Consumer engagement, if the market hype is anything to go by, is currently one of the biggest challenges that utilities face but one needs to ask if both the customer and the utility will benefit from it.
Utilities are on the look-out for messaging systems, programs and incentives that encourage consumers to save energy. However, we believe it would be safe to assume that most customers really don’t care about the problems that utilities face: increasing demand, ageing infrastructure and energy efficiency targets, to mention a few. “Consumers don’t care about energy. When you’re trying to get a lot of uptake, you’re trying to break through the noise of busy lives to get customers to take action,” explains Kerry O’Neill, Senior Advisor at the Clean Energy Finance Centre.
The relationship is a transactional one and we don’t see this changing. Customers pay for their power and expect a reliable service in return.
The analogy with IKEA, a Swedish furniture store, resonates. The firm sells great furniture at a great price and customers keep returning as a result. Simply put, as long as the products and prices are attractive, the customer will keep coming back for more. This is our expectation of energy providers and it is generally the promise made by political masters of various countries.
It’s not that simple
There is often an over-simplified analogy with the telecoms market which is portrayed as some form of Holy Grail for utilities to replicate its customer engagement and billing models. However, significant variables are overlooked. In the telecom services market you can charge what the customer is willing to pay - gold plated iPhone, no problem - and you can innovate your core product to create different solutions to real or perceived consumer problems.
In contrast, this is not the case for utilities. You can't make a better electron or a more efficient molecule of H2O. Additionally you can't charge what you like for it -or in some cases even come close to the prevailing market rate. Finally as the provider, you are reliant on a capital and operationally intensive infrastructure to deliver it. Energy beaming technology is not coming to your microwave antenna anytime soon.
Where are the Smart Tariffs?
The benefits to advanced consumer and retail-style engagement will only work if a smart grid can deliver smart tariffs and utility providers can get close to billing at market rate. One has to ask if this is even possible. And, what is the real objective and who is the real winner here?
The biggest winner is the utility. This is if they are able to change the dynamic of energy use across thousands or millions of households and, as a result, see big gains across areas like demand response, energy efficiency and operating margins.
But what of the individual homeowner? Their reward at best is a slight decrease in energy prices or a flat lining of energy cost- assuming no other investment such as insulation etc. This creates the big disparity. Therefore, the challenge for utilities is how they are going to ‘sell’ the benefit of any new smart tariff.
Say it how it is
It is essential that utilities devise customer engagement projects around the needs of the actual customer! To successfully engage a customer, the utility needs to ask: “How will this benefit the customer?” The utility also has the responsibility to explain (honestly and clearly) how the projects will affect the utility’s operations.
With a bit of creativity and thought, utilities have the opportunity to involve the customer. Several utilities have got their customers to save energy through a contest that awards local schools grants for saving the most power. In this way, the “boring” energy bill becomes fun and a local school receives support. Another example is Pacific Gas and Electric-they handed out over US$600-m in rebates to customers that have reduced their energy consumption levels.
Communication with the utility must be made easy too. An easy engagement is one where the customer doesn’t have to make too much of an effort to participate. The customer should be able to choose a preferred means of communication (at any time of the day or night) without ending up frustrated with the utility.
And, most importantly, the engagement must be cheap or free to use and the customer should be able to save significant money or earn significant rewards on their utility bill. Without these benefits, there’s really no point.
True customer engagement runs deeper than mere communication mediums. Each approach should be viewed through the customer’s eyes and everything the customer sees must have meaning to them. Utilities need approaches that start from the customer and work inward to the utility.
Will it ever work?
In our view, all customer engagement tactics are playing at the edges. The real solutions lie in fully automated control at a residential level, enabling constant optimisation of energy use. More efficient energy use is a collective responsibility and the only way to make it truly happen, is to convince the human element to relinquish some of the traditional control and allow big data-driven control systems into the home.
Customers are not looking for intimacy with their utilities. They want a reliable service and fair prices. The utility relationship is a transactional one - a fact that is key to shifting the relationship with the utility. Sell easy energy management not tariffs this will help customers adopt new programs and technology in partnership with the utility.