(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
The Case for Customer Centricity
Understanding consumer preferences in energy efficiency.
Growing concerns over climate change, security of supply, and volatile energy costs are prompting governments and energy providers to respond with bold new investments. Smart grid infrastructure, renewable generation capacity, and an array of pricing and demand-response programs are just a few of the initiatives under way across the globe. In the United States, some $3.4 billion in federal smart grid grants are encouraging utilities and electricity providers to embrace smart metering. However, as energy providers well know, this shift involves massive operational and cultural change—for providers, as well as consumers.
To their credit, some providers already are taking steps to educate and motivate consumers. Earlier this year, electric power companies and industry groups launched the Smart Grid Consumer Collaborative—a nonprofit that aims to get consumers involved in their energy consumption. Alongside such positive activity, however, high-profile lawsuits, consumer backlash, and tighter regulations are illustrating the myriad of challenges and risks involved in smart metering initiatives. The struggles of early smart technology implementers highlight energy providers’ relative lack of experience and expertise in engaging with their customers.
Put simply, in a smart world, a focus on reliability and cost isn’t enough. To succeed at smart metering, utilities and electricity providers must get to know their consumers—evolving their capabilities and developing a core competence in customer centricity.
In early 2010, Accenture conducted a large-scale study to explore the drivers of, and barriers to, adoption of energy efficiency and conservation programs. For the Understanding Consumer Preferences in Energy Efficiency study, more than 9,000 end consumers were surveyed in 17 countries and it was found that while some consumers are open to the idea of moving to electricity management plans—under which suppliers can actively help households use energy more efficiently through the remote limiting of when home appliances are used—they demand very large price discounts in return. For instance, only 16 percent of consumers would allow electricity providers to remotely limit their use of certain household appliances if they have no option to reverse the action taken by the provider.
Ultimately, the study’s findings challenge many traditional assumptions and provide actionable insights for energy providers as they design products, services, campaigns, and consumer interaction strategies. A review of numerous consumer-oriented smart metering or energy efficiency pilots around the world complements this research. The data and analysis suggest that the time has come for a new approach to consumers: Energy providers must get to know their consumers.
In today’s environment, small changes to the status quo won’t be enough to succeed. Rather, energy providers must build a new core competence and reshape their customer operations. To meet those objectives, they must first identify and understand their consumers—including their behaviors and preferences.
Consumers’ level of enthusiasm for, or commitment to, contributing to energy efficiency and conservation falls into three main categories: “Not Knowing” ( i.e., those who fail to recognize the positive impact that regular energy management activities can