Digital transformation at the heart of energy’s net zero ambitions

The convergence of net zero ambitions, evolving digital and industrial technologies as well as changing consumer awareness is driving the emergence of new digital opportunities within the energy system.

The World Economic Forum (WEF) estimates the potential for digital transformation to unlock US$1.3 trillion of value for the global electricity sector alone.

Australia’s energy suppliers are among global trailblazers when it comes to digitising toward net zero ambitions. Publicis Sapient’s ‘Next Stop: Net Zero’ survey identified clear intent from Australian energy suppliers to use digital business transformation to drive net zero outcomes.

70% of Australian energy suppliers are actively engaged in implementing digital transformation strategies intended to help achieve net zero goals – well above the global average of 50% of energy suppliers. 88% of Australian respondents also expressed that the net zero agenda presented them with an opportunity to transform their business more broadly.

While other global markets are still at a stage of defining value pools, Australia is a step ahead with a focus on forming strategic responses and actions. What is the target business model? What’s the investment plan? What’s the actual implementation plan?

In the medium term there is an opportunity for Australian energy businesses and their investors to leverage recent Australian energy transition experiences as well as the lessons learnt from these journeys, to explore value pools globally.

Evolving customer expectations

Australia’s exposure to the destructive effects of climate change is driving increased government, consumer and shareholder visibility of the impacts of climate risk and the need for net zero focus relative to other jurisdictions.

Customers increasingly demand that energy companies are supportive of net zero efforts. 78% of Australian energy suppliers surveyed cited increased pressure from customers to become more environmentally sustainable as a key challenge during the last five years – the highest rate across all regions surveyed.

Meanwhile, the diversity and complexity of customer needs across the energy supply chain are evolving as the energy system also evolves. Changes can range from an increased volume of participation-related enquiries, the increasing burden of renewable generation and alternative consumption model-related connection requests and complexity further upstream as well as novel market behaviour underpinned by business model innovation throughout the system.

Strong Australian adoption of renewables over the last few decades has cultivated the underlying conditions for experimentation that other regions are yet to achieve. The next stage will be about orchestration and how digital can enable visibility and control of the underlying pieces to drive value.

One of the key challenges will be around standardisation and interoperability although it’s harder to agree on some of these aspects when people and organisations have invested in products and processes, which may mean that determinations in this space will create winners and losers.

The rise of digital energy challengers

Australian energy suppliers are more concerned than global peers about increased competition from ‘digital native’ challengers and how they should respond. 44% of Australian respondents expressed that the challengers were an extremely influential motivator in driving their corporate digital transformation agenda (compared to an average of 28% across other regions).

Australia has a highly supportive environment for digital energy challengers. Relative to other parts of the world, there is strong central focus, consumer appetite and supportive technological and environmental conditions for new challengers wanting to offer digital energy business and market models in Australia.

The government has been integral in driving change with targeted support to the start-ups and SME segments to increase the rate of innovation and competitive tension in the market. Incumbent businesses are compelled to think through and action competitive responses to retain value and relevance as challengers rapidly approach and consume new value pools.

With clear and decisive action, incumbents are well placed to benefit from a once-in-a-generation capture of value pools given their strong market position, existing brand value, operational experience, regulatory influence and capital, and the readiness of the Australian market, while challengers have access to unprecedented opportunities to scale.

The net zero mission has become a powerful mantra for driving digital transformation strategies, providing an opportunity for energy suppliers to transform themselves from the inside out.

If energy suppliers are to realise their net zero ambitions, a significant re-evaluation of their digital strategies needs to take place. This includes forging new partnerships across ecosystems, achieving a deep understanding of customer data, and instilling a culture of innovation. Culture must be instilled from the top down: if management is not on board with the organisation’s digital transformation agenda, it will become impossible to sustain.

By David Leung, Senior Manager Strategy & Consulting at digital transformation consultancy Publicis Sapient

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