The changing energy market: Haven Power’s Mark Anderson interviewed by Energy Live News (ELN)
At 2019’s Energy Live Consultancy Conference in Manchester, Haven Power’s Portfolio Sales & Service Director Mark Anderson presented “The opportunities for businesses in a changing energy market” to a full-house. The presentation followed the supplier’s publication of their ‘Future of Energy’ white paper (download it [here]) and blog series explaining how a more service-led energy market is already evolving.
After the ELN event, the host’s podcast presenter Sumit Bose interviewed Mark to ask about uncertainty in the energy market, its effect on decision making, and upcoming challenges. You can either read the interview below, or [download or stream the podcast] to listen later.
Read more below:
What do you say to people when they ask you "How do I find some sort of certainty in this time?".
There's no certainty, but what you can do is manage the uncertainty. In terms of the energy market, sometimes you do want the uncertainty to end prematurely because you've got a business or an organisation to run, and you've got plans to put in place.
You want to make sure that the uncertainty is managed because you’re transferring risk to your partners. You’re getting good advice about your forward purchasing strategy. You're hedging, but you're also mitigating some of the other uncertainty, some of the regulatory uncertainty, by looking at what services you need.
Whether you need to reduce consumption. Whether you need a better understanding of your load profile. All of those things are about finding the right partners throughout the industry and working with them to make sure that you're addressing the uncertainty, and then trying to mitigate it.
Uncertainty in some ways is good. You could call uncertainty volatility. Everyone knows that there is opportunity in volatility, as well as risk. But this uncertainty feels more about a crippling of decision making. Am I reading that wrong or is that how you see it?
There are plenty of decisions that are getting taken.
The regulation to roll out smart meters across the UK. It’s a bold move and we welcome it. It's very much aligned with our beliefs and our purpose at Haven Power and at Drax, in that the decarbonisation of baseload is only one part of quite a complex jigsaw. The management of the entire system and network is a really important feature of it.
So, enabling all consumers to understand their consumption and then enabling them to work with their partners in the energy industry, getting services and advice to help them manage consumption patterns, that's a bold move. That’s a decision that's getting taken and pushed through the industry.
There's plenty of other issues that are floating around, like consulting regulation and various other things like that.
Claire Perry, the Energy Minister, was on the radio again today, trying to bolster the idea of what is happening in terms of decision making, ‘greening’ the economy in light of the climate protests. But I feel that Brexit has overshadowed a lot of parliamentary work.
As we know, this industry is driven, unfortunately or fortunately, with a lot of legislative pressure. So, decision making on things like investment for big capital projects, or what the government is doing in terms of subsidies for low carbon, seems to have stagnated a bit.
Do you think that's affected your decision making as a company? Or are you just saying ‘We'll do what we're doing”, irrespective of waiting for the legislation to catch up?
Yes, much more the latter. In some of the questions, particularly about long-term decisions, in Haven Power and across Retail, we're definitely investing in the area. We’re investing in new services and new capabilities, making some of those long-term decisions to position ourselves for the future.
As Drax, we're also investing in some extremely long-term things. We’re working on our supply chain of biomass to make sure that it becomes commercially viable and that we can continue to drive that low cost and low carbon energy part of the mix, regardless of subsidies and regulatory/policy decisions from government.
We're also working on things like bio energy, carbon capture and storage. This is an extremely far-sighted part of our mission, rather than a narrow response to a defined commerciality of the regulatory or policy decision.
I suppose the thing for your customers is that there was a time where they just said "Hey Mark, give me some energy... thank you very much! Here's the procurement deal", and off they go. They’re now facing a bit of an upheaval in what they need, let alone what they want.
So, what do they need? Well, do they need infrastructure for EVs? Do they need to do retro-fitting? Do they need to have onsite generation? What are they asking you for now, that five years ago they would’ve never asked for?
I think the biggest thing is partnership. We've gone from that world where no matter how much we talked it up, it could be fairly transactional. Essentially, we were supplying a commodity to consumers as a commodity.
We're now moving to a paradigm where there are lots of different questions. For example, you touched on EVs… to actually have a coherent approach to EVs, customers have to think about their policy, their drivers, why they're doing it, what are they trying to achieve? They've got to think about the infrastructure that they've got. That's some of their own infrastructure, but it's also some outside infrastructure as well - such as the network and grid-side infrastructures that they can't directly influence. They've got to think about their fleet and review what can they actually do? They've got to think of employee engagement. They've got to think of measurement. They've got to think - is this a tax benefit? And, how do we encourage the behavioural change that you need in this?
As we know from doing it ourselves with our so-called 'EV Wonder' - our electric vehicle at Haven Power - you've also got to think about range anxiety. There's all those aspects of change which, on the front of it, sounds like something which could be another transactional exchange of “We'd like a tariff that suits charging and we want you to install a charging point”. But there's so much more to it.
So, you need that sort of flexible partnership approach to enter into those discussions and say "Are you even asking the right questions? Can we help you with some of the answers? Can we then help you find someone with the other answers?"
What you're talking about sounds like consultancy, advice. Are you geared up for that?
I think, increasingly, all suppliers have to be geared up for that deeper relationship with their customers. Now we, as you know, work extremely closely with a number of consultancies as well. So, it’s turning into a more complicated landscape where different consultants have different strengths and different things that they can offer to our mutual customers.
Some of our customers are direct, so there is no intermediary, and we've got to be supporting those customers as their main energy partner. So, we are moving into a world where I think partnership and that flexibility starts to encompass a more diverse range and greater number of services.
I want to talk about the broker in a moment, but for the direct customers, have you had to upskill your team? It's very different to say to someone "Hello Sumit, what do you need? Here is some power. I'll give you a good deal. Oh, hang on, you want a ground source heat pump? You want a CHP plant, then you’ll want all of this..."
It's a very different skill set and knowledge base that you'll have. What have you been doing to do that with your staff?
Yes, absolutely. At Haven Power we've been investing in an Energy Services team, so we've been building up, bringing in specialists. Some have been recruited internally, some have come in from external and bringing with them the skills. We are investing in training and developing their skills to offer a new tranche of services.
We've also been looking at the market and saying that, actually, energy services is such a broad church - as I described just now with EVs, which is something we've looked more closely at, and have a defined set of offers. But that's quite broad, and that's just one tiny niche. We're heading into this big landscape of possible service provisions.
We also pull on our sister companies and at Drax, who have a lot of deep engineering expertise. We've got a product incubation team, and research and innovation team at Drax. So, we've got a lot of expertise in a lot of areas that are relevant to lots of our customers.
There’s a conflict though between the industry moving towards this more diverse, more complex, more bespoke world, and what is still a large chunk of the industry rightly wanting low cost, low prices - which means standardisation, efficiency, and investing in that sort of knowledge industry-side of our business.
We also have to invest in that process and systems-heavy side of our business, to make sure that those customers that want our core supplier offerings are getting a great service. We're delivering efficiently, we're delivering timely, and we're delivering high quality. And, in turn, that's not getting prejudiced by the more bespoke things that we're offering on the other side of the business.
Let's move on to the brokers or consultants, and the relationship there. Does all of this change in your skills put you in conflict with what the brokers are offering?
Quite honestly it could, but it doesn't. Brokers, as you say, are extremely important to us and they're extremely important to customers as well. We are extremely keen to work out a way of complementing one another and working together. We've got a number of partnerships with specific brokers where we're finding ways to do that. I think it is a learning curve for both of us.
A great example of that is our energy partnership at Edgbaston with Amber Energy. Amber is a broad-based consultant that is not just offering contract management type services, but a much broader suite of energy services. We've got that sufficient level of trust with Amber, and with plenty of other consultants that we work with, that we can get in a room, have a three-way with the client, listen to their needs, and then work on it collaboratively.
If you all go in with the right intention, it doesn't need to be awkward. You're all just trying to benefit the customer in an economic way.
We're coming to the end, but I want to touch on a couple of points.
What do you think is the biggest challenge you'll be facing over the next 12 months? If not challenge, what's the thing you're going to be doing in the next twelve months that's going to be different? Often a challenge leads to the solution, that becomes something else, that then becomes a product.
I do think it is a challenge, but it's an extremely exciting challenge, and one that is shared across the industry. But we touched on it before. The rollout of smart meters is a real enabler for some huge changes in the industry. It springs to mind because, although we're embracing it, we think it's very aligned with how we see the market and our place in it - it’s extremely challenging. I think any industry-wide paradigm changing rollout like this is always going to have challenges. So, it’s really important that we address that. That we work in partnership across the industry to get it there.
And why I think it's so exciting is that, in the first instance, it will give customers - a lot of whom we know from surveys are not fundamentally engaged with their energy – convenience. They'll have certainty over their bills, instead of having a reconciliation every X months when the manual meter read takes place. And it will give them visibility of their profile and consumption patterns which, if that starts to engage them, is a good thing. On its own I'm not sure that it's going to, but it does allow actors in the industry – whether that's suppliers, consultants or both together – to start developing new services and new ways of engaging with energy.
You can order a taxi on your mobile phone and watch while it drives around the block three times because he can't recognise you, and yet your energy is billed on estimates. So, bringing us into the modern age. And not just building services that allow us to create and bring to market new business models, but whole new ways of looking at what clients need, and how we bridge the gap between what we're currently delivering and what that brave new future looks like.
So, it's incredibly exciting. The next 12 months, I think, is going to be the challenging bit. Thereafter, we'll start to apply our imagination and our innovation, our excitement and our passion, and we're starting to see some of those new business models and new ideas come into the fold.
I'm pretty cynical about the smart meter rollout and don't think it's going to hit its target. Whatever, for sure this technology is coming. And that leads me to the end point that I want to talk about.
I think the biggest challenge facing the sector is data and data management, and as you just said, you'd get so much more information. How do you see that for Haven Power and Drax, and how will you be able to make sure that a) you're gathering the data right for your customers, and b) protecting it and then using that to create a way of changing behaviour?
If you get the data, you get the information, then you can hopefully change behaviour and we can get to where we want to be. So, the data play for you... how do you read that?
In some ways I think you've got to look at this challenge the right way. This is not a unique problem. In a lot of ways, in the energy industry we have a uniquely complicated angle on it. Compare the complexity of banking transactions, to half-hourly meter reads from hundreds of sites in a single customer's portfolio, scattered over the entire country. Or sub-second responsiveness for demand management schemes - we do have some challenges to address.
But the big data industry has been developing, unnoticed by our industry, for the last 20 years. But then it really got its rocket-fired roller skates on for the last decade. So, there is a lot of expertise already out there, and we're drawing on that in terms of bringing in experts to make sure we're building our data lake, and then our data warehouse, and making sure that the GDPR compliance and the data protection is all in place. But at the same time, both the richness of that raw data and the responsiveness of the analytic capabilities are all there.
So, in a nutshell, it's a case of working with partners and with the experts that already exist in the industry to make sure that we're doing it right. Because we understand energy and are increasingly trying to make sure that we stay abreast of our customers' changing needs and requirements in the face of regulatory requirements and the opportunities that those present. So that's our role. That's where we want to concentrate... i.e. what are we trying to achieve here?
We will make sure that we're setting ourselves up to do that by bringing in the right experts. Whether we're recruiting them or working with external partners or third parties. We're just trying to put the best pieces together to make sure that we can achieve those outcomes for our customers and our partners.
You can find more information about Haven Power’s approach to partnership here.Contact us