UK Retail Energy Market Reform–the "Green Deal" and "Smart Metering"
Amongst much of the hype concerning the introduction of smart meters, such as the ability for customers to monitor how spot prices vary and so change their usage accordingly, many have missed the fact that all companies will have access to accurate real time consumption data. In BW Energy's view, this is the major benefit of smart metering and could initiate a major change to the competitive dynamics of the UK retail energy industry.
The electricity industry has been bedevilled by appalling billing and metering systems. Consequently, billing errors lead to 90% of all enquiries to customer call centres and are a major cause of utility companies' poor reputation. Smart metering would allow a new entrant to electricity supply to avoid the need to establish a large, expensive, customer call centre. In addition, the reputational risk of sending Granny Smith a bill for £2 million, owing to poor data, would be negligible. As such, we may see firms with highly respected brands and a deep understanding of consumer products being willing to enter the energy supply business. Indeed, coupling the ability to sell electricity with the opportunity to install energy enhancing equipment under the Green Deal could be too good to miss. Innovative entrants to energy supply could now contemplate providing retail customers with the things they want, such as a warm house, illumination and the ability to be entertained, rather than units of energy. It would be up to this innovative supplier to decide, in discussion with the customer, through energy delivered over the networks, improved insulation, better fitting windows or micro-generation, or a combination. The Big 6 could, for the first time, face competition in their core domestic energy supply markets from companies with a deep understanding of selling to the retail sector.
BW Energy