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In this article, you will learn more about the power of APIs in the energy sector and how adopting an energy API Marketplace approach is fundamental to connecting businesses to energy data.
The energy landscape is changing
A convergence of global political and societal trends, coupled with technological advances, is driving an accelerating paradigm shift towards decarbonisation and decentralisation, leaving utilities increasingly looking inwards at their market position and value proposition to customers.
As renewable energy sources (RES) penetrate the mainstream, gaps in a rapidly diversifying energy market are encouraging the rise of new technologies and business models which challenge the incumbent monopolies. Continuing geo-political instability, including the devastating impact of Covid-19 on global demand, is testing the market to its limits and threatening significant long-term implications beyond just fossil fuels.
After decades of predictability, the demands on the energy industry now come from every angle. Regulatory changes now require smarter systems, greener standards and greater choice for the end-consumer. The end-consumer, now adapted to the bespoke data-rich digital services provided by other industries, not only expects the same control over its energy needs but even demands an active role in its supply. These disruptive trends are re-shaping the energy industry, but these digital times should be seen as an exciting opportunity for all energy businesses, not a threat. The way forward lies in digital transformation, a requirement to achieve those decarbonisation and decentralisation objectives, and the opportunities it brings for operational efficiencies, growth and innovation.
Why is energy behind the digital curve?
The energy industry is moving full steam towards digital transformation, but the penetration of digitalisation nevertheless remains shallow, certainly compared to other industries. Many energy retailers, (renewable) energy producers or grid operators still run their core business based on monthly dashboards and ex-post data analytics, while the operations of tomorrow react in real time to demand, such as electric vehicles and RES volatility.
Two key enablers for the digital transformation process are data and technology. Data is already recognised and valued as a crucial building block in the creation of a smart energy system. The availability of operational data from across the energy chain is maturing, and it already plays a role in informing decisions around sustainable infrastructure planning or is recognised as the future when it comes to the smart grid. However, obstacles presented by legacy IT systems and a scarcity of workforce skillset leave the sector unable to create or access the technology platforms required to unlock the value of the data they already have within their systems, let alone any coming in from outside their own boundaries.
Take smart meters for example. As stated recently by the European Commission, there has been a 72% roll-out in Europe for electricity. But while most utilities recognise the benefit of smart meter data analytics for improving billing, grid management and electricity trading, they struggle to extract any real-time value from the data due to outdated technology and must wait for up to a month at times to even get an overview. As a result, customers are still not seeing the real value of smart meter use, which retailers will only be able to deliver when they leverage the smart meter technology platform to create new user-centric digital services which go beyond a simple app showing consumption. Beyond the technology, there are also challenges in the exchange of data itself.
Despite the move towards integrated end-to-end services from generation to consumption, most energy data are still fragmented and siloed. As the industry further diversifies, branching into new sectors such as smart mobility, this fragmentation is likely to worsen unless forward-thinking companies realise the solution for cross-sector collaboration.
Disrupters enter the energy markets.
New players in digitalisation are disrupting the energy sector.
Changing customer needs.
Customers want to cut costs, reduce consumption, protect the environment, and access new products and services.
Uncertain geopolitical landscape.
Trends in geopolitical instability create uncertainty in the energy market.
New threats are emerging along with new laws and energy industry regulations to help protect consumers, the markets, and critical infrastructure.
What does digital transformation really mean?
Digitalisation and energy
Much has already been written about the distinction between digitisation, digitalisation and digital transformation in other industries, but it is an important point to make in order to fully understand the possibilities for the world of energy.
iTunes and Spotify
To briefly illustrate the difference, we can look at iTunes and Spotify. iTunes was heralded for revolutionising the way we consumed music, digitising delivery to the end-consumer by replacing the physical CD with a digital version purchased online. The business model however remained the same, despite the digitisation of the product. In 2006, Spotify digitalised its entire business model to create a ground breaking free and legal on-demand streaming service, and its sister subscription model, and brought about the digital transformation of the music industry.
Digital transformation is not solely the digitising of products – rather, it is the integration of digital products and services, delivered mainly through web-based APIs (found on an energy API marketplace), to totally transform a traditional business model, strategy and operations. It requires broad organisational and strategic change. Maintaining a traditional approach while simply overlaying digital products does not go far enough, as iTunes quickly discovered.
What is a web-based API? And where are they found? API Marketplace.
A web-based API is a vital building block in any digital transformation strategy, and one of the most valuable in achieving scale, reach and innovation.
Behind every mobile app and online experience, there is at least one web-based API. At its most basic level, an API is used to integrate diverse systems by acting as the communication interface which allows two different applications to exchange data over a network connection without the need to merge physical operational infrastructure.
Internally, APIs can be integrated with those legacy IT systems to make internal operational processes far more agile and efficient. Externally, APIs can open up collaboration opportunities with partners, digitalising and expanding existing products or driving revenue streams with the creation of new ones.
Web-based APIs are the means of making an organisation’s data and services digitally available to external developers, partners and internal teams over the internet on energy API Marketplace’s, creating seamless cross-channel experiences and driving the digital economy. And so, greater API-led connectivity through a platform such as an energy API marketplace ultimately creates a two-way path for data, digital products and services which power digital transformation.
Unlocking the benefits of digital products and services in energy.
A business model which adopts a digital collaborative approach underpinned by APIs will inevitably bring about a smarter, more dynamic and more efficient energy system. API-led connectivity opens the door to a better flow of information from one end of the chain to the other. With that gateway comes the technical capability to adapt existing business strategies to develop Energy-as-a-Service (EaaS) solutions which optimise consumption, address sustainability and ultimately reduce costs.
Enabling Energy-as-a-Service solutions
Energy-as-a-Service is a maturing retail model which looks to transform energy suppliers into energy service providers. It focuses on delivering a suite of tailored smart energy services to the end-user in order to add value, rather than solely selling energy units as a stand-alone commodity. These full package smart energy solutions have become increasingly popular over the last few years across both the residential and commercial sectors. However, with better integration of technology, data, third party services, demand and resources, facilitated by digital products and services, we could see even greater value and innovation unleashed.
Enabling smart energy solutions for operational efficiency.
According to Navigant Research, the global market for commercial and industrial (C&I) Energy-as-a-Service is predicted to reach $221 billion by 2026. For Industrial and Commercial (I&C) customers, we are seeing the increased monetisation of flexibility through the implementation of subscriptionbased models which move away from traditional fixed-price supply contracts. These new ‘all inclusive’ models provide value to the end-user by integrating demand-based energy supply at a predictable fixed cost with the outsourcing of operations such as maintenance contracts and minimal upfront capital expenditure. Businesses can be incentivised to adapt their energy use according to peak demand, enabling suppliers to optimise usage and pass on their own costsavings to their customers. It is an attractive user centric model for both customer and supplier which creates cost-saving synergies on both sides. EaaS is a model which also enables more efficient balancing of production consumption, particularly when combined with the API-led integration of data and analytics from a range of external sources such as real-time weather forecasting (vital for renewable sources) and end user consumption profiles (provided via smart meters) for a smart grid. As we address sustainability through increased electrification powered by unpredictable renewable sources, the need for effective load balancing has never been more relevant.
Taking energy innovation to the next level
The possibilities for digital transformation in the energy industry are endless through energy API-led connectivity. Dynamic maintenance and fault prediction for RES producers through real-time data analytics is now evolving into increased operational warranties based on usage and just-in-time delivery of replacement parts. Balancing of demand from EVs based on renewable production peaks is quickly becoming a full demand management service – a fixed monthly fee for the user for an intelligent charging plan determined by EV usage patterns and available grid capacity.
Digitising the customer experience for greater engagement
Thanks to market diversification, distributed generation and deregulation, customers now have far greater choice of energy supplier. Utilities have to invest in the customer experience or face losing them to their competitors. In today’s world, customer satisfaction comes from a seamless multi-channel experience with multiple interaction points along the journey, including anything from digital flexible billing to personalised communications and greater visibility and control over their own consumption. An engaged customer is a loyal customer. Far from being a budget drain, the digitalisation of the customer experience provides utilities with the opportunity to make significant cost efficiencies and even generate new revenue. Smart meters for example offer utilities a stream of behavioural and usage data which, if combined with effective analytics, can improve operational processes. Savvy suppliers can develop and reach out to customers with new personalised services and digital apps based entirely on data driven preferences. This includes bespoke new tariffs based on demand-based output which put the utility firmly in the driving seat when it comes to smart home technology innovation.
The API platform (energy API Marketplace) approach.
Digital energy products, and the APIs which connect them, are becoming ever more complex as developers face the challenge of integrating disparate data sources on a single platform to satisfy increasing consumer demands for smart multi-channel experiences.
An API-led approach raises the need for a structured and centralised management of these various APIs. API management platforms allow you to keep track of the utilisation of the product, any service disruptions, and the technical adequacy of your setup. Yet these platforms usually focus on the technical management of the API as a communication tool. They do not focus on the transaction management and settlement of the digital product as a whole.
Adopting an API led approach/API-as-a product strategy can therefore be further simplified by utilising an API Marketplace, thereby outsourcing issues around data security, subscription pricing models, testing, analytics and contract management. This approach further reduces the complexity to manage a portfolio of digital products. This concept of a digital platform economy allows organisations to interact with a much broader ecosystem of service providers and consumers, increasing market visibility and opening up greater opportunities to monetise digital products and services with agile development.
Understanding the value of APIs Case studies
Plaid, fintech’s biggest winner.
The financial services sector has aggressively embraced digital transformation over the past few years, investing strategically in API-led connectivity to enable long term innovation.
Regulatory changes, in particular PSD2 in the EU and the Open Banking initiative in the UK, have pushed the industry towards data sharing as the new status quo, where banks are required to make functionality and data accessible for third party platforms through open source APIs. Traditional incumbents have been left feeling the competitive pressure from new market players who spotted the huge opportunity to open up new business models based on fast access and integration.
Take the example of Plaid, one of fintech’s biggest winners in recent years and now one of the world’s most widespread API providers. Acquired for $5.3 billion by Visa in early 2020, Plaid is the go-to connector of financial services data, integrating consumer banking data with third party fintech apps. Plaid’s API technology enables fintech companies to meet increasing customer demand for easy access to agile banking as well as bring new products to market quickly. Its API-led approach offers access to developers who want to create apps using banking data but need to bypass the challenges of integrating with the outdated legacy systems of traditional banks.
Plaid’s API platform now integrates with more than 15,000 banks in the US and Europe and connects to more than 20 million consumer accounts.
Transforming Mobility-as-a-Service through API connectivity:
The Qixxit and flyii partnership
Transport stands on a similar frontier to energy, facing its own data-driven, user-centric digital paradigm shift.
Mobility-as-a-Service (MaaS), a key goal in the industry’s own digital transformation, requires a seamless end-to-end user service where all elements of any journey, from planning and booking to payment and disruption updates, are integrated on a single digital platform, regardless of the transport mode.
This cannot be done without data exchange between multiple service providers and it is largely facilitated by API-led connectivity. The recent partnership between Germany-based intermodal travel platform Qixxit and airline distribution start-up flyiin demonstrates the value of such integration for both API provider and API consumer.
Qixxit, spun originally out of Deutsche Bahn Digital Ventures GmbH but bought out in 2019, is one of the first intermodal travel planner apps which also allows for one-stop payment checkout on its platform. By integrating with flyiin’s unique Airline Direct Connect API platform, Qixxit bypassed the time-consuming and costly challenge of integrating individual airline booking engines with its platform. Instead, it was able to combine easily accessible flight data through flyiin with that of buses and trains for the first time and deliver a rapidly growing truly intermodal digital product with a ‘one-click-booking’ customer-centric focus.
Media (Netflix) – Consumer behaviour.
The media industry lies alongside financial services at the vanguard of digital transformation.
In less than five years, we have seen a drastic switch from traditional ‘push’ broadcasting – the transmission of set content along set channels at set times – to consumer-led ‘pull’ consumption where viewers curate their own content when they want across multiple connected devices.
The digital streaming platform behemoths such as Netflix and Spotify have led this digital pivot towards the individual by using data, usage patterns and accurate analytics to revolutionise the way viewers receive their information.
API-based digital products, combined with complex machine learning and AI, enable media companies to deliver content to a huge array of platforms as well as leveraging consumer behavioural data to deliver highly personalised content recommendations.
Much as with e-commerce – Amazon and Alibaba among others – this digital transformation in media consumption has opened the door to a stream of new revenue opportunities, most obviously for advertisers looking to pitch their products to a bespoke audience.
To explore the re.alto energy API Marketplace, start here.