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With a sizeable prize up for grabs, the battle for EV customers begins

For utilities, the rise of EVs presents as much opportunity as it does threat, as a recent blog from my colleague Jon Slowe has described, so let’s unpick the opportunity, and discuss how new-entrant energy supplier Octopus Energy is positioning itself to capture part of the prize.

Octopus Energy is a good example of an innovative, agile player that is moving quickly. With less and less doubt about the future value at stake, a key question is how companies can go about capturing this value and avoid being left behind?

In our most recent EV webinar, we discussed the three key types of direct value, specifically around the retailing of electricity and the additional services for EV customers, that are out there to be captured. The figure below details these values and provides examples of the tools that can be used to capture them.

EVsMarch.2018 bodytext1a

From a utilities perspective, there are three strategic approaches (passive, reactive and active) which can be used to capture these values. The strategies, detailed in the table below, are differentiated by the diversity of value and customers captured. The figure below illustrates this differentiation and provides examples of companies currently executing the particular strategies.

EVsMarch.2018 bodytext2a

 

 

Attempting to predict what players in the market will do in the future is always a tricky business – in Jon’s last blog he did so with Nissan. Now I’ll take a look at Octopus Energy.

Last week they provided a glimpse into their future EV strategy via the announcement of their new Agile tariff. This time-of-use tariff provides customers with access to half-hourly energy prices, thereby allowing them to reduce their energy costs if electricity use can be shifted to outside of peak times.

While it’s not specific to EVs, it will enable EV owners to optimise their EV charging which could potentially result in substantial cost savings. The big advertising point around this tariff was ‘plunge pricing’ – under certain grid conditions the wholesale energy prices could potentially fall below 0p/kWh. This tariff will then pass on the negative prices to customers and paying them to consume electricity – in essence, customers are effectively paid to help balance the system. If you dig a little deeper into what an energy tariff is comprised of, you’ll discover that the wholesale prices is less than half of the actual electricity tariff. So even if that goes negative, it is unlikely that the tariff will be negative. Regardless, this tariff can be viewed as the first step towards enabling customers to be paid for feeding electricity into the grid from their EV.

What is really interesting, however is piecing this together with their other activities. Octopus Electric Vehicles enables customers to lease an EV, and together Octopus EV and Octopus Energy are leading a consortium to run the first large-scale domestic trial project of V2G charging in the UK. Putting these three pieces of the puzzle together indicates that, as a whole, Octopus are putting the building blocks in place to possibly execute an active strategy to capture the electricity sales and flexibility values in the EV market.

EVsMarch.2018 bodytext3a

Of course, Octopus isn’t unique in this regard. Many utilities, incumbent and new entrant, and others are positioning themselves to capture the values I’ve discussed – Engie acquiring charging station manufacturer EV Box, EnBW partnering with charge point host Tank & Rast and Shell acquiring both charging provider NewMotion and electricity retailer First Utility are just a few examples.

This highlights that the EV market is extremely dynamic and because it is still immature and growing, the size of the prize is large. So much activity indicates that the battle for the customer (and the associated values) is going to be one that is fought by a number of different players with varying strategies and it will be very interesting to see how this battle unfolds.

Our research on the Electric Vehicles – Electricity interface is exploring this battle and the players involved, on a European scale, as well as other associated issues. You can find out more by visiting www.delta-ee.com/EVs or getting in touch.

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