Millennials are on the move, and utilities will do well to take notice.
About 80 million millennials have become the largest US demographic group, spending some $600 billion every year, and this will increase. Millennials will truly come into their own by 2020, when Accenture projects their spending in the United States will reach $1.4 trillion annually, or 30 percent of total retail sales.i
Energy providers that court them just as they become energy consumers could win this group before an increasingly complex set of new competitors and market entrants does.
Our recent research showed that not only will these consumers drive the most future value for energy utilities, but millennials want to adopt new energy-related products and services, like applications to remotely monitor and control home elements for example. They also want to be the first to do so, as 24 percent were classified as early adopters, significantly more than for other age groups.
Millennials’ green agenda also bears close watch. More than half of them are likely to sign up for low-carbon solar panels in the next five years, double the proportion of baby boomers.
So, it’s crucial that energy utilities act now, giving millennials the flexibility to adopt distributed energy resources (DER) like solar, and offering associated products and services.
Energy providers must also interact with this generation differently than with their older counterparts. That’s because switched-on millennials want information and services that are accessible on their terms.
In fact, 87 percent of them are far more likely to consider DER after receiving relevant information. As demanding as this generation has proved to be, they are also very receptive, and energy providers need to be the first to respond to this appropriately.
Similarly, millennials have high expectations for what energy providers should deliver through digital channels for energy management, similar to what banks, retailers and other providers already give them.
A majority already log into their energy provider’s website using their social media credentials, and more than half are interested in smart home technology. Yet, almost four-fifths of millennials would consider switching energy providers if a seamless experience was not provided, which shows how important the customer experience is for them.
This brings up a key question for the energy utilities industry: Is there a risk millennial customers might cut their ties altogether with energy utilities, if they don’t get the services and the technologies they want from their existing energy providers?
The lost opportunity could be costly. Research we conducted revealed the continued growth of distributed energy resources and energy efficiency technologies can risk driving down utilities revenue by up to $48 billion a year in the United States and €61 billion in Europe, based on load reduction by 2025.
Clearly, demand disruption caused by the growing adoption of these new technologies is poised to disrupt utilities’ traditional business models.
But the so-called utilities “death spiral”, where consumers migrate off the grid or use it as backup, is very unlikely, due to natural limitations on viability and cost constraints.
The majority of utilities executives believe that it won’t be cost-effective for consumers to go off-grid without any subsidies until 2030 or beyond. Yet it can’t be ignored that for some customers and locations, distributed generation and energy storage already makes economic sense.
So, it’s more important than ever for energy utilities to rise to this challenge and recognize the strategic importance of these new energy consumers now. By tapping into this new and highly profitable market, they could benefit financially from it. In addition to their core product of electricity as a commodity, utilities should deliver energy-related services like energy monitoring to customers or partner with communities and individuals to help them access locally generated low-carbon energy, for example.
This ties in with our research, which showed that 65 percent of millennials have either already signed up to or planned to sign up to a community solar program in the next five years. But while traditional energy utilities were their preferred provider for this kind of service, millennials were more likely to turn to alternative, non-traditional providers than older generations.
The call is clear for utilities to embrace the opportunity presented by millennials. However, they will need to transform their business model and develop new customer strategies appealing to the millennial energy consumer, who wants products and services that are seamless, personalized, experiential in nature, and that build a sense of community.