This is the second blog in Philip New’s series on energy. The first blog: Hot showers, warm drinks and heating - let's talk about energy the way consumers do is here.
People care about comfort. They don’t care about kilowatts - let alone understand them. But the energy sector struggles to translate comfort into a compelling consumer offer. Communication and understanding between the sector and its customers is cramped. The language we use to talk about energy is limited. But by changing the conversation, the sector can better understand and respond to the real needs and preferences of consumers. In turn, this presents huge opportunities: new choices for consumers; new answers to the challenges of balancing supply and demand, and of scaling the deployment of low carbon technologies; and new business models for the sector.
How can we find out what people really want from energy?
Technology. It has already revolutionized other parts of our lives, such as communication, travel, and shopping. Now the emerging smart home could reveal the experiences that energy consumers value most. Rather than asking people to tell us how they prefer to use energy, the smart home will find out.
Our research shows that people are happy to share data collected from their daily life if it helps them - or a trusted service provider - choose their preferred level of service. This might be heating the whole home to a high temperature all day for one price, or heating some rooms to lower temperatures for part of the day for another price. People are very interested to find out what it costs to heat their home in different ways, and which choices have the greatest impact on cost.
If businesses can really understand customer expectations, and consequently integrate, install and control low carbon systems to deliver cost competitive, in demand services, they could attract and retain more customers. This presents a huge opportunity for firms to develop a range of new business models and value propositions according to different customer needs.
We also found that people are open to the idea of their energy provider decarbonising their energy supply, as long as they still get the experiences they want. Two thirds of people put off upgrading their boiler until it requires replacing, and would love to trust someone else to do it for them. Businesses selling energy services will become a new channel to market for low carbon products, an aggregator capturing grid service revenues and a source of consumer feedback to guide product development.
Have you read?
The Energy Systems Catapult is working with a cross-section of UK households in three cities, building on an initial trial in 2016/17. It is gathering vast amounts of anonymized data - a million data points per house per day. This data enables both individuals - that is, the small minority already actively engaged with energy - and service providers to build a much clearer picture of how comfort or functionality can be delivered at the least cost. It gives people the tools to exercise real choice, or select and instruct someone else to deliver it for them.
Governments and businesses will need to work together to create markets in which consumers pay for the low carbon energy experience they want. Incentives and obligations can be re-aligned to harness market forces. A richer understanding of individual preferences and buildings, combined with new business models and informed local energy planning, could unlock significant opportunities to deliver decarbonisation. This means lower cost and higher value for customers. And economic growth for us all.