The Act on the Digitization of the Energy Transition (GDEW) has been a done deal for almost two years. This has created enormous pressure for energy supply companies to act. In this context, the two TCI partners Ines Muskau (IMU) and Ernst Kiel (EKI) recently published a comprehensive essay in the book "In focus: The metering point and gateway administrator with basic responsibility". This is dedicated to the strategies and options for action in the area of metering point operation for energy supply companies, from cooperation to taking over or transferring operation to outsourcing and other options. In addition to their other joint publication on Enterprise Transformation Cycle they also answer questions from the TCI editorial team about the challenges facing energy suppliers as a result of digitalization. Part one of the interview series focuses on the changes that the digitalization of the energy transition will bring for energy suppliers and what consumers can expect.

Energy suppliers are under pressure to act as a result of digitalization

Hello Ms. Muskau and Mr. Kiel, the new legal requirements mean far-reaching changes for energy supply companies (ESCOs). What challenges and risks do energy supply companies face as a result of the "Act on the Digitization of the Energy Transition (GDEW)" effectively confronted?

IMU: The energy industry is the only sector that is "forced" by law to push ahead with digitalization. Many energy supply companies have of course been working on digitalization projects in one form or another for a long time, but the pressure to act is now being stepped up in the area of smart metering.

All operators of distribution grids, and that is around 900 companies in Germany, had to decide by 30.06.2017 whether they wanted to take on the role of "basic metering point operator" as described in the GDEW, and almost all of them have decided to accept the challenge. However, this is accompanied by the obligation to take on considerable costs and risks, such as those associated with a comprehensive ICT-project are connected.

The design options cover a broad spectrum, from the sole assumption of all tasks to the outsourcing of the entire metering system. We assume that most energy supply companies/grid operators will work with service providers in one form or another. These generally offer services ranging from pure software installations to software as a service (SaaS) and services in the field of metering. Business Process Outsourcing (BPO) are sufficient.

Regardless of which service the energy supply company uses, the company will be faced with serious changes. Not only the processes in metering and meter installation, but also many other parts of the company, such as sales, customer service, billing, controlling and receivables management, will be affected.

The resulting corporate transformation requires fundamental strategic planning and resource allocation in order to be implemented successfully. The financial and reputational risks that can result from wrong decisions should not be neglected at this point.

The importance of the digitalization of the energy supply for consumers

What does this mean for the energy supply companies in their dealings with their customers as end consumers, both commercial and private? Is it to be expected that the customers' demands on the energy supply companies will also increase with the improved knowledge based on data?

EKI: With the mandatory installation of smart metering systems, the GDEW is initially addressing all consumers with an electricity consumption of more than 6,000 kWh per year and those feeding in electricity from renewable energies with an output of more than 7 KW. This amounts to around 4 million metering points in Germany.

The obligation to install smart metering systems therefore mainly affects commercial customers. They naturally have a great interest in being able to measure and control their energy consumption better, as they are also obliged to provide environmental and sustainability reports, among other things. Furthermore, they can also use the more precise figures as consumers to better control the purchase of energy to their advantage. This naturally increases the demands on the energy supply company as a supplier. Feeders can more easily determine on a daily basis how much turnover they are generating with their system and how well their system is still functioning.

What is your assessment: Will companies perceive the GDEW more as a severe restriction or more as a constructive reason for forward-looking transformations in the company?

IMU: That varies greatly. Some companies are very innovative and have been pushing ahead with pilot projects for some time. They rely on the knowledge advantage they have gained as a result, but also take risks, as the technical components and certification requirements are constantly evolving.

Others tend to sit back and wait until "ready-made" solutions are available on the market. However, as the legal requirements are accompanied by tight implementation deadlines, these companies could then encounter resource problems as both the production capacities for the devices and the personnel resources of the service providers are limited.

We see the introduction of smart metering as an important basis for the digitalization of the energy industry. Smart meters provide the digital data on which all other business models can be built. Be it automated grid control, which also allows switching operations, planning of electromobility, merging renewable energy systems into virtual power plants or applications in the field of smart cities. Smart metering in itself is not a profitable business model, but it is the basis for many opportunities.

High need for action for energy supply companies

What goal must energy supply companies now pursue in order to implement the requirements in a sustainable and meaningful way?

EKI: The energy supply companies must expand their business model from pure supply operations to a Service-oriented offer for your customers. This starts with making the numbers easy for customers in a portal but also with regard to data protection and to support possible decisions and actions by consumers or feeders of renewable energy. This includes, among other things, informing the customer of the changes and providing advice in the event of significant deviations from normal consumption/feed-in performance. The energy supply company of the future will not only supply electricity, gas and district heating to the customer right up to the house connection, but will also support the customer in the optimal use of energy in their property. Even if previous "contracting models" have not been particularly successful, this approach is the key to customer loyalty and therefore to business success.

In your opinion, what are the greatest opportunities for energy supply companies in the increasingly digital energy industry - initially in very general terms?

IMU: The digitalization of the energy transition provides the basis for opening up additional, economically attractive business areas. The customers of energy supply companies are prepared to pay for genuine additional benefits. This must be systematically developed with the involvement of customers and in compliance with the legal framework. There is a wide range of opportunities here to maintain the diversity of the supplier landscape.

Thank you very much, Mrs. Muskau and Mr Kiel, for your interesting comments on the digitalization of the energy transition and its specific impact on energy supply companies. We look forward to continuing the discussion!

Editor's note: Part two of the interview series will be published in the coming weeks and will deal with the objectives, the basis for smart metering and intelligent grid management as well as the resulting potential for energy suppliers and consumers.

(Cover image: © Theerapong | stock.adobe.com)