Energy efficiency remains a big problem. World energy consumption is expected to increase by 56% by 2040. In 2010, EU households alone consumed almost 13% more energy than two decades ago, generating 25% of energy-related greenhouse gas emissions. This is despite the introduction of smart technology. The EU is already in danger of not meeting its goal of decreasing its primary energy consumption by 20% by 2020.
Energy Efficiency makes environmental and financial sense
By reducing energy consumption, supply security will improve and greenhouse gas emissions will decrease in a cost-effective manner, thereby mitigating climate change. In addition to this, energy efficient regions will see a boost in innovative technological solutions, an increase in competitiveness of the energy industry and high quality jobs would be created as a result. In Denmark, for instance, several utilities have launched new businesses to capitalise on the demand for energy efficiency services. Says says Tina Sommer Kristensen, administrator for Denmark’s Department of Buildings and Energy Efficiency, “A lot of the companies now see this as a potential to increase their market in advising on energy savings.”
The potential is most definitely there but companies will need to convince the consumer that energy saving has numerous advantages for the individual consumer and community. A lower utility bill is certainly attractive but the saving may be too small for the amount of effort required. If methods are time-consuming (with very little to gain) and expensive, the consumer probably won’t be interested.
But, how do we convince the consumer?
It is possible to save 15-20% energy through altered customer behavior patterns. This is according to Anca-Diana Barbu of the European Environment Agency, who also adds that for this to happen, customers need a “frame of reference”.
Consumers need an adequate frame of reference in order to know whether their consumptions levels are excessive or not. The ways in which feedback on consumption are given must be improved because without this frame of reference, consumers have no way of knowing what excessive consumption is.
Customer behavior must be understood before it can be changed. Without this essential research, energy efficiency projects will fail quickly and will cost companies (and customers) a fortune in wasted time and money. A good example of this was in the UK where an energy retailer failed to reach out and engage customers prior to a smart meter rollout. As a result, the retailer had to revisit five percent of its customers up to six times before a meter could be fitted. On the other hand, two successful projects in the US managed to keep half of its customers engaged.
They did this by carrying out a pre-rollout communications program which included the use of an App with a game that created awareness in energy efficiency and ownership. “Dropoly” is one such “game” which aims at reducing energy consumption. This gamified energy audit provides a simple way in which people can make effective energy savings in their homes. As part of its launch, Dropoly invited families to “play to win”, offering Restaurant and Amazon gift cards for the first 300 families to create an account.
This “game” also keeps the customer engaged by sending out constant reminders and updates via email and phone. Without these notifications, the customer will forget about the program or lose interest. Because, the truth is that there are those who would like to be environmentally and economically responsible but busy lifestyles can hinder good intentions.
President, Bouygues Telecom in France says it is essential to offer the customer something more than just energy. The Swedish Coordination Council for Smart Grid found that factors such as the environment and flexibility can be important drivers for customer engagement, not just price. Incentives, such as bundle offers with a variety of combined services, could be one way to successfully reach out to customers. Comfort, entertainment, health, security and mostly price feature high up on the consumer’s list of priorities. If energy retailers are able to appeal to these, they would be delivering value to the customer in smart homes.
Energy policies must be designed around factors that affect consumer behavior such as technological development, current economic state, age, social norms, belief systems, culture, and marketing strategies. Consumption habits are definitely affected by a range of actors and these should not be ignored by policy-makers.
Energy infrastructure plays a major role in determining what people consider “normal” as far as energy consumption is concerned. The way in which energy is delivered influences the way in which energy is viewed. If people are exposed to energy efficient buildings, for instance, they will begin to expect this kind of efficiency in other aspects of their lives such as energy efficient vehicles. An “energy efficient” lifestyle will become the norm.
Consumer behavior may change if the energy industry allows the consumer to actively engage with the energy market. For instance, more flexible energy tariffs could help capture the full benefits of real-time information smart meters can provide. The utility may want to consider offering the consumer financial incentives to promote energy efficiency.
The residential sector plays an important role in energy efficiency programs and policies. In 2010, figures show that household consumption accounted for 26.7% of the EU’s total final energy usage. Only the transport sector took a bigger share of the total (31.7%). The industry and services sectors were both smaller in terms of final energy consumption with a share of 25.3% and 13.2% respectively. Therefore, it would be a mistake for policy-makers and market retailers to overlook effective energy efficiency programs for this sector.
If the residential energy consumer continues to ignore energy saving measures, the move to a smart energy economy will be challenging. While smart technology helps the consumer and utility to collect and analyze data, it won’t necessarily change consumption habits. It is therefore essential for utilities and energy retailers to tap into what incentivises the average consumer to save energy.