Publication date (electronic): 30 June 2015
Modeling the emergence of multi-utility service companies in the UK domestic energy market
Peter Allen is Emeritus Professor of Evolutionary Complex Systems at Cranfield University. He has a PhD in Theoretical Physics, and worked with Professor Ilya Prigogine at the Universite Libre de Bruxelles from 1970 - 1987. Since 1987 he has developed and run the Complex Systems Research Centre at Cranfield University which, following his partial retirement is now run by Professor Liz Varga. He is a reviewer for many journals and project evaluator for UK Research Councils as well as for the EU. He has been working on the mathematical modelling of change and innovation in social, economic, financial and ecological systems, and the development of integrated systems models linking the physical, ecological and socio-economic aspects of complex systems as a basis for improved decision support systems. Professor Allen has written and edited several books and published well over 200 articles in a range of fields including ecology, social science, urban and regional science, economics, systems theory, low carbon energy production and supply. He co-edited the Sage Handbook of Complexity and Management and is co-author with Jean Boulton and Cliff Bowman of Embracing Complexity which is just out from OUP.
Liz Varga, Chair in Complex Infrastructure Systems, is Director of the Complex Systems Research Centre (CSRC), Cranfield School of Management (SoM), Cranfield University. Liz’s research focuses on explaining the economic, social, and environmental outcomes of interactions and interdependencies within critical infrastructure systems, i.e., energy, transport, water and waste, and telecommunications systems. Her skills are in creating abstractions of real-world systems, recognizing emergent phenomena and co-evolutionary effects, together with measurable systemic metrics, and working in trans-disciplinary environments. Using mixed methods approaches, embracing big data, and leading the design of computational agent-based models, the consequences of social behaviors, political interventions, and technological potentials are examined at multiple scales and assessed for impact upon resilience and adaptation and toward normative scenarios. She has over 60 publications and has been research investigator on 10 Research Councils UK and European Commission projects.
Stephen Varga is a Research Fellow with over 25 years’ industrial experience in the management of logistics systems. He has been involved in mapping, data collection and simulating UK industries in freight goods, and energy supply, with the aim of reducing carbon emissions, improving efficiency, and reducing resource consumption. His objective is to provide solutions to complex supply chain management challenges.
The paper looks at the potential for multi-utility service providers to create business models that compete with traditional utility product providers whereby customers' services increase and resource efficiency is improved. The objective in our modeling is to show the how Multi-Utility Service Companies (MUSCos) could invade the market, changing it from markets focused on selling, for example, energy to customers, to markets aimed at selling efficiency. The output of our modeling is the extent to which the resource efficiency of UK homes can be significantly improved, and we show this in 10 centile categories. The key difference between the two types of providers (Traditional and MUSCo) is that while households can switch traditional suppliers fairly rapidly (3 months), if a household signs up to get house improvements and utilities from a particular MUSCo, then the arrangement will be at least 5 years, and possibly longer. This means that households, once they sign up are no longer ‘on the market’ for utility supply. Although getting a contract signed may take much more time for a salesman than simply getting a normal utility order, the fruits and the income are guaranteed to the MUSCo for 5 or 10 years. Their sales force efforts can be switched to non-contracted households. So, essentially both utilities and MUSCos are trying to sell to the normal, non-contracted households. The real advantage that a MUSCo customer is that there is a discount on both the house improvements offered and the price of future supplies of energy and water. MUSCos are able to offer reduced cost of house insulation, appliances which reduce consumption and waste from multiple utilities, and can achieve marginal profits from financing of these appliances.
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