In-house or turnkey? The real cost of developing a smart energy app from scratch

Consumers want a better user experience. So, utilities have the ongoing pressure to deliver something new and less transactional that helps them compete with other utilities beyond just energy contract prices. If the customer experience is superior, customers are more likely to stay.

For this reason, digital products in the energy industry have taken new forms to deliver a more relational approach rather than just a transaction. We mapped out that these software types fall under customer & consumption management software and consumption optimization software.

The latter has become paramount, given consumers want more control over their electricity use and costs. Furthermore, customer-owner energy assets like EVs, heat pumps, and solar panels have made this possible, with the plethora of apps available to shift energy use to cheaper hours.

Most established utilities with big digital teams and budgets have banked on this consumer need by developing robust digital offerings in-house. One can't say the same about the various small and mid-size utilities catching up. Thankfully, new players like Synergi offer utilities a plug-and-play solution, allowing them to launch a ready-to-use smart and flexible energy app to help consumers save on their energy bills and get rewarded by using energy when it's good for the grid.

But what's better for a utility, in-house or turnkey? What's the cost of developing an in-house smart energy app or buying into the turnkey approach? Let's explore.

Is in-house or turnkey the right for you?

We have a few examples to show which cases  turnkey has been the best solution for our utility customers.

1. You want to build upon an existing digital service: Our customer, KSS Energia, partnered with Synergi to build a digital service ecosystem within their “Muutakin®” application. The goal of the app is to simplify energy matters for consumers in a single environment. Rather than building all features in the app from scratch, KSS Energia partners with service providers to link their services to their Muutakin® ecosystem. More about our partnership with KSS Energia here.
2. You want to spend the company’s resources elsewhere: Our customer, Aalto Energia, is a modern energy company that wants to build simple, easy-to-understand energy products. They wanted to offer access to an existing smart energy app rather than creating a digital product in-house. This way, they avoid hiring an army of developers, maintaining API connections, and developing the product further as a consumer needs to evolve.
3. You are behind in the game: The truth is that the energy industry has been slow to adopt digital practices like other industries, such as commerce. So, most utilities are catching up. The upfront investment in building a digital product from zero is hefty, and it also takes several months to make it worthwhile to customers. This makes an option like Synergi really attractive.

What’s the real cost of developing in-house or buying turnkey?

A way to know what direction is better and more cost-efficient for you is by calculating the total cost of ownership of developing in-house and turnkey. To calculate this, you could take into consideration the following factors:

• initial cost (I)
• operation cost (O)
• maintenance cost (M)

Building a smart energy app in-house

It’s essential to consider the complexity of the mobile app product you want to create. As shown in the table below, the more infrastructure complexity and features you want to add, the more time and cost increase rapidly.

The cost of creating an application with Synergi-type features

What is the total cost of ownership of building a smart energy app like Synergi? For more context, Synergi is more than an app. It’s a platform providing real-time energy optimization opportunities for over 400 DER brands and devices through APIs. The app features smart algorithms that control devices according to different signals, such as price and grid congestion. In the future, it will also plug European utilities into flexibility markets, opening up the ~€11 billion revenue potential behind flexibility markets.

Since, we want to focus only the basic app development, Synergi is considered a complex app with sophisticated UI/UX and real-time features, the average cost is expected to be $ 100 000-$300 000. That, without digging too deep into it. But here’s a more accurate calculation:

• ‍Initial cost (I) = 250,000€‍
• Operation cost (O) = Customer Support = 2 people = 50,000*2 =100,000‍
• Maintenance cost (M) = 15-20% of the initial app’s development cost per year = 250,000*0.2 =50,000€

TCO=250,000€+100,000€+50,000€ = 400,000€*

*Cost can increase if we include other variables like downtime or production costs.

Timeline

• ‍12+ months of getting to go-live

Turnkey could be for you

To sum up, the turnkey approach offers plenty of advantages. When utilities partner with service providers to integrate existing digital services into their ecosystem, they can build on established tools rather than starting from zero. This allows utilities to reallocate resources that would otherwise go toward extensive in-house development, upkeep, and staffing. Lastly, turnkey solutions help utilities catch up quickly and cost-effectively without the high investment and lengthy timelines of custom-built applications.

Contact us via this link if launching a smart energy app connected to flexibility markets interests you.