Romania’s energy and utilities market is thriving. The country has a high level of energy independence, thanks to oil and gas reserves in the Black Sea, and there is also activity in the solar energy market. However, many utilities companies are struggling to make appealing offers to customers, and there is considerable discussion about oil and gas liberalisation, with pricing changes in the air. I caught up with Carlos Carvalheira, SAS Industry Leader Energy & Utilities, to discuss changing energy markets and how analytics could help.
Carlos, how important do you think it is to treat energy production and distribution differently?
Energy production is, at its heart, a matter of national security. The ideal is to produce as much of your own energy as you can, to avoid dependence. Romania is fortunate in that it has significant oil reserves in its national territory. However, there is a question about how we move away from oil and gas, and how countries can manage that. COVID-19 has highlighted the importance of being self-sufficient, not least because it enables you to make your own decisions. However, as markets open up, we are seeing increasing challenges to the monolithic producers, many of whom were government agencies. They can seem slow-moving, not least because customers now have more choice.
As the markets open up, what do companies need to do to compete?
The big challenges are what you might expect: How can I retain my customers? How can I make the correct offers to my customers? But there are layers to the answers. The correct offer, for instance, is not only about how to get more money from customers but also making the right choices from an energy distribution point of view. Let’s take what the market is now calling pro-sumers: that is, customers who have solar panels. These customers make their own energy and feed what they don’t use into the grid, but they also sometimes draw down from the grid. This is hard to understand, because sometimes companies may take a loss on that customer if they look at them in isolation. And there are thousands, if not millions, of these pro-sumers now.
What does that mean for energy companies?
Fundamentally, the renewable energy production market has been decentralised. Instead of having big power stations, you now have lots of smaller producers. It means that companies need to understand exactly what is going on, and particularly to know their customers in a lot of detail. It is similar to what we are seeing in our own ecosystem with the cloud, which is decentralising computing power. It means that data, which energy companies always had in the past, is now probably the biggest asset they have to help them overcome the challenges of operating in a decentralised world.
How can energy companies use data successfully to compete?
A good use case is the ability to integrate maintenance data with customer service data. This means that if a customer is calling, the call centre can see from their phone number where they are calling from, and quickly check whether there are any issues locally. That allows faster and more efficient responses. Other mature utilities distributors have integrated maintenance data with customer success data. However, there is an interesting point about who exactly are the customers of energy distributors, because many of these companies don’t necessarily see end-users as customers. The successful ones appreciate that these are their customers, and that they are a people “customer,” not an address to which energy is delivered, and an energy capacity – and they understand more about them as people.
How does regulation affect this?
The energy market is heavily regulated, especially on the distribution side. For progressive countries, like Romania, the approach taken by the regulator is very important and can change the whole market. For example, if you look at Germany, the regulator and government basically forced energy companies to buy from small pro-sumers and therefore made it possible to decentralise the market. Germany now has one of the largest numbers of solar panels on rooftops in Europe. They are becoming more self-sufficient, and also greener. However, I think there is potential to change the market even further if we can use data to sell energy from these sources when it is not needed – and to know exactly how much that person wants. This would have to be automated using artificial intelligence, but I think it is the future for energy companies.