The rise of the energy consumer

For a long time, many electricity providers have largely ignored the needs of the customer. These utility companies have steadily grown, invested in new supply technologies and generally behaved like the monopolies they are.

But utility companies have found it increasingly difficult to get licences from policy-makers for new projects, which have gradually become more costly.

The scope for customers to reduce or reshape their energy needs is now great, as is the potential to let customers or groups of customers make trade-offs between cost and reliability, such as paying more for a better service, or less for a more basic one.

In other industries, we have seen technological advances in the way information is captured and transmitted, leading to greater choice for consumers. Industry players have responded by looking for new ways to price and deliver their services. The electricity industry now has the same opportunity.

Consumers should be able to get their hands on relevant information about reliability, consumption and cost. Investments in smart grid technology can help with this.

But electricity policy and regulation have not kept pace with technology, and so progress has been slow. As a result, supply-side investments are usually separate from investments in reducing or reshaping demand.

Meanwhile, a customer might make investments in their home or business, which is disconnected from investments made by the energy provider on the wider electric grid. Regulators and utility companies see a barrier between “company” and “customer” that they do not like to cross.

New energy providers are appearing and will continue to disrupt the status quo, so existing companies, regulators and policy-makers should be on the lookout for creative ways to engage with customers and embrace new technology.

Utility companies have three choices – to focus even more on being bulk suppliers, accepting that new entrants to the industry are here, and are growing; to partner with companies with more experience in maintaining customer relationships; or to try to change into customer-facing companies.

Policy-makers can help increase consumer influence, and therefore make energy more affordable and flexible, by creating new regulations and, in some cases, reducing oversight.

This creates more space for consumers and business to find solutions that combine supply and demand. Consumers care more about the cost and reliability of energy, rather than who delivers it.

In developing countries, companies should focus on developing infrastructure that will give customers greater choice, such as modern grids with smart meters.

Utility companies should also be allowed, indeed encouraged, to develop prototype solutions in certain areas that experiment with new ideas in concert with consumer groups.

There are good reasons why the electricity system has been much slower to adapt than, for example, the telecommunications sector. But there are also lessons for energy providers to learn here. Can they be seen as creative problem solvers, as well as mere suppliers of energy?

Author: Bob G. Elton, Adjunct Professor, University of British Columbia, Canada; Chair of the Global Agenda Council on New Energy Architecture

Image: A technician works an electrical line, Arkansas April 29, 2014. REUTERS/Carlo Allegri