Operating effectively in retail energy markets has become increasingly complex. With incumbent utilities being challenged by new entrants, innovative technologies allowing energy consumers to become more empowered and mass participation in smart metering and community energy schemes, effective strategies to create value are ever more important.
Our Service Offerings
Strategic Market Entry
When retail markets were first liberalised across Europe, the business of supplying energy to customers was largely dominated by the incumbent utilities. More recently however new players have been entering these markets to challenge incumbents, both on price and customer service, but also by offering innovative new products and services. FTI Consulting specialists have helped a range of new entrants identify and exploit gaps in the market and secure market share. This support is built around defining and executing on a competitive differentiator, e.g. low cost on-line only customer service, community energy led, pre-payment customer focused, enabling customer self-generation, and offering other innovative products and services. Our professionals have also advised incumbent utilities in one country on entering markets in adjacent countries, requiring new strategies more focused on “attack” than “defense.”
Strategic Decision Making – War Gaming
Energy retailers are increasingly facing major change within their markets, ranging from threats due to greater competition from new entrants and regulatory interventions, to opportunities from deploying breakthrough technologies. FTI Consulting helps retailers navigate such changes and make informed decisions through its War Gaming capability. In a recent example, our professionals supported a large utility facing the threat of major pricing regulation. War gaming allowed the client to “play” different competitors and other stakeholders (e.g. government and regulator) in a real-time game. The game enabled them to test different strategic responses to the potential regulatory interventions they faced and assess optimal responses to each. The work included development of an economic model to assess how price, investment and strategic choices made by different players impacted market share and EBITDA across a range of different scenarios.
Customer segmentation is critical, both for existing players defending market share and new entrants planning to enter and compete in a market. For incumbents, identifying the most valuable customers and which are at risk of leaving for a rival supplier is key. FTI Consulting Retail Energy professionals provide the advanced data analytics to segment customers, and insight to develop strategies to retain them, e.g. through changing pricing, product or customer incentives. Equally, FTI Consulting supports new entrants in deploying the same analytical tools to segment and target those specific customer groups most likely to be attracted away from the incumbents.
Product Development & Innovation
Retail energy has become highly commoditised, making retailers ever more keen to differentiate themselves, either through pricing, product or customer service. Companies are also differentiating themselves in new ways by offering customers a range of energy services. These include higher efficiency boilers, home-generated power, and home energy management products (often linked to smart meters). Companies deploying such services generate value by enabling customers to take more control of their energy needs and reduce their usage and costs. FTI Consulting Retail Energy professionals have helped utilities take advantage of these innovative offerings and move beyond technology-only products to develop integrated services that generate value for both the customer and the retailer.
One of the most significant trends in the retail energy sector is the deployment of smart metering, both to help customers control their usage, and to enable energy distributors to manage their networks more efficiently. Often driven by a policy or regulatory mandate, the objectives for a smart metering rollout vary country by country. Some deployments are more customer-focused and designed to enable consumers to access benefits from reduced energy consumption and more accurate billing, and act as a platform for home automation. Other deployments however are designed to provide data for network and grid operators to allow them to plan their investments more efficiently better manage outages and control energy flows more effectively. FTI Retail Energy professionals have advised large utilities on smart metering (commercial strategy, regulatory engagement and business case), as well as smaller players focusing on communications technology, asset financing and field force solutions.
Often there are challenges in securing local community acceptance to operate or to build a new energy asset. One way of overcoming or mitigating this challenge is to enable local residents and/or business owners to benefit financially from the asset. Rather than just consuming energy, these customers can also become part-owners through a split in the revenues or profits from producing the energy. FTI Consulting advises utility clients on how to develop community energy projects and engage communities, for example through the design of new financial structures that enable local communities to actually own a share of a retail energy installation or facility. Our professionals have evaluated a broad range of community benefit schemes including shared revenue, split ownership, crowd-funding and use of structures such as Cooperatives, Community Benefit Societies and Community Interest Companies.