records with their permission to make sure that we actually had their real historic data.

Jon: Was that a very deliberate move because you worried about that friction of asking customers to put data in and how hard was it to do that?

Nigel: It was a deliberate move. It was a combination of things: one) people just struggle with the concept of energy data. I mean most people don't know the difference between the kilowatt and a kilowatt hour for instance and indeed why should they. So there's a challenge of understanding but also there are you know significant errors can get introduced that way and if you try and use simple heuristics such as how many bedrooms do you have do you have children the family etc.? I'm not saying they're useless, on the contrary, but they don't really get to the level of granularity that you need if you really are comparing a very large number of offers. In terms of customers’ willingness to hand over the data, because that's really what we're asking them to do, certainly in the early period it was concern, and you know for good reason this is an unusual thing to do but I think people began slowly to understand that it's only with that data that we can find them the best deal and at least as importantly keep on switching them to the best deal as the market changes. And I think that that we have overcome that hurdle now. So, what we end up with is a situation where from the customers’ perspective it's very, very simple. Okay, behind it, of course, there's the IT which makes it less so but that's not the customer’s problem. That's our problem.

Jon: Hmm. And what would you say you've learnt over the few years that you've been going? You know how quickly have you been able to grow the business? Have you achieved your aspirations? What's been the toughest part of the journey?

Nigel: I think there have been a number of tough things actually. Firstly, given the model that we have which is not commission-based, the first challenge is to get people to part with money. And again, this isn't surprising – people don't typically when they're searching online for anything, they don't expect to have to pay money. An awful lot is available for nothing. So that's something that you really have to overcome that challenge particularly when you're a new company, which nobody's heard of. And that that was you know, let's be clear that was a that was a struggle that we had to overcome. The way that we overcame it was basically through some lucky breaks, some very, very good early PR that we had from very reputable sources in the UK, particularly the BBC and that did help us really breakthrough in the summer of 2016 and started getting significant numbers of customers signing up. What we then began to get were the customer reviews which progressively have improved and now they’re extraordinarily good. Trustpilot scores that the company is getting are 9, with very, very high levels of satisfaction. But that is something that we have to work on very carefully because things do go wrong and very frequently it’s because of problems at the supplier end, but because we're taking control customers don't want to hear about that, again quite rightly. We are taking on the problem, so every problem is ours.

Jon: That's quite interesting. So, because you're effectively taking over the customer relationship you're taking the pain of the mistakes of the challenges that suppliers have with their IT systems and their billing for example.

Nigel: That's exactly right and I think you know customers are increasingly thinking and saying who… people they will be asked who is your energy supplier and they'll say oh Flipper. Now, we're not an energy supplier, but they think of us as the people who are sorting out energy, so hence we’re their supplier and in many ways, we like the fact that they are looking to us to solve their problems and all of the pain at the back end. Some suppliers are excellent, some of them are very slow, some of themhave very, very difficult systems to work with and some of them, as Charmaine alluded to earlier, have gone out of business and that causes no end of concern to customers again quite reasonably.

Jon: Do you ever regret going down the paid route, the fee route, rather than the commission route? I mean I can see that the fee route means you are truly independent and on the customer side of the table, but does put up that that barrier to get the customer to join?

Nigel: Well, the reason I decided that we were going to go down the fee route was simply that in the long run I felt that a commission model wasn't sustainable simply because if you're going to a supplier and saying pay us some money 20, 30, 50 euros for each switch, but at the same time saying to the customer, if after two or three months, we find a better deal will switch you to it, then suppliers are increasingly going to say there is no way we are going to pay that acquisition cost if we're, if the relationship with the customer is very remote and ephemeral. So, I just felt that notwithstanding the if you like the moral stance, which I think Flipper has with regards to the way it's presented and the way that we charge customers, I think that it the commission- based approach in the long run is not sustainable.

Jon: Yeah, I can very much see that. So, playing the long game even if it means it's a bit harder to get those customers to sign up to begin with?

Nigel: Exactly so.

Jon: Geraldine, you've come at this from a completely different angle, I guess, or different perspective. Can you tell us a bit about your digital personal assistant and how you got into auto-switching from there?

Geraldine: Well, it's been an interesting journey, so first of all, we thought about this problem and think about the problem every customer or consumer in a home anywhere in the world. They all need electricity. They all need insurance. They need many, many home services. And in fact, all of them are really complicated to get because they hide behind their own complexity and most people are time poor. All they want to do is know that they're getting the right deal or the right the right savings. So, what we do is we built a technology it’s actually a platform which has a brain in it that gets to know the end consumer and all we need are data points. So once we know where a person lives and we know, you know sort of a little bit about how they're consuming energy whether that comes from a smart meter or from their energy bill, we take that data and we're able to then and their preferences and we're able to go out and scan the entire energy market through one of our energy partners and bring back the right prices and right plans which then the consumer can then elect to switch. Now we in our example, we went from knowing nothing about a consumer. We were a no-name brand to bringing on that consumer onto into our technology and some into my own as we call it My Intelligence Assistant and we were able to do all of that and less than six minutes including getting to the switch, which is i.e that they get, you know, they're going over to an energy company with a package of information that that is the switch. Now in terms of the practicalities there was a little bit of work behind the scenes liaising with those energy companies, but our energy partner which was an aggregator did that with us, but by and large the average consumer, you know age group was about 55. We had people as old as 95 years old using it and when we surveyed them like why did they use they said it’s that simple it's actually just so easy, it's so intuitive and also it remembers me and it will actually be able to continue to serve me, you know forever and ever. But what it’s done since then is evolved because energy companies now are starting to adopt this technology because they can see the power of essentially into what we call it is intelligent personalisation where you can build a relationship with your customer based around their data, give your customer a benefit based on their data, but also use it to make sure that people are on right plans. They're not just left to go back to the you know, the worst plan that’s available in the worst tariff and actually solve other challenges and I'd be delighted in this podcast today to share with you some of these new challenges that we're solving again because we've got a brain that centred on customers and customer data, so it's been fascinating journey and it's actually only just starting with because it's evolving into many different areas now with energy companies.

Jon: Okay, so your auto switching between energy companies and then even auto-switching within an energy supplier’s portfolio of different tariffs, for example.

Geraldine: Yes. So, for example, if I’m boarding if an energy company has three different types of energy companies within the group and you don't know how to you know, which one to choose what we can actually be helping, you know onboard people in a very simple and seamless way. And in fact, you know, the rates of conversion using our technology were way higher than even an app or a website so conversion rates were very good. But even now we're being used also to prevent existing customers having to go to call centres so if you can say to our technology I need a payment plan because I can't afford my energy bill this month our technology actually can manage the payment plan as it’ll remember what you did before? And say would you like the same energy per payment plan that you had last time we gave them 9 weeks to pay. Yes. Thanks. I'll take that same plan.We've got beneficiaries who are social welfare beneficiaries who are entitled to energy discounts. So what we're doing there is, under permission from the end-user we access the social welfare data, bring that into the into the energy data match the data sets and then we are able to then say, yes, you're entitled to an 18 percent energy discount and we can do all of that today. That was a 40-minute phone conversation on the call centre and we've turned this into a 30-second process. So energy companies are finding that we're helping to reduce the cost of to serve the customers and we’re deflecting between 30 and 50% off their call centres by using this technology. So where we started as being a switching we can do that matching pair right people to write plans. We're being used in so many more ways now and what we're doing it, we’re licensing our technology to the energy companies to enable them to do these intelligent things using the data that they have.

Jon: So you’re very much aggregating or bringing together data from different sources and using that to help companies, be it an energy company, be it your own auto-switching company to make the best decision for the customer. Okay. So Nigel, I'm interested from your perspective. You're building a consumer brand in the UK market. How much do you consider Flipper a consumer brand business or a technology business or you're a natural blend of both together?

Nigel: I think it's principally a consumer brand business at the back of it, of course, is technology but conceivably we would license some of our tech to others, although I must admit we haven't done that, but the customer is at the heart of what we do and when we think about what else we can offer how the market is changing and how we can interface with that both in energy and more broadly, it's always the customer who which we start with so, I think it's very much a consumer business and a customer facing business.

Jon: Nigel, do you think you're limited? Well, I can imagine the answer now your own or the main shareholder of Flipper is a water company. So it is how broad can you be energy or beyond energy?

Nigel: I think we could potentially be very broad with a whole range of Home Services potentially amenable to this type of approach. Some are more obvious than others. I mean things like mobile telephony broadband etcetera would be relatively straightforward to look at in the same way. But I also think that there's a huge amount of opportunity still in energy, which we’re only just beginning to scratch the surface of and Geraldine has alluded to some of the changes already, but the combination of things like a far greater penetration of smart meters the potential move to half-hourly settlement for residential customers in the UK market, where every half hour the price potentially could change and the facilitation of two-way interaction with customers in other words, they're not necessarily just demanding and consuming energy, but they potentially, with storage devices or with interruptability of existing devices, offering support to the market generally or the network.All of that opens a whole range of complication, but real opportunity as well. So, in the UK, we've got now about 60 to 70 suppliers all with a range of tariffs – that's complicated. If you say additionally that you've got half hourly pricing in that market and you've got two-way interaction then it's impossible for anybody to try and do this without automated systems. So, it's either going to be reliant on a supplier or on an intermediary such as Flipper which always by its nature. Is there looking after your interests rather than trying to exploit your loyalty and hope that you won't realise the prices have risen. So, I think that it's adding the richness and the value beyond price saving which is where much of the future benefit and growth could come from.

Jon: That's really interesting because some people might look at auto-switchers and think well that only really works when you've got a commoditised market of kilowatt-hours coming from the grid and you can compare one identical kilowatt hour with another identical kilowatt hour. But I think we see a future where yes that will be part of the market. But another part will be people charging their electric vehicle, time of use tariffs, as you say half-hourly settlement, and companies that can help the consumer get the best deal and that market or help them with smart charging for example could be really interesting.

Nigel: I think that's right Jon and you know, we may move away from a model in which you're switching the customer from supplier a to supplier b after three or six months or something to one in which you're thinking all the time in real time. What is the best thing for you to do now from whom with whom so you may have somebody who for part of their demand during some days is dependent on a particular supplier. And at another time may be dependent on a completely different supplier. And with things like as you say electric vehicles the demand curve and the demand shape will be profoundly changed just by, you know, an individual consumer the you go out to get your electric vehicle and suddenly you look different. So, the opportunities are potentially huge. At present people by electric vehicles are often paying exorbitantly high prices for the power.

Jon: Charmaine, I guess another example of this could be the fact that in you could have two suppliers to one household for different loads with in that house.

Charmaine: Yeah. It's a really fascinating potential opportunity because customers’ needs are going to be much more complex. So Jon I think you're referring to some of the changes that the UK market is looking at where you will have one meter but the idea is that you can have more than one supplier and that would change dynamically over time. So, it may well be that for this particular point in time, your electricity supplier should be somebody's got really highly specialised and appropriate electric vehicle tariff for example, but then three hours later it might be someone who's got a very targeted heat pump tariff or someone that offers you a very good export rate to the grid and given that you can do multiple suppliers on one point it opens up well two things way greater customer choice, but also a huge amount of innovation in the energy sector and it kind of comes back to one of the points that Geraldine doing was making around data and actually what does the customer really, really want or need at this particular point in time and that changes it's not as simple as the kilowatt hour over the course of the day.

Jon: Okay finish off with a question to it to everyone so… auto-switching. A huge threat for incumbent energy suppliers or actually the technology behind this a huge opportunity for them to optimise what they offer to the customer? Geraldine, and we’ll need to keep it fairly short but, Geraldine, did you want to go first on that?

Geraldine: Well, I think that it is a huge opportunity and I think what Charmaine just said and this is why data is everything and you will not be able to unlock the next generation of energy innovation with electric vehicles and all of the things we've been talking about including being centred on the customer without having AI and a data driven model and that's exactly why we built the technology we've got and why are we experiencing such a strong uptake by energy companies because you know, that's exactly the channels that we were born to solve. So, we're right in the middle of this shift particularly in the New Zealand and Australian markets and also in Britain, so it's a very exciting time I think to be an energy.

Jon: Okay Nigel – threat for an energy, energy companies or opportunity for them to use this kind of technology themselves?

Nigel: Well, I'm very much in the Geraldine camp here. It's the opportunities are enormous and indeed the energy suppliers need this type of technology and these type of intermediaries to enable them effectively to access the market but there is a little anecdote. I like to share… six to nine months ago a number of energy suppliers in the UK acted together to frustrate Flipper by not allowing Flipper customers to take supply so they obviously thought it was a huge challenge and they decided that Flipper customers were not acceptable. Fortunately, the regulator disagreed extremely strongly with that and told them that they actually had to, so that's encouraging that the regulator made a good decision. But I think also from the suppliers’ point of view they were slightly missing the point that effectively they can use companies like Flipper themselves to offer maybe very short-term products into the market which you know, we could offer something great for a week. Hmm something like that. There are huge opportunities for them.

Jon: Okay, really interesting. And Charmaine final thought from you in terms of threat for energy suppliers. Will this put them out of business or actually an opportunity of that's the technology.

Charmaine: Well, I think I need to be a bit more dampen down everyone's enthusiasm just to show the other side of the fence. I think there's a there's a really interesting opportunity for both sides. I think one of the key challenges for auto-switchers in whatever format they may evolve to is that getting in front of the customer and challenging those years and years of brand recognition from energy suppliers full stop and then including big ones and small ones. So, you know, just getting the customer line-of-sight to their product offering is, it's a key one. I think the other piece is really kind of the boring bit about starting a new business, which is just getting all the processes, all of the, you know, perhaps in this case of algorithms machine learning. All the data piece just working really quickly and its people often reflects that in quite a kind of light touch way, but it's complicated and I think that refinement is what we'll see going on next kind of 12 to 18 months. But yeah, I think it's an opportunity for everyone really think with all these things in you and you've got to think of it differently about the whole system.

Jon: Okay, well, I hope you've enjoyed listening to the podcast. I think it's been fascinating to hear from two companies that are coming at the same problem and from slightly different backgrounds, but with many similarities. For energy companies is not all doom and gloom by any means. Theywon't be auto-switched out of the market, but there are some big opportunities and challenges to embrace this technology to thrive in a more complex energy world and the future. S Nigel and Geraldine, thank you so much for sharing your thoughts and experiences. Good luck to both of you with your businesses going forward. Charmaine, thank you very much to you. And to the listeners, thank you very much for listening and look forward to you joining me for the next podcast. Thank you very much and goodbye.