Energy sector could cash in on subscription-based billing model

Recent news reports make no mistake, the energy sector is in upheaval. With inflation on the rise, concerns are growing and everyone is already trying to save money. The case of consumption-based billing is becoming a major issue in this particular context. At a time when the subscription model is attracting more and more consumers and is trending towards ever greater personalisation, the most forward-thinking energy suppliers have an opportunity to make the most of the situation.

The energy sector is experiencing profound changes and new challenges

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

This renewed interest in energy billing management is also explained by major changes in our consumption habits. Between the IoT (internet of things), the democratization of electric cars and the rise of home automation, it’s high time to review current, increasingly archaic billing models.

The growing Energy as a Service (EaaS) model

The changes that are taking place are based on a fundamental principle: the need to control one’s consumption. It’s no coincidence that in recent years more and more individuals have turned to energy self-sufficiency.

Energy as a Service (EaaS) is one of the rising trends. EaaS is the logical evolution from the model we know today. It shifts from a billing system involving regulation and periodic readings to a system based exclusively on actual consumption. In other words, no more unpleasant surprises at the end of the year with a huge difference to pay!

Like other popular subscription services (streaming, software, etc.), the goal of the EaaS model is to offer a subscription to an energy service. This can be as simple as renting an electrical appliance or as complex as a customized subscription for an energy service like lighting.

The EaaS model has three main aspects:

• Recurring payments made by the user;
• Pricing based on reality (only pay for what is actually consumed);
• No costs for the user related to installation, maintenance or upgrades (similar to what we see with the SaaS model).

Pay-per-use billing in the energy sector is a flexible model adapted to consumers’ needs

Consumers are particularly interested in having control over their energy bills. It seems obvious to offer them a model where they can track their consumption, while being sure to pay only for what they have actually consumed.

This pay-as-you-go model is especially relevant for B2B customers. Adjusting energy consumption can translate into substantial savings over the course of a year. 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.

For companies in the energy sector, consumption-based billing is the logical choice. It also echoes the emergence of new services and products compatible with a subscription model such as smart thermostats and wallboxes.

These are the pay-as-you-go model advantages in a nutshell:

• Optimize the customer experience through offer flexibility and collected data;
• Stand out from the competition and their often too rigid models;
• Ensure regular revenues via a subscription system with the possibility of coupling a fixed monthly energy subscription with complementary services on a per-use basis;
• Adapt the billing model to both B2B and B2C customers.

Case study of an energy company using pay-as-you-go billing

Let’s take a look at a concrete example of pay as you go in the energy sector to better understand its challenges.

Elec-Tri-City specializes in local electricity distribution. To differentiate itself from the competition, it offers a subscription model based on consumption billing. This model ensures recurring but somewhat irregular revenues since household consumption isn’t the same in the middle of winter as in the middle of summer.

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

The importance of choosing the right billing tool for the usership economy and energy sector

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

• offer a wide choice of payment methods to the user like integrated CB payment;
• accurately bill the energy consumed;
• track energy consumption in real time;
• easily juggle recurring billing and additional services;
• collect and analyze customer data;
• bring together sales and accounting teams for better customer follow-up.

In addition, you should pay special attention to the agility of the billing software you choose. The energy sector can be complex in terms of pricing. For example, some households may receive social welfare or environmental bonuses that need to be taken into account when billing.

The more you are able to offer a tailored pricing service, the more you strengthen the customer experience and encourage loyalty.