Energy is changing. New technology is giving rise to smart homes and new energy platforms that give customers much more control over how they consume their energy and where they get it from.

The typical supply chain, where the grid provides energy to the end-user through an energy supplier, is morphing into a much more decentralized system.

European utilities must stay at the forefront of this change in order to survive. The days when they could expect to transform in isolation and innovate in-house in order to meet the challenges they face are long gone.

Instead, a new wave of collaboration, where utilities work alongside other organizations to solve a problem, is well underway.

Tata Consultancy Services (TCS) conducted a survey of over 120 utility executives across 13 countries in Europe and the UK in order to understand how new revenue streams, collaboration with the ecosystem and technologies for digital transformation were affecting the industry.

The survey found that 60% of European utilities are currently involved in strategic partnerships and just under 50% are creating joint ventures.

Collaboration is king

According to the research, three-quarters of utilities still consider the customer/supplier relationship as the leading method of collaboration.

Three years ago, German company RWE partnered with Siemens on a next-generation virtual power plant. Smartpool was a future-focused tech platform that would connect a large number of electricity market participants in a single virtual power plant (VPP) that will greatly improve grid stability.

It was the first example of a cost-effective solution within the industry that integrated producers, consumer loads and storage units on a mass-market scale.

More recently, energy retailers have been incorporating new technology into their businesses. One of the UK’s leading energy retailers is trialing electric vehicle charging using blockchain, while in the US, an energy retailer has adopted a digital power portfolio for optimized energy procurement.

Also in the US, an integrated utility is thinking about building a platform on the energy cloud to offer multiple services, such as smart operations, smart homes, and smart cities, under a single Intelligent Energy Service Platform.

Krishna Kanth, Head of the Utilities Industries Unit at TCS explains the methodology behind the collaboration: “The utilities sector is making itself resilient by creating numerous new services around empowering consumers, smart assets, intelligent infrastructure and complementing it with traditional energy selling services.”

Collaborative Disruption

Collaborations with startups that populate the energy and digital technology landscape are highly sought after, especially around emerging technology.

These partnerships are mutually beneficial. They expose utility organisations to cutting-edge technology and ideas, but at the same time, bring utilities’ own technology and engineering expertise to the table, helping fledgling companies develop ways to integrate their innovations into the fabric of energy businesses.

For example, Cleantech developer Oxygen Initiative in partnership with Germany energy services company Innogy SE, announced last year that they were readying the US launch of a blockchain-based Share & Charge electric vehicle (EV) digital wallet. Following successful testing in Germany, this launch marked two years of close collaboration.

Looking inwards, industry incubators have begun appearing rapidly across Europe, and are proving invaluable in breathing new life into workforces.

ENGIE, the French energy provider, set up its own incubator, Incubation by ENGIE, enabling its staff to build their own startups in collaboration with external partners.

Since launch, the incubator has received over 400 project applications, and 50 employees have developed 18 projects so far. Several of them have now been brought to market, including a tool for flexible energy management and an online customer concierge service.

Interestingly, of all European utilities, those in Britain are significantly more reluctant to collaborate, according to the survey. Less than 20% see strategic partnerships, M&As and startup collaboration patterns emerging, versus the Continental average of around, or well in excess of, 50%.

Under Pressure

With an influx of energy service players, low margin from the commodity operations, fluctuation of the commodity prices and advent of the stringent regulations, utilities around the world are under increasing pressure to deliver on customer expectations. Those expectations have been formed in more digitally mature industries, where companies have successfully established a more intimate relationship with their customers by using their data to gain insights.

Faced with the increasing speed of change demanded by digital consumers in an increasingly decentralized market, utilities are actively looking for ways to bring the outside in and become nimbler, acquire new capabilities, and prepare the next generation of revenue streams.