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The role of customer engagement in the energy transition

Much of the energy transition narrative has been around the decentralisation of energy assets, the digitalisation of business models and the shift from fossil fuel to renewable energy generation. There is growing momentum in interest and innovation here and few in the energy sector will dispute the huge changes already underway and accelerating in the years ahead.

The predominant view is that this shift will be led by technology even at the end of the supply chain – solar and storage to reduce reliance on the electricity grid, heat pumps to replace gas or oil boilers, and EV smart chargers to overtake petrol pumps.

Perhaps this is unsurprising in an energy sector that has invested heavily in asset and infrastructure for decades, and is driven by engineers, technicians and others with backgrounds very distanced from the end consumer.

But do we fully appreciate the power shift towards consumers? Don’t they need to have a strong need or burning desire before investing and engaging in the energy transition?

Consider some of the most disruptive brands of the last decade in other sectors – Uber to the taxi industry, AirBnB to the hotel sector, and Spotify to music ownership for instance. Many commentators hold up technology as the reason for these companies’ successes. And in each case, it is true that technology has been the enabler, but technology does not create behaviour change. Importantly, these business models meet unmet or under-served customer needs, whether it’s the greater convenience and safety that Uber offers, the authentic home away from home experience of AirBnB or the ease of finding new music with Spotify over traditional routes. And each underpinned with a fast and frictionless service.

So, customer motivation is a critical component to behaviour change, and many would argue the driving force of it.

Re-framing the energy transition narrative

Bringing it back to energy, to create the huge behaviour change needed in the energy sector, we cannot rely on technology alone. Whilst technology provides the ability to reduce our carbon footprint, we need the collective motivation to do so and that’s where customer engagement comes in (see chart).

a chart showing customer engagement

So how should we re-frame the energy transition narrative to take account of our need to bring consumers with us on the journey?

In energy retail, companies are looking to pivot towards providing energy services as margins are being squeezed, there’s increased competition and consumer needs are changing. The situation where a customer is seen as little more than a meter point, receiving a commodity bill in kilowatt hours based on some estimated historic consumption is outdated.

New technology is where much of the focus lies in installing solar PV and energy storage, electrifying heating systems, and rolling out EV connected chargepoints.

But the ultimate goal here is the top right quadrant of the chart, where the customer is an active and willing participant in the energy transition, making use of services such as home energy management and heat as a service for benefits at the individual home level and also at the energy system level and the market players in this eco-system.

Let’s get going!

So how do we get there through customer engagement?

The starting point is to be honest about where we stand now. Despite increasing options for households, the energy sector suffers from low customer trust in providing for what many see as an intangible, homogeneous commodity. We are seeing progress and there are notable exceptions, but overall, the current energy company/customer relationship is often one based on infrequent, negative interactions of receiving or querying an energy bill.

Engagement can take many forms and options that make necessary interaction quicker and more convenient such as 24/7 self-serve web portals and chatbots can play a positive role. However, whilst they may differentiate your service, reduce cost to serve and be preferable for consumers from an account management perspective, do they tackle the underlying issue of energy visibility and transparency?

Whilst there is a growing base of prosumers and energy activists, the reality is that most consumers have next to zero understanding of their energy consumption and bill. We cannot expect people to effectively manage their home energy and invest in new energy technology if they have little appreciation for where their money goes and what difference they can make and how.

Different routes to the same goal

In the case of smart meter adoption, it’s interesting that most European countries with roll-out programmes went down the mandated route – effectively the technology-led approach that led to widespread adoption but little consumer value unless energy companies embarked upon their own customer engagement plans.

The UK did things a little differently. Firstly, it put the onus on energy retailers to install smart meters in an opt-in roll-out. The UK programme has had its challenges, but one thing this approach has led to is more effective customer engagement initiatives by energy retailers. In their attempt to encourage consumer take-up of smart meters, they have been able to design processes that have demonstrated the consumer benefit and captured data sharing consents as part of the smart meter installation journey. Secondly, the regulator stipulated that an in-home display was offered to all households with a smart meter installation. This enabled consumers to receive an immediate benefit from having a smart meter installed as they could monitor their energy use in near real-time, thereby building a more informed populace as a step along both axis towards the new energy nirvana represented by the top right quadrant of the chart.

There are many tools to help develop customer understanding such as energy visualisation, bill itemisation and energy advice, which can be achieved via different channels. At Delta-EE we have been researching innovation in this space across Europe and beyond for several years. We have found that customer engagement is a continuous process, punctuated with different phases. But it is critical to build this early consumer understanding of how their actions and decisions impact their energy consumption. This will help develop the customer relationship and ease the transition towards offering energy services.

Contact Principal Analyst David Trevithick if you would like to discuss further.

 

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Tuesday, 28 September 2021

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