DEMAND FLEXIBILITY SCHEME OPENS NEW POSSIBILITIES FOR SUPPLIERS

The past few months have put energy supply and consumption in the spotlight – both for consumers and businesses. And while the energy prices continues to impact people across the world, policy makers are implementing solutions to help address the challenge. For example, the new Demand Flexibility Scheme, introduced by the National Grid, gives energy suppliers the chance to pay their customers a small bonus if they use less electricity than usual at certain times of the day.

The industry’s focus on encouraging new consumer habits when it comes to energy consumption will help reduce the need for additional peaking power generation while also cutting CO2 emissions – a key priority for the government in its plan to become a net zero country by 2050. But tackling the problem requires close collaboration between the industry and consumers – and the right technology to support the transition to cleaner energy sources and more efficient consumption.

Although it is clear there are financial benefits for consumers who partake in the Demand Flexibility Scheme, energy suppliers are still on the fence. Some of them want to fully assess the benefits of the scheme for their business before embracing it. Meanwhile, others are already taking full advantage of it to make themselves indispensable to their customers. This can be seen with companies such as Ovo, which is helping customers reduce bills and reduce demand on the grid.

By having a closer relationship with their customers, suppliers can build trust at a time when businesses and consumers are looking for suppliers to help them shoulder the cost-of-living crisis they are going through. In addition, this approach enables energy suppliers to open a dialogue to identify the specific needs of the people they serve and how they can offer new products and services to their customers that support a lower carbon mode of operating the power system.

The closer the collaboration between suppliers and customers, the more energy suppliers can understand consumption patterns – and the better they can forecast (and manage) peaks or troughs in demand, which in turn impact the carbon intensity of generation to meet that demand.

From a supply perspective, this also enables energy companies to adjust their operations to avoid shortages, withstand periods of lower demand and be able to offer the right amount of energy during periods when their customers need it most, without firing up fossil fuel assets to cover those needs. This new way of working for suppliers will require collaborative business models with third-party organisations that offer specific services based around time of use, and all underpinned by high quality, readily available data.

Automation also plays a significant role in bridging the gap between suppliers and customers. In an increasingly competitive market that’s experiencing rapid change and economic uncertainty, suppliers are focusing on end-to-end customer process journeys to increase efficiency, improve quality,

The scheme isn’t only designed to help the industry and consumers withstand changes in energy availability. It also helps the National Grid tackle its biggest challenge: reducing the country’s energy demand.

And this objective is no mean feat. Without substantial reductions in energy consumption, meeting the government’s 2050 Net Zero goals will be both extremely expensive and complex. In November of 2022, the Finance Minister Jeremy Hunt announced he wanted to cut Britain’s energy usage by 15% by 2023 to help reduce bills, catching up with European neighbours who are already prioritising measures to counter spiralling prices. Reducing demand by this much means, in today’s prices, a £28 billion saving from the UK’s national energy bill or £450 off the average household bill yearly. The alternative to reducing consumption is to rely heavily on decarbonising the supply chain, which would require more effective methods to capture and store clean energy. While research and commercial solutions exist to tackle this, we have yet to see those scale to support the entire energy needs of the entire country.

A report conducted by IMB last year, which surveyed 16,000 global consumers, revealed that than half (51%) of respondents believed environmental sustainability is more important to them today than it was 12 months ago. The report also found that consumers’ actions are starting to match their intent. As sustainability is being brought to the top of the corporate agenda with 90% of executives believe sustainability is important, suppliers can play on the importance of reducing energy consumption in line with sustainability targets as a way to entice both consumers and businesses into enrolling onto the Demand Flexibility Scheme.

There are a few ways that suppliers can use the Demand Flexibility Scheme to support their existing customers and attract new ones. To save customers money, suppliers need to be able to measure and share actual consumption data. To do so, energy companies need to roll out technology that helps gather accurate data in real-time, such as smart meters. Making them more affordable and accessible to consumers, and deploying engineers to install them will help drive wider adoption. Suppliers to businesses could also consider providing scalable plans to entice their customers to adopt one solution for all their needs over time. Simplifying the options to those that customers need today should go hand-in-hand with investing in Research & Development to develop innovation that will support the needs of tomorrow. This will allow energy companies to provide appropriate services to their customers over time, and remain indispensable as they continue to explore the various energy sources available to them.

The Demand Flexibility Scheme is only the first step towards improved energy management for a future where energy access is likely to become increasingly more regulated. Early adopters who combine a strong customer base with a commitment to innovation stand a better chance to lead in the future. https://expleo.com/