The transition from ‘old’ to ‘new’ heat is disrupting the market in several ways, creating new business models, customer propositions and new technology ecosystems, as well as opening up opportunities for new market players and sales channels. In part one of this two-part blog series, we discussed how new technology ecosystems and connectivity are shaping the market.
For this second and final part of the heat blog series we consider customer propositions and new market entrants and how they will impact the heating market.
New customer propositions
The way customers interact with the energy system is changing. Many are becoming increasingly informed and engaged, and thanks to the rise in domestic renewable generation, many have become prosumers. At the same time, digitalisation and a shift in focus from offering products to services is seeing a plethora of new business models emerge.
Each model sees providers take on different risks that the customer previously held, from financial and technical risks to performance, behaviour and energy price risks. The most disruptive model that is emerging, is heat as a service (HaaS), whereby the service provider will take on all risk.
Heat as a Service
The key difference between domestic and commercial consumers is the predictability of heat demand. The more predictable, the less risky. As domestic usage is often less predictable, we expect that true HaaS models might initially be launched to householders through an intermediary such as a housing association or council, as is the case with energy supplier Eneco’s recent trial in the Netherlands.
What to watch: We expect several large utility players to launch HaaS offers within the next few years, and first movers are likely to be those that already offer most or all of the constituent products and services.
New market entrants
Traditional energy suppliers are being squeezed for market share from big and smaller market players.
With over 100 million Amazon Prime users, and the recent launch of its Home Services division, which offers services such as plumbing for customers in London, Manchester and Birmingham, purchasing energy services from Amazon will not be a stretch for many customers.
On the other side, nimble start-ups and controls specialists (e.g. PassivSystems, TrueEnergy) are causing disruption with their ability to side-step traditional routes to market.
What to watch: Incumbent energy companies will need to pick up the pace if they want to defend their market share. This may include looking at technology and services partners or acquiring some of these innovative start-ups so they don’t get left behind.
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