- 54% say technology is a vital driver of growth
- 49% say historically their internal processes – including supply chains and operations - have benefited the most from technology investment
- 77% anticipate that more major energy companies will move into renewables
- 61% cite wind power as most likely to offer additional opportunities for investment over the medium to longer term
The report, "Pacesetters: Energy", reveals that 54% of Western Europe's fastest growing energy companies cite technology as one of the most important drivers of growth over the next three years, beating out alliances and joint ventures (48%), competitive cost base (33%) and effective capital allocation (32%).
The research has shown that investment in technology is becoming more and more important and is vital for future growth. Whilst only 26% of businesses in the sector said that they prioritised investment in technology over the last 3 years, 54% have said that they will prioritising technology as part of their growth strategy in the next 3 years.
Over the past 3 years existing investment has predominantly targeted enhancing internal processes. 49% of the fastest-growing energy companies say internal processes have benefitted the most from technological investment. This has included enhancing the supply chain, improving the operational efficiency of a plant by managing losses along transmission lines, and gaining a more detailed analysis of data; for example identifying faults along transmission lines and getting them repaired faster.
Fast forward to the next three years and many have fresh priorities: 31% plan to prioritise technology investment that will help them understand and enhance the customer experience, up from 12% over the previous three years.
Thorsten Volz, Head of the German Energy Practice at Pinsent Masons commented, “A lot of the changes that we are seeing from larger energy companies are being driven by a need to get closer to customers and maintain market share. We’re seeing businesses move into services as well as products to create that long-term relationship with customers. We’re also seeing customers, both commercial and domestic, becoming far more aware of pricing and therefore their opportunity to switch energy suppliers, so the value proposition of these companies is ever more important.”
Fast growing energy companies are looking to invest in a range of technologies in order to better understand customer needs. Cloud computing is set to be a priority for more than half the businesses in this survey (55%), providing a means for them to scale up with agility and speed, particularly with the use of “as-a-service” tools that can boost or reduce capacity at a moment’s notice.
Automation will be a key focus for 47% of businesses, exploiting both internal tools to reduce manual processing and improve quality and productivity, and investing in market-facing areas. Big Data and analytics are also set for investment, with more than a third (35%) of fast-growing energy businesses focused on this area.
These technologies are enabling providers to expand into new offerings and capabilities, most notably, into renewables. More than three-quarters of fast-growing energy businesses (77%) anticipate that major utility and oil & gas companies will continue to move into the renewables sector. Almost two-thirds (61%) of respondents cite wind power as most likely to offer additional opportunities for investment over the medium to longer term – almost twice as many as those that pick the next most attractive sub-sector, solar (31%).
Paul Rice, Global Head of Energy for Pinsent Masons said, “In Europe, wind power – particularly offshore wind – has become much cheaper to generate, making it very attractive to investors. In the UK, for example, the winning bids for some recent large offshore schemes are a third of the tariff price they were just a few years ago. It can generate more electricity and can be scaled up without requiring tracts of land onshore.”
“Digitalisation of generation, transmission and use is driving change throughout the sector. This adds to the overall energy demand, while also creating data, which in turn produces even greater energy demands for the cloud and other applications stemming from the use of Big Data.”
The preference of European companies for wind and solar power almost certainly reflects their view of where capacity is likely to be added most rapidly in the years to come. In Western Europe for example, 58% of fast-growing companies see offshore wind offering the greatest scope for adding capacity, with a further 3% citing onshore wind. This is followed by photovoltaic solar panels (44%), and thermal solar (38%). The switch represents a means for businesses in potentially slower growing - or even stagnant—sub-sectors of energy to secure a boost.
As technology investment helps to keep fast-growing companies ahead of the game, M&A and collaboration will also remain essential. 81% surveyed have made a minority stake acquisition in the past three years and just under half (48%) rate Alliances and JVs as an area of focus in the next three years. This enables companies to establish specific goals including buying new technologies, increasing market share and entering new markets.
The energy sector faces a variety of challenges, but most businesses are clear about where their most profitable opportunities now lie and continue to deliver impressive rates of growth.
The full report can be downloaded here.