Energy companies have the power to boost smart business revolution

Apr 06, 2017

  • One third of industrial firms looking to invest over £1m in smart energy technology by 2022
  • 55% of businesses investing in smart technology more likely to rely on energy companies than engineering, technology and telecoms suppliers
  • But barriers persist: more than half of UK firms concerned about costs and many are not confident that smart tech investments will pay back in an acceptable timeframe. 

As the revolution driving the ‘Internet of Things’ gains momentum, a new PwC B2B energy survey uncovers a growing interest in smart technology within the business community - and an appetite to spend.

According to the survey of over 500 UK businesses, over a third of industrial firms and one in five commercial organisations intend investing over £1m on smart and distributed energy technology (such as on-site renewable generation, heat networks, biomass boilers and demand side management) by 2022. 

And when firms do invest, over half (55%) would prefer to deal with their energy supplier, with engineering and technology installers nipping at their heels.

Steve Jennings, PwC’s power and utilities leader, believes energy companies have the power to build business confidence in smart technology – but they must move fast if they are to make the most of this consumer trust and grow market share. 

“Energy companies have a major role to play in powering this smart business revolution, helping firms not only shape but invest in their future energy strategy – a critical enabler to mitigating high energy costs and managing security of supply

“But while many will agree that technology innovation has the potential to change the B2B energy landscape, our survey shows that barriers remain. 

“Costs are a prime concern for UK firms as is their lack of confidence in the speed at which returns will materialise. Unless addressed, these issues will continue to influence both the level and pace of smart energy adoption across the UK business community.”

Powering up the smart energy revolution

When it comes to energy usage over the next two years, three in five firms (59%) are worried about pricing and the rise in associated taxes and levies. This is particularly acute among industrial and commercial businesses (79%), a result which is perhaps unsurprising with industrials currently paying more for their energy than many EU peers1

In addition, price is the main reason why firms have switched suppliers - particularly amongst small to medium sized enterprises (SMEs - 74 %) and public sector and institutions (PS&Is - 53%).  

But price alone may be losing its pulling power due to increasing product innovation: one in five commercial and industrial businesses admitted switching supplier to access new technology offerings.

When considering further smart energy investment, the greatest barrier facing firms is the fear that the benefits will not outweigh the cost within an acceptable payback period (ranked within the top five barriers by 63% of respondents).  In terms of energy usage, reliability and security of supply also ranked highly with one in six respondents listing it as a key issue to be resolved.

In spite of these findings, two-thirds of respondents don’t have a formal, documented energy strategy, while a quarter (26%) simply focus on the need to minimise energy bills – this applied to 63% of SMEs.  And while industrial organisations are the most likely to have a formal plan in place, only 45% of them said they follow a documented energy strategy, demonstrating a disconnect between energy issues and broader corporate strategy. This presents an opportunity for energy companies to help customers shape and invest in their energy strategy.

Reducing reliance on the grid

17% of industrial respondents stated that they plan to produce all or almost all of their own power within the next five years, only using the grid for occasional back-up.  And while an additional 45% will be mostly reliant on the grid, they do intend to offset this with some on-site power supply.

Steve Jennings, PwC’s power and utilities leader, added: 

“Although only around a fifth of industrial customers intend to significantly reduce their dependence on the grid, this represents a significant challenge for the network planners and operators responsible for delivering sufficient levels of capacity, flexibility and balancing to accommodate these large occasional users, who in many cases will also be exporting back into the grid.

“As to why customers may be moving away from the grid, there are a number of possible reasons from reducing their cost base or environmental footprint to taking control of their security of supply. 

“What is concerning however, is that the nature of current network charging regime means that there is a risk that this trend could lead to higher bills for those remaining on the grid. The precise impact of changing behaviours is difficult to gauge, however more clarity should emerge as Ofgem completes the current range of market reviews.” 

Ends.

Notes to editors:

1.     BEIS data from June 2016 shows that UK firms in the large industrial category (70,000- 150,000 MWh consumption) pay the highest average prices across the EU, with the UK also ranking third in the medium industrial user category (2,000 – 19,999 MWh)

About the survey: PwC interviewed 506 businesses across the UK including SMEs, industrial organisations, commercial firms and public sector and institutions between 7th and 12th December.  The majority of these spend under £500k a year each on gas and electricity while around a fifth spend £1m or more. You can find more details about this survey and our previous consumer survey on our Disrupting Utilities webpage.

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