No more meters? Make energy a service, not a commodity

Imagine never again receiving an energy bill. Instead, you could pay a flat fee for “comfort”, “cleanliness” or “home entertainment” alongside a premium for more energy-demanding TVs, kettles or fridge-freezers. This isn’t the stuff of science fiction – it’s emerging right now. Recent changes in technology and regulation are enabling the development of new ways to provide electricity and gas.

The energy economy is changing fast. By the 2030s, the power sector will have to be substantially decarbonised if the UK is to meet its emissions targets. This means a lot more renewables, which in turn means more intermittent and variable electricity supply.

Related technological developments, for example in solar and storage, and wider developments in IT and data including the roll-out of smart meters, have the potential to transform contemporary systems of provision.

For instance, the capacity to pool and aggregate data about patterns of energy demand may enable the emergence of new business models in which “energy” suppliers also have a role in providing or managing appliances and the forms of heating, lighting, cooling, computing and entertainment that these enable.

Developments such as these call the very identity of “the provider” into question: as small-scale wind and solar power becomes more common, consumers are increasingly also producers. Even when this is not the case, there are various new “non-traditional” market entrants some of whom have new non-traditional ambitions like those of ensuring that energy is more affordable, especially for those on low incomes or the elderly.

An example is the growing interest of public bodies (local authorities, housing associations and the like) in energy generation and supply, with the aim of delivering greater affordability and fairness to consumers. Alternatively, these offerings may be provided to local communities or communities of interest and may bundle basic energy services with additional offerings such as energy efficiency measures.

In effect energy supply is being repackaged as a form of service provision.

Thinking of energy as a service

We all pay energy bills and we understand that energy is delivered through wires and pipes into boilers, TVs, kettles and so forth. However, it is not the energy, as such, that consumers’ value.

In paying energy bills, people are really paying for the services that energy makes possible: for thermal comfort, for entertainment or for a cooked meal. In other words, it is the ability to watch a favourite TV soap (while consuming a favourite TV dinner) and the cosiness of the home that really matters.

‘Entertainment’, not kilowatt-hours.
Al Ibrahim, CC BY-SA

This isn’t just an academic distinction. Whether energy is seen as a commodity or a service is fast becoming a crucial factor in how the sector is organised and regulated.

The rhetoric of consumer “empowerment” in the energy market and the ambition to provide people with more knowledge about their energy use only makes sense if we think of it as a uniform commodity.

By contrast, if we see energy as being embedded in a huge variety of different practices – that is, if we think of energy as something that is in a sense part of writing emails, watching TV, or making dinner – then demand reduction is not about energy as such, it is about changing the details of daily life.

Recognising these differences helps understand otherwise puzzling features like why more and better information about energy use doesn’t automatically translate into energy-saving actions.

Who will provide this service?

The commodity-service distinction is also useful in thinking about how relationships between consumers and providers might be configured now and in the future. If we think of energy not as a commodity but as something that is incorporated in the provision of services we should also think of energy providers as service providers.

We are already seeing the emergence of Energy Service Companies (ESCos) which guarantee a fixed energy bill as long as the company can install efficiency measures in your home or office. Other providers offer multi-utility tariffs, bundling together rent, water and energy into a single bill.

At the moment it is unclear whether these novel forms of “energy-plus” provision are forerunners of arrangements that are set to become the norm, of if they will remain niche solutions for a few. Whatever else, these moments of flux remind us that energy and energy services are never set in stone.

The Conversation

This article was originally published on The Conversation.
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