THE VIRTUAL POWER STATION
South Africa, with its abundance of natural resources, still faces a serious energy crisis that threatens economic growth for the entire nation. Demand for energy is stretching supply to the point where load shedding and rapidly increasing energy prices are a serious concern for businesses and consumers alike across the country. Endeavour Magazine looks at how experience gained in claims management and business process outsourcing for the insurance sector can provide an answer for long term energy security in the country. London Stock Exchange listed Innovation Group is a leading international outsourcing and software provider for the insurance, automotive and property sectors, employing over 2000 staff in 13 countries covering the largest insurance markets across the world. Originally established in the UK in 1996 and developing its first claims solutions for the insurance sector in 1999, the company has grown to represent more than 800 clients including many of the leading insurers, fleet management companies and financial service providers worldwide. A great deal of this growth can be attributed to the company’s approach of developing tailored solutions to individual client needs according to the markets in which they operate. This is why their South African operation has embarked on a major alternative energy solutions programme as explained by Llewellan Vance, Business Development Manager for Innovation Group South Africa: “A national power emergency was declared in 2008 and since then South Africa has been subject to rolling blackouts and vast increases in energy prices mainly due to the demand for energy beginning to completely outstrip supply but also to cover the cost of power plant refurbishment and building new generating capacity. “Climate change is a local and global problem and South Africa’s state utility Eskom has had to address the critical issues of how energy can be supplied sustainably whilst also looking at how to reduce consumption.”
These challenges helped to force a renewed government focus on the development of sustainable energy policies and provided an ideal opportunity for Innovation Group to carry over its extensive experience in the insurance sector as Llewellan explains: “As a group we specialise in claims administration and providing solutions to encompass the full claims cycle. In addition we provide incident management processes and solutions which enable us to effectively service our clients through our panel of accredited service providers. Globally the group processes in excess of 1.2 million claims annually and pays out over ZAR 1 billion in claims each month, whereas in South Africa we handle over 160,000 incidents per month paying out over ZAR 400 million to service providers on behalf of our clients. “As part of our incident management processes we have traditionally been involved with the replacement of electric geysers (boilers) in the event of breakdown or failure; with increasing focus being placed on sustainability, we decided we could shift our outsourcing model towards the use of solar water heating through reactive insurance related boiler replacements.” Electric water heating is highly energy intensive and is a factor that has further added to the problems affecting the South African energy sector. Solar water heating eliminates the demand of conventional electric systems by using natural solar thermal energy for water heating. South Africa is considered to be an ideal market for use of solar thermal energy due to the high rate of annual sunshine and solar radiation levels ranking among the highest in the world. Innovation Group embarked on a rigorous process for the selection of solar water heating system suppliers to be used as part of a major rollout programme. Each supplier was required to be accredited by the South African Bureau of Standards (SABS) to be recognised an Eskom solar water heating provider. The Eskom objective was to stimulate the uptake of solar water heating systems by offering a rebate which is paid to offset the cost of converting against long term energy saving. The issue of supplier selection remains an important factor as Llewellan explains: “We ensure that an extensive due diligence process is followed to assess the quality of local and imported system manufacturers and extend this approach to also cover the capabilities of approved solar water heating installers on a national basis. The government, through Eskom, has focussed on supporting local content and this is enforced through the rebate programme, we support this alongside our insurance partners through investment in local suppliers and installers as a means of skills development and job creation. “We have developed very strong relationships with our suppliers and service providers meaning we can centrally manage each and every installation on behalf of our insurance clients to offer a bespoke system for each end user. Through continuous improvement we have developed a national network of suppliers and installers meaning we can offer the best possible response time and service for the end customer.” As the concept of sustainability is still a relatively new phenomenon in South Africa, the problem remains that consumers are still slow to accept the technology but continuous improvement has allowed Innovation Group to refine its processes even further to help improve conversion rates:
“By applying continuous learning principles from each roll-out project we are able to optimise reasons for conversion and address barriers for change. We are able to offer a comprehensive cost analysis to each end-user which breaks down the cost of conversion against monthly savings to offer a strong financial incentive. We have found that one of the main call to action barriers is the up-front cost of conversion as even with the Eskom rebate customers can be put off because the lead time for settlement of the rebate can take as long as six to eight weeks.” “Through the central management of each conversion we are able to settle each rebate payment with the end user up front so they receive the benefit almost immediately where after we apply for the Eskom rebate through our service providers. This approach means we can offer an instant return when monthly savings are factored into the value proposition meaning that we can optimise conversions even when the end customer is operating a fully functioning electric system.” For the company to achieve its ambitious target of removing energy demand of up to 600 megawatts from the national power grid it becomes even more important that it is successful in converting households with functioning systems just as well as those who suffer system failures: “We approach this task by seeking to maximise both proactive and reactive conversions across the market. Proactively we approach leads from our insurance and corporate clients to offer conversions from a value and cost saving perspective. By maximising conversion of proactive business we can also secure access to our insurance client’s reactive conversions which arise in the event of system failure. By increasing volume we can achieve greater leverage with our supply chain partners by developing economies of scale which further adds to our long term value proposition.” Developing close links with the supply chain has also allowed Innovation Group to enhance value added services to enhance customer satisfaction and improve quality through after sale care: “We are the only company to develop an enhanced service and maintenance plan which includes a warranty covering each system for up to 10 years after installation. We follow up with each customer to ensure a positive experience and we are able to liaise with our suppliers to rectify any problems that are identified with either the installation or operation
of the equipment. This approach also helps our suppliers to ensure that each installation is carried out correctly first time.” The model that Innovation Group has developed is unique and the first of its kind in South Africa. The approach represents a commitment to quality and consistency which has not been seen before and also has the potential to make a significant contribution to energy saving through the implementation of mass roll out projects supported by a comprehensive and well managed supply chain. The company has a very strong ethical approach to the way it carries out its business which further attributes to its potential: “As a company we are committed to playing our part in solving the energy crisis and supporting environmental protection. We continuously strive to create a total solution for the end user which addresses all of their concerns and creates a compelling reason to buy. We aim to be a major role player in addressing the problems affecting the energy sector by promoting a more sustainable way of living.” The company has also extended its initiative to include complementary technologies such as heat pumps which utilise thermal energy in the air for water heating using technology developed for air conditioning. The company has further enhanced its supply chain to include specialists involved in air conditioning to make this technology available when an equally energy efficient alternative to solar water heating is required. The Innovation Group renewable energy solutions initiative presents a ground-breaking approach to energy saving and, should the project reach its target, it will reduce energy consumption at a rate equal to the generation capacity of one entire national power station. This comparison puts into perspective both the ambition behind the initiative and the confidence of the corporate clients and insurers who support it. It is not inconceivable to see Innovation Group as a key facilitator for driving residential sustainable energy technologies throughout South Africa bringing much needed investment into the market. This type of investment driven growth brings a host of additional economic benefits above and beyond improving energy security including job creation and skills development which is no small achievement in such a challenging international economic environment. It goes to show how innovation is the driving force behind economic growth.
The Innovation Group Solar Team
Innovation Group specialises in the administration of energy saving solutions and provides complete back ofﬁce support for large scale green projects. Through our comprehensive solar water heater installation and management solution, we aim to make a signiﬁcant contribution towards a better and more sustainable future for all. With an international footprint and strong local presence we can assist in the design of any mass consumer or employee solar water heater rollout project. Our focus on efﬁciency and removal of risk ensures that all our projects run within your budget without compromising on quality control.
Call us today to ﬁnd out how we can assist you to contribute towards a greener tomorrow.
INNOVATION GROUP (PTY) LTD Innovation House | 192 Bram Fischer Drive | Randburg | South Africa | Private Bag x99, Bryanston, 2021, South Africa T: +27 (0) 11 790 5821 | F: +27 (0) 11 790 5221 | E: firstname.lastname@example.org | www.innovation-group.com/sa Innovation Group is an authorised Financial Services Provider
Innovation Group www.za.innovation-group.com + 27 11 790 5200 Written by Martin White