by Don Mak and Kevin Monagle, IBM
“We collectively haven’t cracked the code on conveying the benefits of [a] smarter energy system to consumers. Until that happens, the full potential of the smart grid won’t be realized.” –IBM CEO Sam Palmisano (Gridwise Global Forum, Sept. 21, 2010)
An energy company’s business case for investing in a smart grid is driven by: 1) planned operational efficiencies and 2) benefits gained by consumer participation in smart grid-enabled programs for energy efficiency, demand response, load control, critical peak pricing and new energy technologies.
The first rests solely within the energy company’s control; the second relies on consumers’ decisions to change their behavior by engaging with smart grid-enabled programs, a dependency that energy companies can influence but not control. Although consumers are eager to lower their bills and drive more sustainable use of resources, a predisposition to do the right thing doesn’t necessarily mean a change in behavior.
In 2011, IBM conducted its Global Utility Consumer Survey to better understand energy consumers worldwide. The study explores key influences, perceptions, knowledge and expectations of some 10,000 energy consumers across 15 countries and in nine languages:
- More than 50 percent of consumers worldwide expect the deployment of smart grids and smart meters to foster development of clean energy technologies, and more than 60 percent expect that these technologies will benefit their families; however,
- Sixty percent of consumers do not know the meaning of the terms “smart grid” or “smart meters,” and 80 percent are unaware of “consumer energy portals,”
- Slightly more than 30 percent of consumers reported that they are unaware of the basic unit of charge for energy consumption (e.g., cents per kilowatt-hour), and
- More than half of survey respondents do not know if their energy provider offers a green energy program.
Complicating matters, consumers have changed their preferences on how they communicate and do business. A recent Pew Research Center study reveals that social media use among citizens ages 50-64 has increased by 88 percent in one year–from 25 to 47 percent. Meanwhile, use among those 65 and older doubled from 13 percent in April 2009 to 26 percent in May 2010, according to the study, “Older Adults and Social Media.” In today’s technology-driven world of information, consumers are clicking, flicking and tweeting their way to the information they desire through their computers, social networks, devices and personal contacts.
According to the IBM Global Utility Consumer Survey, energy consumers have steered away from using traditional utility billing statements as their primary source of information about energy use and their own consumption. The majority of those surveyed, almost two-thirds, do not use energy bills and inserts to obtain information about energy costs, environmental impact and alternative suppliers. Reliance on traditional media (television, newspapers, magazines, etc.), Internet-based sources (nonprovider websites, social media, etc.) and opinions of friends and family in aggregate outweighed the influence of more direct-contact sources such as bill inserts and energy provider websites.
As could be expected, if consumers are unaware of their own energy consumption and options for managing energy use, they are unlikely to act differently. Fewer than half of consumers surveyed are committed to engaging more with their providers to meet their personal goals and objectives relating to energy use, and a third are unlikely to take added responsibility for these decisions in the short term to midterm.
Despite this disconnect with consumers, many energy providers continue to consider traditional billing statements as their primary choice for sharing information. This can cause misalignment of channel and message.
The challenge for energy companies runs deeper than just having too little communication in the wrong places. As for consumer interactions, experiences and engagement, most organizations rely on an innovation cycle that is unresponsive and unable to adapt efficiently. Even when the performance of specific programs is understood, the innovation cycle is too slow to respond and might even lag significantly behind consumers’ appetite for the latest in new channels and media. In addition, the complexity that often comes with new or undisciplined innovation can be a problem. Having too many offerings and options can create confusion and cause consumers to disconnect.
Behavioral economics and related research can help the industry better understand how consumers make decisions and identify choice architectures that tilt consumers toward behaviors that reflect their stated economic, energy conservation and environmental goals. For example, to address the urgent need to change how, what and where providers interact with their consumers, providers will need to focus on a new consumer interaction model that offers consistent messaging, education and well-designed options about using new smart grid-enabled services via new channels (e.g., mobile devices, text messaging and social media). As part of a larger operational shift, energy providers will need to build a culture of collaboration and coordination among their initiatives and programs to accelerate innovation cycles and take a more integrated approach to managing touch points or contact with individual consumers. Energy providers should:
- Create new consumer interaction models and plans based on consumer experiences and interactions.
- Keep track of new media and channels that are a priority for consumers and begin rolling out new programs that encourage consumers at all levels, via an energy Web portal, social networks and mobile devices.
- Accelerate innovation cycles through testing and measurement.
- Coordinate a consumer strategy across organizations, programs and tactics.
The case for smart grid transformation depends on consumer participation. Companies that intend to realize the full value of their smart grid investments will make consumer behavior a critical component of their strategies.
Don Mak leads IBM’s smart grid services in the U.S., working with IBM’s clients to design and implement smart grid capabilities to improve customer service and utility operations.
Kevin Monagle is an associate partner in the communication sector focusing on energy and utilities companies and the intelligent utility network. He develops, implements and integrates enterprise-class software solutions and smart grid technologies for utilities.