The evolution of the energy consumer

Energy providers are already facing challenges around energy security, price volatility and climate change concerns.

Now, however, they face a new wave of disruptions that will toss up even more challenges. Emerging technologies, a growing emphasis on energy efficiency, and the introduction of an entirely new beyond-the-meter marketplace will test utilities in both competitive and noncompetitive markets. These developments also offer new commercial opportunities to incumbent energy providers who may have some clear advantages. But that does not alter the fact that they must remodel their business to successfully compete and address the new energy consumer in the long run.

Electric vehicles and the introduction of distributed generation are two examples of new technologies capturing consumers’ imagination. And they won’t just transform consumption patterns. They will also create new two way flows of supply as households generate and store their own energy in various ways. These will create new opportunities for value added services that non-traditional players could offer.

In noncompetitive markets, traditional product retailers and other home service providers are entering the beyond-the-meter market with products and services designed to complement regulated utilities’ commodity services. Home energy management services are just one example. In competitive markets, energy companies face an additional competitive threat from new entrants, such as product retailers and telecommunications companies who hope to offer value added products and services.

According to global research by Accenture, nearly three-quarters of consumers (73 percent) indicated that they would consider buying electricity, energy efficiency products, and related services from providers other than their electricity suppliers. More than half (59 percent) would consider buying from retailers, 49 percent from cable or phone companies, and 45 percent from online sites, such as Amazon and Google.

The bad news for incumbents is balanced by the fact that they have valuable opportunities to further strengthen customer relationships. Most consumers say they would still go to their utilities or energy providers to buy electricity and choose an electricity pricing program or to obtain personalized information about their electricity usage (73 percent and 67 percent, respectively). And levels of trust are generally higher for utilities than for alternative providers.

Despite this advantage, utilities and energy providers must not take a wait-and-see approach. They will have to reshape their consumer operations by focusing on three areas of transformation.

The first is information – for energy providers. It is the new currency and will need to be harnessed to improve competitive positioning. Smart meters and grids and a proliferation in customer channels will generate vast quantities of data that utilities must use in real time to respond to consumers. There is a diverse range of customer interests – from those eager to be green and capable of being so, to those in need of more personal support and advice. Incumbent providers must use the wealth of data they have before competitors from other consumer industries erode this advantage. This will help utilities segment the market and offer a portfolio of value added services. The use of data analytics will be central to this task, not just defining opportunities, but measuring the relative financial return of marketing and providing different services to different customers.

The second imperative is to redefine the meaning of innovation. Where the industry continues to apply some of the greatest engineering minds to address technical challenges, it must also appreciate innovation to create products and services and refashion customer relationships. An ‘innovation engine’ is required to perpetuate that creative process in an industry unused to service creativity. The good news is that there’s margin in it. Our survey shows that consumers are not just seeking lower prices in return for signing up for energy management programs. When we asked consumers to trade off between programs with different attributes, the results showed that 29 percent would be willing to pay a premium, for a specific mix of program elements, of five percent of their electricity bill. And 57 percent of consumers would adopt an energy management program even if it did not reduce their electricity bills.

The final need is to redefine the meaning of ‘consumer’. No longer should consumers be seen as bill payers. The new energy consumer will be on the move in electric vehicles, generating their own energy at home and expecting more from their service providers. 60 percent of respondents to our survey said they would be interested in technology to completely automate the management of their electricity. More than a third (35 percent) would want to monitor and manage usage through personal electronics. And 89 percent say it important or very important for energy management programs to be easy to use for the whole family. Energy now has to be considered as part of consumers’ lifestyle, family life, even entertainment.

A number of utilities and energy providers are already blazing ahead with innovative business models and new consumer oriented capabilities and products. These energy providers understand that these three critical imperatives have the greatest chance to turn these disruptive developments into commercial advantages. But, all energy providers will still have to make major changes to the way they analyze customer information, create new services and re-model their business around the new energy consumers – who are becoming active and less predictable members of a complex and fast changing marketplace.

Greg Guthridge, global lead for retail and business services for utilities, Accenture