The first post of this series, Energy Is Entering Its Internet Moment, explored the large scale disruption of the energy sector that is currently underway, shifting energy production and distribution to digitally enabled, decentralized power. This post explores the drastically divergent logic of digitalization in the energy sector, set against the internet’s digitalization journey, and what that means for value delivery and the service model in the sector.
The internet's first act was made up largely of fiber and servers that were not highly accessible to the general public. It didn’t become a technological revolution until its second act when clusters of new technologies, products, and industries were created on that initial infrastructure that caused significant economic and societal upheaval. The revolution brought Amazon, Spotify, and online banking, all digitally-driven service relationships that made the infrastructure meaningful and changed economic models fundamentally. If energy’s first act was the grid as we know it, energy’s digitally-driven second act is just getting started, and it has yet to be determined.
In energy’s second act, digital technologies are now combining with the technology of electricity itself, evolving into completely new technology clusters, economics, and relationships. This is not the digital transformation of the organization and its operational billing systems, customer portals, apps, and smart meters feeding data into back end systems. Energy itself is being digitalized, transforming the industry, and most of all its relationships. Today, distributed energy resources like your electric vehicle or home battery are being treated like tiny power plants that get paid to respond to grid signals. In the not distant future, we’ll be treating electrons like data, using many of the architectural principles of the internet, applied to energy distribution. This introduces a fundamentally different logic, one that is distributed, bidirectional, data-rich, participatory and networked on top of infrastructure and institutions designed for the centralized, unidirectional, transactional old logic of unitary utility systems. Whether it’s National Grid, one of the world’s largest investor-owned utility companies, or Rewiring America, a nationwide nonprofit advocating for a green transition, the consensus on the future of energy is decentralization and digitalization.
Why the old methods answer the wrong question
For the most part, every time a major technological transition has succeeded, the technology often turned out to not be the difficult part. The hard part was redesigning the relationships, habits, and institutions around it. Jigar Shah agrees, technology has rarely been the limiting factor in the roll out of new energy technologies. With focus primarily on the infrastructure, policy and market incentives, is the sector prepared to respond to the shifting demands that come with this new digital logic and the inevitable redesign of the relationships involved in the service? The question may seem hyperbolic, but when considered against the Netflix’s coup as a digital challenger when Blockbuster was sitting comfortable at its peak, it starts to seem more plausible. We’ve all seen the arc of the story, and it’s safe to bet that the ones that understand the opportunities that come with these new technologies will be the ones driving the transition, rather than struggling to keep up.
Traditional utility programs focused primarily on generation capacity, and the levers available were 1. generate more energy or 2. use less energy. As a result, the key metrics of utility programs have focused on kilowatts and participation rates, bolstered by rates and behavioral programs (with some basic UI functionality) as levers. They were innovative and valuable for the logic of the grid at the time, but the results produced fragile outcomes. Only 13 percent of U.S. households participate in a demand response program, and a nearly equal 12 percent have already churned out. Fifty four percent of non-participating customers have never heard of their utility's DR program or don't think one exists, according to Utility Dive. A meta-analysis of 83 behavioral intervention studies published by the NIH found that critical actions like purchasing efficient appliances and changing transportation habits were barely affected by behavioral interventions alone, and information-based interventions, the most commonly used, had very limited impact. And what of digital transformation of the last ten years? As of 2023, 30 percent of the nation's largest utilities offered no mobile app, up from 27 percent in 2020, meaning some utilities built apps and then abandoned them. Nudge effectiveness in energy ranges from 0.7 percent to 16 percent savings, with generic and one-time interventions at the low end. MDPI
The reason behavior science, goal-based programs, and UX solutions underperform in energy isn't that they're bad tools. It's that they're operating at the wrong level for the wrong dynamics. Goal-based programs expect individual achievement of predetermined outcomes, often with linear progression toward the goal. But energy behaviors and needs are changing rapidly, from EVs to heat pumps, and the baseline is shifting. Further, once a goal is achieved, motivation often drops. Behavioral change seeks to modify habits by identifying barriers and motivations, but behaviors are impacted by change in context and requires ongoing monitoring. They're designing the interaction — the nudge, the notification, the interface — without designing the system those interactions are embedded in and that determines the incentives. Behavioral change and goal-based programs treat the member as an individual to be moved, like using discretion to stop scrolling on an interface designed to hijack your ability to discern. For the same reason, you can't design a sustainable service relationship by optimizing touch points if the underlying system — the incentive structures, the organizational roles, the communication channels, the member expectations, the staff capabilities — hasn't been redesigned to support it. People are behaving as the system has been designed for. That's not a UX problem. That's a systems relationship problem.
Companies in the early internet era made the same mistake. They hired web designers when they needed to redesign their business model. They optimized the touchpoint when the service logic needed rethinking. The ones who figured it out, the likes of early Amazon and Salesforce, rethought the service relationship question first and let the technology follow. This is especially true in the shifting logic driven by digitalization.
New paradigms, new relationships
In this new paradigm, capacity is no longer a question solely of generation, and generation is no longer centralized and unidirectional. We have solar panels and batteries that can act as little power plants. New levers are available that weren’t previously, and efficiency in the use of our grid resources has become a key priority. For example, Holy Cross is run by 85 percent renewables and sees distributed energy resources as a feasible path to get them to 100 percent, while maintaining prices that put them at the bottom third of rates in the country. When we’re shifting from building new plants to leveraging customers’ hardware, we know we’re entering a new paradigm.
Programs like battery storage and EV charging programs require a rethinking of the service relationship that would make those behavior natural or meaningful, much like early Amazon and Salesforce did. There's a difference between improving how something looks, improving how it works, and redesigning what it actually does for people and institutions. Most digital work in energy is doing the first two. This moment requires the third. How do we design for this digitally-enabled energy relationship, and what it means to be a participant in an energy system, how value flows between the grid and the people on it, and what the member's role actually is? By seeking to understand what questions and incentives unearth the most value for all sides of the equation. We can learn from other industries, and the leading edge of the energy sector.
When telecom networks were deregulated and retail providers separated from infrastructure in the late ‘90s to early 2000s, we saw commoditized infrastructure, differentiated service relationships on top, and customers suddenly having to make choices for a service that they never made before. The losers competed on price until their margin disappeared, and the winners figured out that the service relationship was the product. Energy retail is about 15 years behind telecom in this trajectory.
Realizing that telling patients what to do doesn't work, even when patients understood the stakes, the healthcare industry began to redesign the system around the patient. Healthcare organizations reorganized to make it easier to act than not to act, make progress visible in real time, build the skills and confidence to self-manage, and give the behavior meaning beyond just following instructions. That shift, from compliance to activation, required not just the clinical touchpoint but the in-between moments where the patient is alone with the decision. It was a redesign of the full journey and how it was operationalized. This shift from "patient receives care" to "patient manages health" through apps, wearables, shared data, and financial incentives is structurally similar to the shift from "member receives power" to "member participates in grid management." And the service design challenges are parallel: how do you make complex system participation legible, trustworthy, and low-friction for people who have other things to do with their attention?
From energy services companies that digitized their operations, we see a significant performance gap between utilities that prioritize cohesive orchestration of member journeys and those that don't. McKinsey found high-performing utilities achieved 3–4x higher net customer satisfaction than laggards, with high performers prioritizing customer journeys over transactional interactions. J.D. Power's 2024 utility digital experience study found overall satisfaction at 594 out of 1,000, significantly below wealth management apps at 718. Helpful, yet, that’s not quite the same as the rigorous shift in logic driven by the digitization journey. We can, however, point to those at the leading edge of the field.
Systems determine service relationships, and service relationships determine value
Like we saw in telecom and healthcare digitization, the new programs being rolled out change the underlying logic of power generation, and therefore the logic that drives a market. What digitalization offers in energy is much more robust than kilowatts and participation rates. It offers a completely new way of generating, orchestrating and distributing energy, and new business models driven by the intelligence that comes with it. And it requires a different set of questions. A demand response program is focused on two questions: did members comply, and how much load did we reduce? That's the only question it's designed to answer, and kilowatts and participation rates are the only answers it can return. It treats the member as a lever, something to pull when the grid needs relief.
But when a member has a networked battery, an EV, and rooftop solar, they're not a lever. They're a node. The question the system now needs to ask is different: _what does this member's hardware know about the grid, and what does the grid know about them?_ Holy Cross's Power+FLEX program, which aggregates member batteries as a dispatchable grid resource, is an attempt to answer that question. Rather than another compliance program, it’s the beginning of a different service logic, one where the utility and the member are operating on shared information and shared stakes.
The data from these advanced DER isn't just operational telemetry, just like it wasn’t for the internet era. Taken seriously, this data informs whole new business architecture and service models. It signals whether a new kind of member relationship is forming or not, and what the incentives and structures should be. Are the same members participating repeatedly? Are they expanding their participation to other programs? Are they telling neighbors? Are they disengaging after the first event? That's the data that tells you whether you're building a relationship or just running a compliance program. That's not a data gap; most of these organizations have more data than they can act on. What's missing is the layer between the data and the decisions, the organizational capacity to interpret what the signals are showing and build the service logic around it.
Australia is arguably the most interesting laboratory right now. With high rooftop solar penetration (highest per capita in the world), aging grid, extreme weather stress, and market volatility, they’re moving faster than most others. South Australia Power Networks and Tesla ran a program aggregating home batteries across thousands of households into a dispatchable grid resource. The technical result was impressive. The service design, however, was underdeveloped and caused friction. Members weren't told their battery was being dispatched until after it happened, had no way to understand what occurred or why, and staff were equally unprepared to explain it. It's a useful case study in what happens when the operational capability outpaces the service relationship. There's a layer beneath the service relationship problem: The operational capability existed; the organizational capacity to interpret what was happening (to understand what the data meant, route it to the right people, and act on it) didn't. On the other hand, Amber Electric established wholesale pass-through pricing with a flat subscription fee. Members see real-time wholesale prices and can automate response through integrations with Tesla Powerwalls, EVs, etc. It's a small company but a genuine proof point that members will engage with price signals if the service is designed well.
Octopus Energy is perhaps the most instructive case study. It started as a challenger retail electricity supplier in 2016 and are now one of the largest in the UK, with operations in the US, Germany, Japan, and Australia, by looking at what was happening in other industries going through digitalization and asking a different question than their competitors. They built their own technology platform specifically to enable dynamic tariffs and two-way member relationships — not bolted onto legacy systems. Their Agile Octopus tariff gives customers half-hourly pricing that tracks wholesale rates, including _negative_ prices when there's excess generation. Members with smart home devices, EVs, and batteries can automate around this. Their Intelligent Octopus product automatically charges EVs when electricity is cheapest and cleanest, with zero manual input from the member. The service experience is designed around the idea that the member relationship is ongoing and intelligent, not transactional. Ofgem's 2025 survey found 90% of Octopus customers satisfied or very satisfied, with their NPS at 39 points above the UK industry average, the largest satisfaction gap of any company measured across any sector in Bain's State of CX report. The takeaway from Octopus isn’t their technology, it's that they started from a service relationship question and built backwards to the technology and tariffs. The result is a different service logic producing structurally different outcomes.
The struggles we’re seeing in the energy sector and their ability to deliver their service isn't for lack of tools or investment. Many are asking a smaller question than the moment requires. Behavioral programs optimize the individual. Digital transformation optimized the transaction. Neither redesigns the incentives, the organizational roles, the member expectations, and the staff capabilities that determine whether a new kind of relationship forms. That's what the leading examples from Australia and the UK are getting right, and what most of the sector hasn't started yet. The next, and final post will delve into what it takes to build the organizational capacity to use the data to ask the right questions the moment demands, in a way that we apply the lessons of digital transformation of other sectors.
Header photo by Kindel Media on Pexels
