Energy subscription

Consumption based billing – a great opportunity for the energy sector

With the rising inflation, energy consumers’ concerns are growing and people are trying to save money on their electric bill, the energy sector is in upheaval. As subscription models are attracting more and more consumers and are trending towards ever greater personalisation, now the most forward-thinking energy suppliers have an opportunity to make the most of the situation, in this particular context the case of consumption based billing.

A sector undergoing challenges and changes

Today the traditional energy distribution pattern is being restructured. Between soaring prices, the increasingly important ecological and sustainability concern and the emergence of new suppliers, the cards have been reshuffled. Consumers and companies alike are taking a much closer look at their energy consumption.

This growing interest in energy bill management is also explained by extensive changes in the consumers and companies energy consumption habits. Between the IoT (internet of things), the growing use of electric vehicles and the rise of home automation, now is the time to review and modernise the current, increasingly archaic billing models.

Energy as a Service (EaaS) - a growing demand

Today’s changing energy bill management is based on a fundamental principle: the consumers need to control their consumption. It’s no coincidence that in recent years more and more individuals have turned to or became more interested in being energy self-sufficient.

Energy as a Service (EaaS) is one of the rising trends, that is the logical evolution from the energy model we know and use today. It shifts from using a billing system involving regulation and periodic readings, to a system based exclusively on the actual consumption. In other words, the consumer won’t have any more unpleasant energy bill surprises at the end of the year!

Like other popular subscription services such as streaming, software, etc. the goal of the Energy as a Service model is to offer an energy service subscription. This subscription can be as simple as renting an electrical device or as complex as a customised subscription for an energy service of the consumer’s needs.

consumption based billing

The EaaS model has three main aspects:

  • Recurring payments from the user;
  • Pricing based on what the consumer actually use;
  • Similar to what we see with the SaaS model, no additional costs for the user regarding installation, maintenance or upgrades

Consumption based billing model for the consumers needs

Today’s energy consumers are notably interested in having control over their energy bills. It would seem obvious to offer them a model where they can track their usage, making them sure they only pay for what they have actually consumed.

This pay-as-you-go model is especially relevant for B2B customers. Adjusting energy consumption can result in substantial savings over the course of a year. And when you consider the fluctuations that can occur in just-in-time production lines, it’s clear why a business in the industrial sector would benefit from an EaaS model!

The consumption based billing is the logical choice for companies in the energy sector. It also echoes the evolution of new services and products compatible with an energy subscription model; such as smart thermostats and charging stations.

The pay-as-you-go model advantages:

  • Optimisation of the customer experience through flexibility and collection of data;
  • An opportunity to stand out from the competitors and their often too rigid models;
  • Ensurance of regular revenues through a subscription system with the possibility of combining a fixed monthly energy subscription and complementary services on a per-use basis;
  • A billing model that is adaptable to both B2B and B2C customers.

Example: An energy company using pay-as-you-go billing

To better understand its challenges, let’s use an example of pay as you go in the energy sector.

The company Elec-Tri-City specialises in local electricity distribution. To set itself apart from their competition, the company offers a subscription model based on consumption billing. This model ensures recurring but at the same time somewhat irregular revenues, since household consumption differentiates depending on the season.

Thanks to customer data collection and predictive analysis tools it’s possible to anticipate these revenue fluctuations, and so the manager of Elec-Tri-City is looking to expand his offer. To generate new recurring revenues, he decides to offer rental of wall mounted charging stations as a complementary subscription service billed on a per-use basis.

Choose the right billing toll for the usership economy and energy

To develop a business model based on pay-per-use is one thing, but being able to apply it correctly is another. To choose the right billing tool is crucial to succeed. It must enable you to:

  • offer a wide choice of payment methods to the user;
  • Precisely bill the actual consumed energy;
  • track real time energy consumption;
  • easily handle recurring billing combined with additional services;
  • collect and analyse the customer data;
  • bring together sales and accounting teams for better customer follow-up.

This article is written by our French sister company Sofacto

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