Is the smart grid ready for enlightened consumers?
Compared to the fan-like adoration some online and consumer products companies routinely elicit from consumers, the traditional electrical-grid-to-customer relationship lacks juice. Indeed, Accenture research shows that until very recently, consumers have overwhelmingly viewed electricity as a low-value, commodity product, not worthy of much direct interaction with the provider.
In fact, more than half failed to connect with their utility at all during a given year, and those that did spent, on average, just nine minutes doing so. For many, interacting with their electrical utilities was an afterthought that offered industry players few openings to capture additional value or burnish brands.
Now, however, we believe an increasingly amped-up intimacy could be forming between the energy marketplace and the people who rely on it.
In this podcast, we discuss how a new breed of consumers and innovative technologies are offering smart grid providers fresh opportunities in the evolving energy marketplace.
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During the last decade, concerns over climate change, volatile energy prices, blackouts and brownouts have powered the rollout of new smart grid technologies that manage information flows to make electrical power observable, controllable, automated and integrated. What’s different now, though, are changes on the demand side—the emergence of a new type of energy consumer who is increasingly defining the future of the energy marketplace.
As consumers become more mobile, connected via social media and more conscious of their energy needs than ever before, their preferences are changing. As a consequence, increasing numbers are beginning to expect more from their energy experience than just keeping the lights on.
These new energy consumers are searching more than ever for value beyond the traditional commodity product. They expect service anytime, anywhere (for instance, to recharge electric vehicles) and want targeted offerings and value propositions. Significant numbers want to reduce their personal impact on the environment, more choices over their energy and usage management, and innovative ways to reduce costs.
Accenture global research—in North America, Europe, Asia Pacific and Africa—shows that electricity consumers are increasingly interested in products and services that align with their lifestyles and values. In fact, we identified four value propositions that are rising to the top of the list of consumer demands.
- “Save me money.” Give me the lowest possible cost and I’ll do the rest.
- “Make it predictable.” Give me consistent, no-frills service without any surprises on my bills.
- “Save me time.” Give me consistent, no-frills service without any surprises on my bills.
- “Save the planet.” Give me peace of mind with green options.
Today, no single electricity provider delivers on all of these value propositions.
Consumers are also embracing new channels of communication and changing the way they interact with their providers. Our research shows that when it comes to energy-related interactions, consumers overwhelmingly prefer web-enabled channels and self-service. They are also showing increasing interest in leveraging social media as a platform for meaningful two-way communication and service, particularly in emerging economies.
To accommodate these changing values and preferences, electricity providers are experimenting with new value-added products and services. But utilities no longer have this patch of the energy ecosystem to themselves. The cascade of new technologies and offerings focused on streamlining, integrating and expanding the customer’s relationship with electricity is in many cases coming from providers new to the energy marketplace. Consumer products companies, telecom carriers, big box retailers and others are exploring possible roles in the industry and introducing a wave of consumer-focused innovation.
Once the sole domain of utilities, the traditional energy marketplace has begun to converge with other markets (see chart). This convergence is attracting new challengers vying for a share of consumer energy revenues, and many of their offerings extend beyond the traditional delivery of electricity (that is, “beyond the meter”).
For example, Florida-based ADT, which currently has more than 6 million home security accounts, introduced ADT Pulse in 2010. The offering melds the company’s mainstay remote security monitoring package with home energy management services such as lighting and thermostat control, as well as home automation. For a monthly fee, ADT’s system allows customers to monitor and manage home security and their energy use remotely via the Web or smartphone.
Verizon, a communications player, offers broadband-based home monitoring and energy control systems that include smart thermostats, smart plugs, remote locks and home monitoring cameras. Similarly, Time Warner Cable’s IntelligentHome enables customers to control lighting and home energy use remotely.
Some energy providers, seeing these new competitors enter their markets, are responding with their own offerings. In Australia, some utilities offer consumers bundled electricity, natural gas and green energy, as well as Internet access, home and mobile phone service and television connections, all in packages that offer discounts of up to 25 percent. Or consider Endesa, the largest electricity retailer in the Spanish market. The company has increased its product and service portfolio to offer virtually everything in the home (including new solar solutions and domotics, or home automation). It provides home maintenance services, wiring and plumbing maintenance services, residential solar power, home heating control, personal insurance and even an online real estate portal.
British Gas is positioning itself to become a leading home services provider as well. Along with electricity and gas, it offers a portfolio of products and services that includes electrical repair, boiler servicing and plumbing repairs, as well as such energy-efficiency products as solar panels and home insulation.
These kinds of bundled services create value for consumers by offering not only discounts but also the convenience of a single provider.
Our research shows that as energy-related consumer preferences continue to shift, opportunities exist for many companies in the newly expanded electricity marketplace. For example, 73 percent of consumers responding to an Accenture global survey said they would consider buying electricity or energy-efficient products from non-utility providers.
In fact, retailers in Australia, New Zealand and Europe have all experimented with various types of partnerships with energy companies to provide products or services. Clearly, consumers are searching for value and will take their business to those that offer it.
Increasingly, energy players are collaborating to create value. In the United Kingdom’s deregulated market, for example, the utility SSE teamed with Marks & Spencer (M&S) in 2008 to supply M&S Energy-branded gas and electricity services through the big retailer’s website and stores. M&S Energy offers incentives to consumers for achieving electricity reduction targets and for switching to paperless billing.
By March 2010, the partnership had attracted 175,000 customers. Later that year, Marks & Spencer extended the offering to a full line of home energy services, including energy advice, renewable energy solutions such as solar panels and heat pumps, home insulation and energy-efficient heating solutions.
Best Buy has also collaborated with a number of utilities to create in-store energy learning centers where consumers can find out about the latest technologies for managing their home energy consumption and saving money. The company is piloting the sale of electricity in one of its Chicago stores through a partnership with Constellation Energy. The consumer electronics retailer has also created its own offerings, which include packaged home automation solutions and energy assessments that homeowners can access either via an online survey or at home through an onsite energy audit conducted by Best Buy’s Geek Squad.
Lowe’s, a US-based chain of home improvement stores, offers customers solar panels made by California-based Sungevity as well as a comprehensive line of home management systems. In January 2012, Lowe’s announced a partnership with AlertMe, a UK-based energy management and smart home company, to offer customers the organization’s cloud-based home management system. The system gives consumers a full range of home monitoring solutions that include energy usage tracking and control of door locks, smart thermostats, lighting and more via smartphone or computer.
Such partnerships can, in many cases, provide the quickest path to value, enabling companies to focus on their core strengths and collaborate to extend capabilities.
In search of a game-changer
While companies are introducing a wide range of products and services, so far no single product or technology has emerged to define this developing marketplace. A few new products, however, are harbingers of what will drive success.
One candidate is the Nest Learning Thermostat. Developed by Tony Fadell, Nest’s founder and CEO, who also helped design Apple’s iPod, the smart thermostat automatically learns to personalize settings based on homeowners’ behaviors. The device has motion sensors that detect the homeowner’s presence, enabling it to automatically switch to “away” settings when no motion is sensed and thus become a simple “set-it-and-forget-it” solution to home heating and cooling management. Because it connects to the Internet, users can view and manage their temperature controls either online or through a mobile application. In addition, Nest automatically receives online software updates and can be integrated with other devices, which could in the future extend its functionality and ability to reach further into the home.
The $250 device immediately sold out when introduced in late 2011, and is now available from Amazon.com, Apple, Lowe’s and via Nest’s own website. The success shows that usability and consumer-centric design will be key to consumer adoption.
Electric vehicles may also emerge as a game-changing technology. Accenture research found that 60 percent of global consumers would consider a plug-in hybrid or full electric vehicle for their next vehicle purchase.
Mass-market EV adoption would not only create greater demand for electricity. It could also provide associated opportunities such as installing home- and office-based charging stations, placing charging spots in public locations, developing new billing and payment approaches, and even the possibility of consumers selling energy back into the grid from their car batteries.
Courting the digitally savvy
Because new energy consumers are digitally savvy, opportunities abound to tap into their communication preferences to bring innovations to the energy marketplace.
For instance, Opower, a Virginia-based smart grid software-as-a service provider that offers personalized energy reports through traditional mail, is exploring digital delivery channels, including social media. The company offers an interactive web portal and a “social-energy” app built on the Facebook platform that challenges consumers to conserve energy and allows them to compare their results with those of similar homes and with friends. Opower has also worked with a partner to develop a web-connected programmable thermostat to extend its offering further into the home.
Similarly leveraging social networks and gaming mechanics, US-based Simple Energy has designed an online platform that allows users to score their energy usage against that of Facebook friends and receive rewards for conservation behavior. This mix of online social competition and new technologies clearly motivates consumers to rethink the way they use energy. During one pilot program, people who used Simple Energy’s social gaming app integrated with an automated control device conserved more than twice as much energy as those who didn’t use the app.
We see consumers increasingly in the driver’s seat, defining the energy offerings of tomorrow and helping to spawn a new marketplace of third parties looking to create unique propositions. The Green Button initiative, supported by the US government and a growing number of utilities and energy product and service providers, is enabling consumers to download and review their energy usage data in an easy-to-use format. Software developers and other third parties are adopting Green Button’s standardized data format and offering direct-to-consumer mobile applications, home energy management solutions and energy audits.
The new energy consumer is creating a more dynamic electricity marketplace. As a consequence, new players are injecting innovation and competitive urgency into the traditional utility markets. To develop the competencies critical for the future, providers have a number of options, such as developing strategic partnerships and alliances that can boost their agility or tailoring the customer experience for high-value consumer segments, enabling them to focus on core competencies and increase the value of new products or services.
But time is running out for players to stake a position in this dynamic new marketplace, as a range of forces—from increased consumerism to smart technologies to regulation and new market competitors—continue to reshape the industry. And the pace is quickening.
Success will require a vision that focuses on creating value in the “smart” energy marketplace, which means more than simply enabling new channels, installing in-home technologies and deploying smart grid technology. Winners will actively harness the values and preferences of the new energy consumer to create an entirely new energy experience.
For further reading
“The New Energy Consumer—Balancing Strategic and Operational Imperatives”
“Actionable Insights for the New Energy Consumer”
“Revealing the Values of the New Energy Consumer”
“Understanding Consumer Preferences in Energy Efficiency in the Utilities Industry”
“Plug-in electric vehicles: Changing perceptions, hedging bets”
Sidebar 1 | Utilities: Choosing the right business model
Advances in smart technologies, increasing consumer demands, and shifting regulatory and government policies are creating significant disruptions for utilities. Within this context of dynamic challenges and nascent opportunities, they need to consider potential new business models for the future. Accenture believes there are four of them.
Standard provider. These companies retain the basic supplier-of-last-resort relationship with customers, providing inexpensive, reliable energy and a simple, cost-effective customer experience.
Specialized provider. These players enhance the traditional commodity service offering with value-added products and services and take a measured approach to growth in the beyond-the-meter marketplace.
Full-service provider. Full-service companies offer all products and services across the energy value chain—including home services. They compete aggressively with home services providers and companies that offer bundled value-added products and services. They take advantage of industry and technological convergence to create revenue streams via new product and service offerings.
Marketplace advisor. While continuing to own the customer relationship and provide core energy services, these companies seek to become trusted energy marketplace advisors. As such, they provide access to a sophisticated marketplace of preferred or recommended vendors for energy efficiency and value-added home services.
Sidebar 2 | Regulation in the new energy marketplace
In the utilities industry, market structures vary around the world, from regulated, non-competitive models to fully competitive ones. But when it comes to products and services “beyond the meter”, the industry and new entrants are quickly converging in a space that is outside the traditional regulatory sphere.
Increasingly, regardless of the regulatory situation, other providers are entering the consumer-facing energy marketplace, disintermediating utility companies from acting as primary points of contact.
Even in non-competitive energy markets, consumers and businesses have new options as non-energy providers begin to offer products and services designed to complement the commodity provided by the regulated utility. In deregulated, competitive markets such as Texas, parts of Australia or the United Kingdom, for example, the pace of change is even faster. Utilities are competing against both one another and new entrants for commodity sales and a growing range of additional value-added products and services.
And utilities focused on traditional transmission and distribution are increasingly finding that consumer dependence on electronic devices coupled with smart grid and meter technology require them to assume a consumer-oriented approach, particularly when it comes to managing electricity outages.
In addition, government funding or regulatory mandates for smart meter rollouts are accelerating market expansion beyond traditional regulatory frameworks. Regardless of the regulatory environment, competition is emerging in the new energy marketplace. Within this environment, utilities must take deliberate action to reshape retail and customer operations with a focus on becoming not just leaders in the industry but competitive-minded organizations focused on cost-effectiveness, innovation and customer-centricity.
Sidebar 3 | About the research
Accenture’s New Energy Consumer initiative is a multiyear global research program aimed at gaining a deeper understanding of consumers’ attitudes and preferences toward electricity providers, energy products and services, and electricity management programs. While the research has been focused largely on electricity, many of the findings apply equally to new providers entering the energy marketplace as well as gas and water utilities in regulated and deregulated markets.
Over three years, Accenture has interviewed nearly 30,000 consumers across 19 countries worldwide.
The insights from the consumer survey as well as input from more than 50 leading providers globally have also been distilled into an energy consumer reference guide: “The New Energy Consumer—Balancing Strategic and Operational Imperatives.”
About the authors
Gregory S. Guthridge is the Vancouver, British Columbia-based managing director of Accenture’s Retail and Business Services for Utilities.
Nicholas Handcock leads Accenture’s New Energy Consumer research program. He is based in Vancouver, British Columbia.
Naomi Manley-Casimir is the director of Accenture’s Innovation Centre for Utilities. She is based in British Columbia.