The next five years will be crucial for the Australian utilities sector as it transitions to clean energy. As a country that is relatively playing catchup in the renewable energy space, there’s a lot of ground to make up in a short space of time. And, with a net-zero target looming ahead, the utilities industry is starting to realise how fast it needs to adapt.
Australia is committed to embracing clean energy and divesting from fossil fuels and non-clean energy sources. And that brings tremendous benefits to the nation. But it doesn’t come without its challenges. Transitioning into this era of clean energy is critical for our environment, consumers and economy. But for some energy providers, this transition period can feel like find the needle in the haystack.
In this resource, we share insights on why and how Utility companies should adopt a stronger strategic digital capability to emerge, thrive, and re-invent themselves.
The recent history of the utilities sector
The industry is changing fast and has been for a while now. And, at the same time, Australia’s energy consumption has been on the rise. Over the past decade, the average annual growth has been 0.7%. As a result, pressure is mounting on the industry to act. If the sector continues its growth spurt before clean energy is phased in, things will get worse before they get better.
To further emphasise the point, it’s worth noting that the mining sector experienced the most growth during this time. Up by 11% in just a year, it’s clear that Australia’s reliance on fossil fuels is far from over.
Elsewhere, the water supply industry has had a bumpy ride. Erratic weather patterns mean that rainfall levels are difficult to predict. And, at the same time, the Australian population is growing and consumer demand with it. To meet these new challenges, the industry must modernise.
Why evolution is essential
There are no two ways about it: the old ways of doing things just aren’t working anymore. The new world we inhabit has new demands and challenges. The utility sector needs to face them head-on if it wants to survive.
The most obvious reason why the sector needs to modernise is climate change. However, while widely understood to be an issue, energy companies delayed environmental action for a long time. As recently as 2015, only 28% of the world’s leading energy companies had carried out climate assessments.
But the risks involved in ignoring climate change are dire. Without a plan in place, there is the possibility that infrastructure could be damaged. In addition, existing products could become less marketable, all the while prices fluctuate unpredictably. And that’s just a small fraction of the issues the sector is likely to face if it doesn’t adjust.
Across the world, people are beginning to expect more from the companies they engage with and Australia is no exception. According to EY’s Future Consumer Index, 67% of Aussie consumers want businesses to have a positive social impact.
A majority of Australian consumers (63%) also expect more from the customer service they receive. Multichannel delivery, human interaction, and a positive overall experience are now paramount, regardless of the industry. With over 30 energy providers and almost 200 water suppliers, Australian utility companies need to think ahead if they want to retain customers.
The digital transformation has swept the world and caused disruptions in all industries, including the utilities sector. The good news is that this new technology, including the Internet of Things, smart meters, and smart grids, can massively improve productivity and service delivery. The bad news is that a lot of existing utility companies are as yet underprepared to adopt it. If they want their clean energy rollout to go smoothly, that’s going to have to change.
There’s no denying that the utilities sector in Australia needs a shakeup. But, despite the added pressure that this places on existing companies, there is a lot to feel positive about. You see, the reasons to revolutionise outlined above don’t just pose problems. They also offer unparalleled opportunities to change things for the better.
By adapting to climate change, for example, companies can future proof themselves in an increasingly eco-conscious Australia. In addition, embracing new technology will allow companies to add value as they switch to renewable energy. This and better data on consumer expectations will inevitably improve customer service capabilities and delivery.
The question now, though, is where do we go from here? To answer this question, it’s worth taking a brief look at how other industries have evolved and what the utilities sector looks like elsewhere. From there, we can begin to face the challenges facing the sector head-on, as outlined below.
How have other industries evolved?
Other industries have acknowledged the changes posed by our so-called “new normal” and adapted far quicker. eCommerce is perhaps the best and most high-profile example, although it is by no means the only one. For example, technology, media, and finance are all, generally speaking, well-adjusted to the demands of the times.
eComm, though, had to change at breakneck speed when Covid-19 hit. Meanwhile, consumer concern about climate change remained a key concern. So, companies scrambled to expand operations. As they did, many also endeavoured to implement more environmentally friendly shipping solutions and reduce packaging.
As such, although the industry still has a long way to go, it made enough headway to give it momentum. The utilities sector in this country needs to follow suit.
How has the utilities sector evolved abroad?
It’s not just other industries that have been quicker on the uptake. Some countries’ utilities sectors have also had significant success adjusting to new expectations.
This has to do with the fact that, in many countries, renewables have become the cheapest option for energy companies. Part of the reason why is that renewable energy has come to be accepted as a wise investment. And, as a result, it now accounts for a third of the world’s energy generation. Australia isn’t too far behind at 24% renewable energy output, but still has a long way to go.
The challenges facing Australia’s renewable energy sector in 2021
For Australian utilities to make significant headway towards the widespread adoption of clean energy, several challenges need to be met. Here’s what you need to know about each of them.
Distributed energy resources
For a while now, consumers have been concerned about the integration of renewables and distributed energy resources. You see, in recent years, smaller, eco-friendly energy generation units (also known as distributed energy resources or DER) have become more widespread. In fact, Australia has one of the best rates of DER uptake in the world.
However, if not properly integrated, DERs can run into reliability issues, affecting their ability to supply quality power. The customer service operation must be second to none if companies are to cope with such issues without losing customers.
There are a lot of potential benefits to the mainstreaming of green energy. But, with regulatory red tape preventing companies from trying new things, it’s hard to see a clear way forwards. In such a dynamic market, regulations must allow for progress. And, thankfully, that is starting to happen.
The Australian Energy Market Commission has introduced what it calls “regulatory sandboxes”. These so-called sandboxes are an environment where stakeholders can work towards development together. In the sandbox, regulators can exempt businesses from certain regulations in service of pursuing innovative new technology.
Legacy technology & systems
Another key challenge facing many Utility companies is legacy technologies and systems that still govern their day-to-day internal operations. At a time when speed is of the essence, slow, manual processes are counterproductive to the sector’s overall challenge and opportunity.
While upgrading legacy systems require a time and financial investment, it almost always pays off both in the long-term and short-term. On the flipside, the cost of running with and maintaining outdated systems will continue to mount over time. Coupled with process inefficiencies, time waste, data vulnerability, inflexibility, adapting and evolving in the current competitive landscape becomes a lot more challenging and less realistic.
For Utility companies looking to thrive and maximise their potential, leaving legacy systems behind and investing in modern tech operated by trained staff is key.
If the past two years have shown us anything, it’s that agility is of the essence, especially in the post-pandemic era. But agile teams and capabilities can bring disruption if not approached and executed properly. And, on some occasions, in-house teams may not have enough resources and specific skillset to introduce and enable a company-wide agile environment. And coupled with strong need to change and evolve, Utility companies face a great opportunity (and risk) to prioritise agile business processes to take on the coming era of disruption and uncertainty in the Utility sector.
Irrespective of how Australia’s utilities sector acclimatises, the digital transformation will continue apace. This brings with it a risk of established businesses falling behind new or more innovative companies. That’s bad news for those struggling to remain competitive in a rapidly changing landscape.
Other potential issues include knowledge gaps and hefty costs if companies don’t begin their digital transformations sooner rather than later. During a period of transition, those sorts of issues can have serious consequences.
Opportunities for the Utility sector
It is entirely up to each company how they approach these challenges. However, those that approach them as opportunities stand a far greater chance of coming out on top.
At the end of the day, there are lots of benefits up for grabs. An improved carbon footprint, operational efficiency, and customer satisfaction are just the tip of the iceberg. By working to overcome obstacles now, companies can make the most of all reinvention has to offer. Still, this might be easier said than done for some.
Not all companies are equipped with the right tools to transition. As it stands, there are plenty struggling with knowledge gaps as well as staffing and budget constraints. So, rather than place the extra burden on an already stretched in-house team, why not consider business process outsourcing? Leveraging a business partner with industry experience and strong digital and customer experience capabilities may prove to be the best path forward.
The future of Utility sector is bright
In just a few years, we could be looking at a very different Australian utilities sector. There is no denying that the clean energy revolution is well on its way. It’s our job at Sigma Connected to ensure that each stage of the process goes as successfully as possible.
With challenges encroaching on the industry from all sides, adopting a new approach to customer management can be instrumental. Without it, adapting to DERs, regulatory changes, and the wider digital transformation will be more difficult, if not impossible for some companies. In a world where ceaseless momentum is the only available pace, plenty of businesses would undoubtedly benefit from outsourced expertise.
How we can help the sector
Our specialties are wide-ranging so we can tailor our services to your company’s specific needs. Our key capabilities lie in a few areas, including:
- Improving customer experience by effectively leveraging technology and data and supplying front-end customer service expertise.
- Providing targeted training to contact centre staff.
- Quality and compliance assurance across customer service solutions.
We understand that each interaction a customer has with your business is an opportunity to create value. This is more important during a period of change than ever. And, we have experience in deploying our capabilities in service of a switch to clean energy. We’ve done it on the other side of the world, and now we’re here to help Australian businesses make it happen.
Keeping up with the phenomenal pace of change can be challenging on many levels. If that’s the case for your business, we’d love to have a chat.
Case study: Enabling one of the UK’s biggest six energy suppliers
This brief case study demonstrates what value Sigma Connected can bring to Utility companies. Working with one of the UK’s big six energy suppliers, we enabled their seamless fast-to-market transition to smart meters whilst having a strong grip on operational costs and profitability.
By 2020, all UK energy companies were required to offer their consumers a smart meter. So, we introduced a Sigma Connected team of advisers that took on the responsibility of communicating and promoting the benefits of smart meters. And we ensured that all appointments booked as a result were done so directly onto the client system.
Not content with simply implementing this program, all insights gained throughout were fed straight back into training frameworks to further optimise the entire process. And as a result, skills, knowledge, and conversions improved consistently as the regime went on. Throughout the campaign, our team processed 46,408 customer eligibility requirements and had a 23.8% conversion rate.
For further information or a wider discussion on how we can help your business, contact us below.
About the author
Jason Cowan is Sigma Connected’s Regional Managing Director, Australia.
You can contact Jason via email or connect with him on LinkedIn.