Aligning with Paris’ agreement net-zero goals is now an organizing principle, requiring the involvement of both the private sector and non-state actors to work towards the objective of not allowing more than 1,5 degrees °C temperature increase in the atmosphere. In this context, the banking industry can play an important role in combating climate change.
There are several things that banks can do in this direction. Banks can offer green financing products to their customers, like green mortgages or green loans, however, these talks normally take place on average every 7 years between a mortgage advisor and a customer. They can also favor financing environmentally friendly businesses over carbon-intensive ones. This blog piece, though, will focus on how banks can create new energy services to increase user engagement, support customers in the energy transition journey, and at the same time, unlock new revenue streams.
Energy services based on smart meter data
Residential smart meter data can be used to invest in Energy As A Service (EaaS) offerings. These can take the form of home energy management services, energy monitoring, energy consultancy services, installation of storage, etc.
Residential smart meter data is the 15-30-60 minute interval reading data coming from smart meters installed in households across the world. Smart meter deployment is in progress or has been completed in many European countries, in the USA and Australia and is expected to pick up pace in coming years in other regions too like India, The Middle East, Latin America and Africa. Smart meter data is stored either on DSO’s (Distribution Service Operator) side or in country central Data Hubs and when analyzed with user consent, they can offer insights such as end-users load profiles, energy consumption habits and trends, electricity production activities from solar PV panels, energy-intensive appliances’ usage, etc.
Nevertheless, accessing such smart meter data would be a rather daunting task for banks as it would mean establishing connections with national Energy Data Hubs or Meter head-end systems which would require a considerable amount of financial and IT resources from banks’ IT departments to adapt their infrastructures to store and analyze the new, incoming data.
Luckily for banks, there are third-party energy insights providers out there who are experienced in accessing, analyzing and presenting such information which can enable them to move into value-adding Energy As a Service offering.
Here are 3 ideas on how banks can leverage smart meter data to create energy services that can generate new revenue streams:
Banking apps enable bank customers to check their expenses and finances. Some apps are even capable of disaggregating expenses into various categories and thus helping end-users become more aware of their spendings and control their budget. What if banking apps could do the same but with electricity costs?
Smart meter data can be analyzed and presented via the banking app showing which activities are more energy-intensive, or which home energy appliances are energy guzzlers. The app can be used to send helpful nudges and recommendations to users on how to change habits in order to spend less energy and save more money. This way end-users can get the most out of their home and can be in control of their energy consumption. At the same time, the bank becomes a valuable adviser who helps its clients to stay in control of their home energy finances, opening an appetite for more services to follow.
Recently, Rabobank, the biggest Dutch bank, took a step in that direction by investing in such a solution by NET2GRID to support their consumers towards more sustainable living.
2. Partnering up with third party energy providers
More and more people these days are buying PhotoVoltaics, EVs, renting EV charging stations, or needing help to manage their home energy equipment. Banking organizations can invest in energy as a service by giving special discounts to their customers and partnering up with third-party providers to offer energy services such as purchasing/renting/leasing a new photovoltaic installation, a heat pump, or an EV charging station.
Residential smart meter data can be used by banks to profile and segment their customers and to start offering them personalized services. For example, EV owners or users who own a damaged/broken photovoltaic system at home could be targeted and provided with discounts and triggers for repair services. Extra business benefits such as new revenue streams or an increase in Customer Lifetime Value (CLV) could result from licensing third-party providers to offer complementary services to end-users.
3. Better targeting for green loans and mortgages
Green mortgages and green loans are a great way for banks’ customers to upgrade their houses’ energy efficiency. What if banks could be in a position to know who of their customers would be more likely to be interested in such a loan or mortgage?
Smart meter data, if analyzed, can provide information on consumers’ profiles and behavior such as which of them are homeowners or live in a 50+-year-old house or spend too much money on gas heating costs. To them, a green loan would be a great way to improve their home energy efficiency via the sale of a heat pump or home insulation, increase their assets’ value or simply pay less for electricity costs.
Smart meter data can help banks boost their internal marketing intelligence by targeting customers with personalized green loans and green mortgages offerings. With this detailed residential household information, banks can also track the performance and effects of the residential renovations so they meet their mortgage portfolio CO2 reduction targets. Improving the energy labels of houses having a mortgage there is a direct financial benefit for most mortgage banks to get access to lower interest rates on the global finance market.