British smart meter agency Smart Energy GB has conducted a survey that shows consumer preferences are radically changing when it comes to buying energy.
The research, which was carried out in November 2017 with 1,500 adults in the UK, has revealed that half of the participants find the idea of buying energy alongside other home services appealing.
These services would include broadband, TV and film streaming, music streaming, and others. Participants claimed they would buy energy directly from lifestyle service companies (LiSCos) that already offer them these services should such companies start to sell energy as well.
Consumers are drawn to this idea due to anticipated cost savings and ease of bill management. They could pay for their home services all in one package and send payments to one company instead of several; in addition, they anticipate better deals and discount vouchers across the company's other services.
Around half of all participants would be interested in buying energy from broadband and phone providers, such as BT and TalkTalk, and from supermarkets, such as Sainsbury's and Tesco. Other companies that consumers showed interest in include TV subscription providers, online retailers such as Amazon, mobile phone providers, high street stores, music and film streaming service providers such as Netflix and banks.
In addition, the report suggests that familiarity with the services may be a significant factor in the appeal. This is due to a correlation between broadband companies having the highest percentage of interest and broadband service being the most commonly owned home service.
Smart meters and the new generation of consumers
The research also shows that participants who own a smart meter were more likely to find the idea appealing. The research report attributes this to a greater openness towards energy management and consumption innovation, as well as growing consumer engagement. However, a definitive reason for the positive correlation has not been established.
Another key finding of the research revealed that respondents aged 18-34 - i.e. millennials - are more likely to be interested in LiSCos to provide energy. 63% of people in this age group responded positively to the idea, against 52% of people aged 35-54 and 37% of those aged over 55.
Both these findings might be related - the next generation of energy consumers is increasingly engaged with the way they buy and consume energy. Additionally, as digital natives, people belonging to this demographic are more likely to embrace technological innovations in energy, such as home energy management systems, smart meters, etc.
This is according to a 2016 survey conducted by Accenture, which found that millennials are likely to want home energy management data in order to monitor their energy consumption and control home elements remotely. Millennials are also interested in a higher engagement with their energy provider, with a personalised experience and accessible information.
Consumer-centric approaches in the market
The idea of ‘outsiders’ entering the energy market is not unheard of, however. It has been predicted that tech giants - such as Google, Facebook and Amazon - may enter energy retail. Though the companies haven't confirmed this and haven't announced any plans on targeting the market, they might become consumer favourites should they decide to.
Their consumer-centric approach and customers' familiarity with their product could be a driving factor towards such a move. Additionally, these companies are already competing in the connected home space with voice-activated technologies - Google launched its voice recognition software Google Assistant in 2016, and Amazon’s digital home assistant Alexa was launched in 2014.
The data from the research indicates that LiSCos have the potential to change the energy market if they take on energy retail and set themselves up as competitors to the utility players. This is another clear warning that the traditional utility retail model is under threat in favour of a service-based approach by retailers offering expanded services around energy, either individually or in partnership with third-party providers.
According to Dr Jeff Hardy, Senior Research Fellow at Imperial College London: "Lifestyle service companies could transform tomorrow’s energy markets, competing to deliver what their customers need. Whether these are today’s energy companies or new entrants from other sectors will largely depend on who understands their customers best.
“Clearly there is an opportunity for consumer-focused energy companies to mobilise data and digitalisation to deliver services that are in tune with the way customers live their lives, although there are regulatory, market design and consumer protection issues that will need to be addressed along the way.”