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It’s going to take a lot of very smart tech, along with laser-accurate strategy, to get Australian energy companies through the next few years

Energy retailers — particularly large ones that also hold generation assets — are facing immediate challenges with no precedents or financial wriggle-room to accommodate trial-and-error. Digitisation is a huge part of the answer, but it’s not as simple as digitising existing business processes. Utilities are having to build the plane as they fly it. 

The first major factor affecting energy companies is that wholesale energy prices have plummeted. The price of wind and sunlight is zero. The cost of transforming these energy sources into electrons is low. In an uncompetitive environment this might provide the opportunity to increase margin. But competition is red-hot as energy-adjacent companies like telcos are already expanding their offering, and big brands like airlines and retailers could also look to strengthen their relationship with customers by making strategic moves into energy as additional revenue streams.  

We are rapidly approaching a scenario with energy that we have previously seen with telecommunications. Rather than consumers paying for a volume of service use, they will effectively pay for access.

Just as we cannot imagine phone providers today charging per text message or call minute, future energy companies will be less competitive if they charge per kilowatt-hour and are more likely to move to a flat-fee model, at least for most home users. 

The other thing that energy companies are grappling with is decarbonisation. This affects everyone, but it affects gentailers most. Where pure retailers must simply account for the carbon emissions of their own operations, and those generated within their supply chains, gentailers have the greater problems of social license, investor hesitance and potentially stranded assets. 

While customers continue to gravitate to cheaper solar and storage set-up, sparking talk of the “death spiral”, the uptake of electric vehicles represents a new variable in this equation. Far from being seen as something that will “tip over the systems”, electric vehicles, as batteries on wheels, are perfect to soak up the excess energy from solar and wind farms. With bi-directional charging, it will be a viable alternative to powering homes, buildings or when aggregated, provide grid services. 

To navigate each of these developments and to be relevant in the near-future, utilities need a coherent, agile and sophisticated digital strategy. Digital is no longer about providing customers with a platform to view usage and invoices. Such a strategy must both plan for known transitions and remain flexible enough to accommodate emerging trends. Some of these digitisation projects will happen within an individual energy company. Others must be undertaken sector-wide, with input from infrastructure owners, regulators, energy companies and emerging partners. 

This may be unfamiliar territory for energy companies more used to competing than collaborating, but with every energy company having a stake in the fitness for purpose and interoperability of grid digitisation projects, it will be necessary. This means that there will not just be a technical digitisation task ahead of energy companies in the near future, but also the complex task of managing partnerships. 

This is an area where the whole industry should collaborate using digital twinning to model and test technology implementations and infrastructure modernisation. The ability to build digital replicas of complex infrastructure assets like energy networks, as well as the generation assets that supply them, will prove invaluable to industry collaboration in a situation where such collaboration is relatively novel and the transformation timeline does not accommodate backtracking. 

On the regulatory front, the persistent wave of changes continues. Having only recently updated their systems to accommodate five-minutes NEM settlements, energy companies must now prepare for a consumer data right for energy. An exposure draft of this bill has been circulated by the Federal Treasury for industry consultation. 

There is likely to be some tension at an industry level between the interests of incumbent gentailers, network operators and data companies who currently have access to this information, and those of digital innovators — both retailers and technology companies — who would seek to disrupt legacy business models. Each of these groups will have their own preference on how consumer data rights are implemented and will make representations to the government to advance those.

Finally, as decarbonisation becomes a business process, investors and customers alike will demand more dynamic and transparent reporting of the environmental impacts of energy companies’ business. Gentailers must plan shutdown timelines for fossil assets, which involves more than just engineering tasks, as there is massive workforce transition required. 

Customer and investor focus will move from operational emission (Scope 1 and 2) to Scope 3 emissions — those contained within the supply chain. Greater regulatory attention and consumer awareness will pressure companies to not just commit to and meet emissions reduction targets, but to be able to show detailed working and make it available to their stakeholders. 

All of these changes will require digitisation strategies that are spread far beyond the IT function of energy companies. They demand close guidance from executive leadership, and detailed input from people who are intimately familiar with the operations of energy systems but who could not write a line of code to save their life. 

A low, or no-code approach that provides tools to non-technical staff to have them participate meaningfully in digital projects is likely to prove valuable for energy companies as they bridge the gap between the need to digitise on the one hand and the scarcity of people who have both advanced software development skills and a deep understanding of energy industry operations. 

All of this sounds extremely difficult, and it is. But the tools exist to help energy companies navigate this process, and hesitance will see energy companies left behind as the sector transforms without them. 

By 2030 we will see a very different energy industry. What shape that takes, how much it costs to build and who is leading it will depend in large part on how well energy companies today manage the digital challenges that face them. 

Soon Wai Lim is a senior manager of utilities, Accenture Australia & New Zealand 

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