What does the energy consumer of the future look like?
Have you ever sat and thought about who you may be buying your energy from in five to ten years’ time? Could it be as part of a bundled package with your phone line and internet? Directly from your neighbour? Or even with your monthly TV streaming subscription?
With the smart meter rollout supporting a digital transformation in our energy sector we have been thinking about what impact it could have on the consumer of the future.
In 2009 there were just 12 domestic energy suppliers operating in Great Britain, jump forward ten years to today and there are now over 60. This huge increase means that there is more choice for consumers and competition within the market than ever before.
There are now more tariffs available to consumers, with new and innovative products and services being introduced to market. Increasingly we are seeing energy suppliers offering cheaper green and renewable tariffs, and those with a smart meter can access smart tariffs which reward you for using energy at off-peak times.
The digital platform and the data generated by smart meters provides a huge opportunity for industry to create innovative, new products and services to benefit both the engaged and disengaged future energy customer.
Could energy become a service rather than a utility?
As we have seen with other sectors, digitisation can open up markets to a range of new competitors and products. Energy is no different, and the digitisation of the energy market could make it possible for household names such as supermarkets, online retailers, film subscription services, broadband providers and even banks, to provide energy as part of wider package of lifestyle services.
Our research into Lifestyle Service Companies found that consumers would be interested in buying energy from companies from which they already receive household products and services, such as broadband providers like BT, supermarkets such as Tesco and TV subscription services like Sky. In addition, almost one fifth of people (18%) said they would be interested in buying it from a music streaming service such as Spotify.
Innovation for the engaged energy consumer
In the future, automation will also be more common. This could be through automated products and services such as auto-switching sites, or through home appliances.
Automated smart home appliances could turn appliances on when energy is cheapest, or switch devices such as phones and computers off once they are fully charged. Our Smarter Living research found that 67 per cent of people with children in the home said they would be happy for appliances to automatically turn on when energy is cheapest, and that 60 per cent of those over the age of 55 would find technology which automatically turned off appliances not in use appealing.
Automation in conjunction with lifestyle tariffs, or Time-of-Use tariffs, would allow people to take control of their household energy use, reduce the amount of energy they use, and benefit by receiving lower bills for using energy when it is cheapest.
This type of automation and flexible energy tariff will be especially important for those with electric vehicles as it will not only benefit the consumer but also the nation as it will help to balance demand on the grid at peak times.
Another area which energy consumers will be able to benefit from is micro-generation. The most engaged consumers will be able to generate their own energy through solar, wind or heat pumps, then use it to power the home and reducing their reliance upon the grid when energy is most expensive or in demand. Through new battery technology they will also be able to store it and sell it back to the grid or potentially to their neighbours when needed.
What about the disengaged energy consumer?
All of the options above are exciting and are fantastic for helping and empowering consumers to become more active and engaged with their household energy use. However, energy has long been considered a ‘low interest’ category amongst consumers, and not everyone will want to, or be able to, spend time shopping around for the smartest or greenest deal. There will also be those who do need to use energy at peak times and as such, Time-of-Use tariffs may not necessarily save them money.
So, for these people, how can the smart energy future help them to save energy and reduce their bills? That is where third-party auto-switching sites have a role to play. There are already a few companies operating in this area, and the concept is simple. Consumers give their energy details and express permission for the company to automatically switch their energy supplier when a cheaper deal becomes available. These sites allow the consumer to remain fairly passive and disengaged whilst at the same time saving them both time and money.
Currently, due to the analogue nature of our energy system, the information can be generic and not bespoke. In the future, thanks to the large amount of real-time data generated by smart meters, it could allow auto-switching sites to not only save consumers money, but also provide them with tailored energy saving advice.
How about those who may face additional barriers?
It is not only those who are engaged or disengaged with their energy use who stand to benefit from a new digital energy system, but also those who are fuel poor, or who may face additional barriers in accessing the energy market.
It is encouraging to see that there is currently a lot of work going on within the industry to make sure that no one, no matter what their circumstances, is left behind.
Last year, the Project Inspire: Energy for All – Innovate for All report by Sustainability First, which found there are pockets of effective innovation out there, which need better communicating and replicating, as well as making the most of future opportunities with smart metering, data analytics and new technologies.
Ofgem also recently published the Draft Consumer Vulnerability Strategy 2025 which sets out its priorities to help protect those in vulnerable situations until 2025. It states:
“We want all consumers (particularly those in vulnerable situations) to have access to affordable energy and suitable services. We want products and services to be designed to meet the needs of a wide range of consumers (including the most vulnerable).”
Ofgem are clear that it expects suppliers and networks to demonstrate innovative measures to support consumers in vulnerable situations, and to support this they have implemented a fund to provide flexibility for gas distribution companies to deliver ambitious and bespoke initiatives which go beyond business as usual in supporting consumers in vulnerable situations.
Making the system work for everyone
The smart meter rollout and development of new innovative business models is helping to transform the energy industry.
However, whilst the opportunities are there, the industry has been historically slow to invest in new technologies and innovations. Energy and technology companies need to look at what it is that their customers want, and create new products and services which are both desired by, and work for/fit into their customers daily lives.
There is also an opportunity here for challenger organisations to enter the market, shake things up and start to do things in a different way and it will be exciting to see what the energy consumer of the future is presented with.