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Energy and heat markets collide – but what will the future look like?

Two traditionally separate markets are starting to collide. Coupled with the start of a connectivity revolution, this is opening up numerous innovation opportunities – which we think will start to disrupt both markets.

New market entrants threaten to disintermediate the utility/customer relationship

At Delta-ee our combination of deep dive analysis into specific technologies, plus our new Energy Services Innovation Study is throwing up plenty of examples of such innovation. One example of this is a Swiss-based initiative, tiko. A joint venture between Swisscom and energy company Repower, tiko is using its connectivity expertise, clever analytics, customer-focused mind set and innovative business model to exploit residential demand flexibility. In a nutshell tiko is shaping electricity demand (mostly from electric heat pumps) and selling this flexibility to the Swiss electricity system operator. They keep the revenue; but provide the customer with a smart heating control app. The key to residential demand response is to sign up customers effectively; and keep the implementation cost per customer low. tiko appears to be doing both well, and has signed up thousands of customers, inserting itself next to the customer rather than remaining in the background. This is an ongoing theme of the disintermediation of incumbent players by new entrants that we see from our analysis of the traditional value and supply chains in both the heating and energy markets.

Flexible business models create new markets

We think that in 5+ years the structure of parts of these markets could change considerably. Some start-ups are already starting to disintermediate players in today’s value chains. And established companies from other verticals are looking into these markets, attracted by the opportunities to position themselves next to the customer – either alongside existing retailers, or potentially between them and the customer. As an example of this, being a joint venture between a telco and a utility, tiko could pivot in different directions as the market evolves. In Switzerland it’s working with incumbent utilities, but in other markets it could (in our opinion) add energy supply into its offering to market itself directly to end users; or use Swisscom’s capabilities to broaden its customer offering into other areas of the connected home.  

The markets are moving, meet us to hear more about it!

This flexibility of future value creation is a key theme in our Energy Services Innovation Study, and a feature of a number of the 36 innovations we’ve profiled and assessed in some depth. tiko is exploiting the interface of electric heating (incl. heat pumps) and the electricity market; hybrid heat pumps can also offer this, as can fuel cells, (micro) CHP, and storage – all enabled by the rapid rise of connectivity and the internet of things. The collision between energy and heating markets is interestingly the theme for an upcoming event held by BNE, the German Association of Energy Market Innovators. My colleague Lukas Bergmann will be at that event – if you’re there please say hello, we’re always excited to share perspectives.

We’d also love to continue the discussion with you via our LinkedIn Group ‘Delta-ee Energy Services Innovation Group’. Alternatively, join us at the Innovation Hub at European Utility Week, 3-5 November, Vienna. For more information, please contact Scott Bryant, [email protected]

In our next blogs we’ll share some highlights of our Energy Services Innovation Study.

 

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Sunday, 22 September 2019

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