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The direction of travel is clear – our energy and heating markets are undergoing a profound transition. The dynamics of power generation that have previously held true for over a century are being flipped precisely on their head, coupled with rapidly evolving and increasingly sophisticated energy demand characteristics.
And now even the largest, most established - and traditionally fossil fuel focused energy companies - are beginning to murmur a response.
To paraphrase the work of The Animals, new energy market players are set to be the ruin of many a traditional energy value chain. Many distributed energy players, like Sonnen, are on the rise. These players are starting to redefine the energy market, generating value through the supply of energy services and autarky amongst end-users. We’ve found that many firms are scrambling to keep up with this shift to new distributed energy business models, and risk being left in the dark as the sun sets on the old energy market paradigm.
Spend your life in energy autarky
Much like the man of steel himself being confused for what he’s not, heating manufacturers are increasingly being confused for what they used to be (see: boiler manufacturers). That is, they’re increasingly moving away from their traditional manufacture-only role as a result of the broader energy market shift towards distributed energy. As I’ve said before, this shift is resulting in large disruptions in the energy market, with many firms being forced to reconsider their existing business models and re-evaluate their likely future opportunities for value creation. Incumbent heating manufacturers are no different; with their core markets under threat by new entrants they are increasingly searching for a hero to save them. Alas, in the absence of superman, they’ll probably have to save themselves.
Engaging customers with their energy consumption to “support a better world” and “change the world for the better” is not something you would typically associate with a telecom giant like Swisscom. tiko, a spinout of Swisscom Energy Solutions AG, has developed a ‘smart home heating control system’, providing a means for electricity demand response (DR) and load management via in-home electrical heating systems (electrical heating e.g. HPs, night storage and direct electrical). The system is designed to provide utilities, energy providers and network operators with a simple ‘on-off’ DR & load management solution, whilst providing customers with reduced heating costs. Connected heating devices are switched on or off as required, but it is ensured that durations are short enough that thermal comfort is not compromised.
What we thought back then…
Tastes in the energy sector are evolving, with lots of talk about the dash for the provision of services in the utility market (although in some markets it’s more like a slow, Sunday morning stroll). A key objective in our work at Delta-ee is simplifying this energy market transition for our clients, distilling this often complex topic down to the key elements.
Changing tastes in the energy market
Time flies. I first blogged about Thermondo in October 2014, pointing out how I believed it could shake up the German heating market. One and a half years later they are in the very early stages of doing precisely this, and recently raised €23.5M to drive their growth into, in their words, “an integrated energy company in a distributed world of energy”. I visited the company’s headquarters in Berlin last week and thought I’d share some of my latest thoughts in this blog.
I previously characterised Thermondo as disrupting the traditional route to market for heating systems, by offering a 21st century way for customers to buy a new heating system and have it installed. They have been executing on precisely this over the last couple of years. Customers complete a survey and upload photographs of their heating system, receiving a firm quote from Thermondo whose software optimises the best solution for the customer. The company’s in-house installation teams across the country then carry out the installation. Thermondo is now installing thousands of heating systems a year in this way. The numbers are small in relation to the overall heating market: their challenge now is to get to scale, and as you’ll see below, broaden their offering.
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