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Technology firms pose threat to energy firms in smart metering, says Ernst & Young

Energy efficiency news – by GreenWise staff
4th October 2011
Mobile phone operators and leading consumer technology companies look poised to seize a share of the smart metering market because consumers distrust the big energy firms, a new report by Ernst & Young warns.
The roll-out of smart meters looks set to shake up the UK energy market, which is currently dominated by the 'Big Six’ energy companies, the research by Ernst & Young shows. 'The Rise of the Smart Customers’ report warns that to stay in the game, energy firms need to re-establish trust with their customers, or risk losing out to new, innovative entrants. It shows that attitudes towards smart meter technology among consumers in the UK is generally positive, but that they have a negative view of their relationship with their energy suppliers.

Smart meters
The roll-out of smart meters globally has been compared to that of the creation of the internet and will cost billions to implement. The UK Government wants the UK’s 30 million homes and businesses to be fitted with smart meters by 2019, with the mandated mass roll-out of the technology set to begin in 2014. 

Smart meters will for the first time place the power in the hands consumers to manage their energy. They enable meter readings to be taken remotely to give householders and businesses real time information on their energy use, thereby encouraging greater energy efficiency. They are also seen as a vital first step towards the introduction of smart grids, which in turn will make it easier to feed renewable generation into the grid.

Consumer distrust
The Ernst & Young report surveyed consumers in 13 countries, including the UK, and found there was a worldwide distrust of power and utility suppliers. In contrast, it found companies in the technology and telecoms industry have built a strong rapport with their customer base and are used to delivering innovative lifestyle technologies. This, said the report, places them in a stronger position than most energy firms to deliver smart technologies.

"The roll out of smart meters in the UK provides a challenge to utility companies to transform their relationship with consumers," Richard Postance advisory partner, Ernst & Young, Power & Utilities said. "The report demonstrates the lack of trust the public worldwide has in energy companies; this combined with technological convergence means that firms with strong relationships with customers, expertise in managing their data and a heritage in supplying innovative technology have a unique opportunity to enter the energy market and provide high value services and products from adjacent markets."

The research follows measures unveiled by the Energy Secretary Chris Huhne to open the energy market up to new entrants. According to the Government, the average consumer is expected to save around £23 per year on their energy bill as a result of smart metering by the end of the decade, but it is concerned about the rising cost of energy bills and dominance of the Big Six energy suppliers.

Wake up call to energy firms
Ernst & Young said the Government’s position and its research should act as a "wake up call" to energy firms, who themselves do not appear to realize how exposed they are to competition. The report interviewed 75 power and utility companies across the globe and found energy executives believe they have a "healthy relationship" with their consumers.

The report calls on major UK energy suppliers to adapt their business model to be more consumer focused and indentifies six key factors that would enhance consumer focus and help smart services succeed. 

These include ensuring the smart technology is as integrated and as compatible as a smart phone; making smart meters simple and easy to use; providing control and choice to the customer; addressing issues of privacy; educating consumers about smart technology; and communicating the customer benefits of the new technology.

"Smart technology puts unprecedented power in the hands of consumers to manage and control their energy use. In time, this will fundamentally shift the balance of utility-customer relations. It seems the era of a one-way relationship — where a utility delivers energy to domestic consumers, end of story — is over, power and utility companies need to adapt now," Postance said. 

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