The interest in energy sustainability calls for increased access to regionally generated renewable energy. With the right commercialization efforts, energy providers can generate new sources of income and create lasting value.
In the past, decarbonization posed significant financial and operational hurdles for companies. However, there has been a paradigm shift regarding the perception of sustainability, with decarbonization and eco-friendly products now deemed as growth drivers rather than cost drivers.
Investing in renewable energy, energy storage, and other green technologies still present challenges. But it is crucial for businesses to recognize the immense potential of sustainable solutions and seize the opportunity to lead the charge toward a more sustainable future.
The key to success lies in a robust commercialization strategy which can help companies unlock new revenue streams, increase market share, and build long-term value.
Sustainability, a hot topic for emerging start-ups
Sustainability has become a critical area of focus for businesses across various industries. It encompasses systems and practices that promote responsible resource usage, reduction of emissions, and waste management.
Our recent Global Sustainability Study highlights an important finding. Consumers are increasingly conscious of the origin of their energy supply, with 63 percent of respondents preferring locally produced clean energy products.
Notably, customers are no longer passive consumers of energy, but are actively seeking resource-efficient and environmentally responsible options. 71 percent of consumers say they have changed their habits to be more sustainable in the last five years. And the rising concern about carbon neutrality and personal responsibility is driving consumer behavior towards sustainable energy products.
This shift is aligned with the growing number of start-ups that are emerging in the energy sector, indicating that sustainable energy is a promising market.
A matter of improving commercialization
In contrast, leading energy businesses are struggling to commercialize sustainable energy offerings.
Energy solution businesses, for example, often do not yet offer optimized customer solutions, and the solutions they do offer require high initial investment. But there are young companies demonstrating the viability of a commercial strategy with lower barriers to entry. Case in point: Enpal has disrupted the solar market with a leasing model. It overcomes the hurdle of high initial installation costs for the customer and instead offers predictable operating costs over a long life cycle.
The utility sector is also struggling to overcome internal organizational barriers. Offering customers simplified, holistic solutions is difficult for established energy companies with traditional product offerings. For instance, they rarely offer solar panels with a storage system and a heat pump. Or an electricity contract for the remaining electricity from the grid, with integrated pricing and management, but that is what a customer asks for.
Here it would be essential to introduce a meaningful product bundling strategy within the product portfolio to provide a holistic approach.
Furthermore, it is necessary for energy companies to inform their customers about energy topics and their latest product offerings. As our research indicates, only 39 percent of consumers believe their energy provider has a good performance in regularly informing them about energy topics. Nearly 60 percent don’t feel entirely supported by their energy supplier in their efforts to reduce climate impact.
Recent Simon-Kucher survey shows strong customer interest
Although customer demand is always linked to the solutions offered by energy providers, we can see that there is a general interest and need in the market for sustainable offerings.
Consumers consider sustainability in the energy sector important and pay particular attention to lifecycle emissions and environmental impact when choosing a sustainable energy product (both electricity and heating).
Our research shows that for 82 percent of respondents, sustainability is a key purchase criterion. It also reveals that one third of respondents are agreeable to paying an average premium of 26 percent for sustainable electricity and heating supply. And 40 percent of consumers would pay a premium of at least 10 percent for green electricity. In contrast, customers across all industries are willing to pay an average premium of 32 percent.
But for two thirds of the customers, sustainability is a hygiene factor, but not a value driver in terms of willingness to pay. They will choose green energy if it is available, but from a supplier that is not more expensive than other tariffs.
This means that in the long term, as the share of renewables in the energy mix increases, willingness to pay will continue to decrease, but sustainability will become a must. This again highlights the need for utilities to have the right commercialization strategy in place.
In short, we can see that the necessary technology and customer preferences and needs are already in place. It is now a question of the right commercialization of sustainability offerings by companies.
At Simon-Kucher, we have over 35 years of experience working with big energy players and regional suppliers as well as public service providers and new market entrants. Our team has also worked on sustainability strategies across different industries.
If you’re ready for better growth and a sustainable future, reach out to our team of experts today.