Financial Incentives Will See Customer Participation in Demand Response Grow

Financial rewards will get customers to participate in demand response programmes, according to a survey.
Published: Thu 11 Sep 2014

To alleviate growing pressure on the power grid, electricity providers are working hard to encourage participation in demand response (DR) programmes. But, a recent survey, Turn Up Demand Response – educate and incent energy consumers [pdf], undertaken by Parago Energy, shows that only 14% of Americans are currently taking advantage of existing demand response programmes.

Parago, an international incentives and engagement company, surveyed Americans in both competitive and rate-regulated markets. More than 2,800 consumers, representative of standard US demographics, responded to the survey.

Incentives must be right

So, what will spike the consumer’s interest in demand response programmes? According to the survey, over 75% say they will participate if offered the right incentives.

Very few consumers (6%) are motivated by environmental concerns but a whopping 84% say they are financially motivated to participate in demand response. Further, 87% would sign up for a monetary reward, like a prepaid card or free energy-saving equipment.

Besides offering attractive incentives, there also seems to be a lack of customer awareness when it comes to demand response programmes. The survey shows that half of their respondents are unsure of whether or not their utility even offered demand response programs. Obviously, this is mostly due to poor communication. Utilities need to understand their target audience first and then it becomes clear as to what medium should be used and what should be communicated, and how. [Engerati-Utilities:Focus More on Consumer Practices.]

This is proven by the fact that two out of the three customers surveyed, and who currently participate in demand response programmes, are unsatisfied with the communication they receive regarding the programs and are unsure about the available rewards. When it comes to communicating with their customer, utilities need to be in the driver’s seat.

"As grid modernization efforts progress, additional benefits of demand response have become clear to electric energy providers," said Jay Grinde, Parago's director of business development - Energy. "Our findings show that, in order to increase participation, providers would be wise to begin educating their communities differently about demand response, and roll out incentive-based strategies that reward consumers in new ways for participation in these programs."

Going beyond the rewards

While financial incentives is one way in which to get customers to reduce their energy usage, Opower’s Salvador Núñez, Product Marketing & Strategy, says that if utilities engage and motivate behaviour that saves energy, this could translate into significant cost savings for generation. Customers can effectively be an energy asset because reducing electricity use is two to three times cheaper than producing electricity. This is magnified during peak hours where electricity generation is at its most expensive. By increasing proactive, personalized advice to customers, the utility will see an improvement to its bottom line.

Customers want to save on their bill, have control of their budget, have convenient and comfortable experiences, have the opportunity to be green, get fair and equal service, and gain control over their energy use. Perhaps if the basics are provided by the utilities in the first place, incentives and rewards may not be necessary after all.

A great example of this is Polytechnic University of Catalonia (currently also referred to as BarcelonaTECH) currently saves over €1 million (US$1.3 million) in its annual energy spend. Focus is placed on changing energy consumption habits since “people have a bigger impact on energy savings than technology.” While a financial incentive is offered, the money is reused by students and staff to further advance their buildings’ energy efficiency. “We tried to create a community of people who take responsibility together to reduce energy consumption,” says Didac Ferrer, head of the sustainability management office at the university. [Engerati- Spanish University Cuts its Annual Energy Bill by €1 Million Euros.]

And it is certainly working – the savings speak volumes.