As Australia becomes increasingly social and connected, more consumers are seeking added value and personal relevance – both of which extend beyond simply generating, distributing and selling energy. Energy Source and Distribution talks with Greg Guthridge – Accenture Asia Pacific utilities lead – about the results of The New Energy Consumer – Architecting for the Future; a report exploring the needs, wants and expectations of tomorrow’s energy consumer, and what providers can do to take partial-grid technologies, big data and behavioural analytics into the next decade.
While it is difficult to predict the path of the connected home, The New Energy Consumer – Architecting for the Future report has outlined one certainty: the market is experiencing a tectonic shift with more changes to come.
The report is the fifth publication of its kind from Accenture, released annually, which details the accelerators, strategies and capabilities needed to help energy providers increase agility and speed to market. More than 50,000 consumers from 22 countries were surveyed for what is likely to be the most comprehensive end-consumer energy research in the world.
Accenture’s TheNew Energy Consumer – Architecting for the Future report for 2014 goes to great lengths to explore how and why energy is becoming a foundation on which innovative value propositions and new products and services can be sold.
“Utilities are at a crossroads and the time to architect for the future is now,” says the program’s executive sponsor Greg Guthridge.
“They can either remain service and commodity providers, or move beyond the commodity and become energy providers.”
While technology may attract new players and value propositions, the report shows it will ultimately be consumer preferences that change the energy landscape. Here, disruptive technology should be seen as an enabler – a piece of the puzzle – as energy providers look to address distinctive consumers needs.
To thrive in the next-generation energy ecosystem, the report suggests energy providers need to move forward with increasing cadence to build new capabilities that enable them to scale quickly, seize new opportunities, tap into unconventional markets and architect a future-proof foundation of simplicity and flexibility.
What will be the prevailing characteristics of the future energy consumer, and what should energy providers do with Accenture’s behavioural analytics?
Greg: Based on key findings from five years of end-consumer research, we have identified a number of consumer characteristics that will shape how providers address and serve the consumer of the future. These include addressing a spectrum of consumer mindsets, from those who are knowledgeable and opinionated to those who simply view it as an essential commodity; supporting virtual interaction; buying and selling energy via a variety of business partners; and providing set-and-forget technologies that deliver financial savings, convenience and individual control.
Providers can approach these characteristics not as individual traits, but as a mosaic of the energy consumer of the future. While consumers will continue to evolve, these characteristics will remain at the core of the preferences and behaviours of next-generation consumers. Successful energy providers will be those that understand how and why the new energy consumer requires much more than the traditional utility service model. They will also recognise that strategies for interaction, new products and services, or in-home technologies should be integrated. Incorporating the consumer characteristics into next-generation strategies will influence how a provider identifies and approaches new market opportunities, sources of value and, ultimately, determines its business model.
The report suggests 60 per cent of consumers are considering purchasing off-grid or partial-grid distributed generation systems in the next five years. What implication will this have on existing energy providers?
It’s certainly a substantial figure, in fact, it’s one of the highest in any country we surveyed. What’s interesting, though, is around 83 per cent of those consumers right now would have that initial dialogue with their existing energy provider. In a lot of other countries, the energy providers have slipped to second place behind the retailers, but in Australia, the energy providers have more than a 20 per cent advantage over the retailers who come in at 58 per cent. It suggests there is a lot of movement around distributed generation, solar power cells, micro grid technology and so on, and that people are thinking about it.
If we assume half of these people never switch or follow through, then, in our lifetime, around a third will eventually acquire off-grid or partial-grid technology, products and services – that’s a big number. That’s enough to upset the entire economic model behind our network and our generation capability. It’s early days, however, we are pretty sure the existing energy providers will have a lot more competition with the big retailers and DIY organisations that will come out of the woodwork as the uptake of off-grid and partial-grid technology gains momentum.
Until battery storage comes along, however, the number of consumers who choose to disconnect from the grid or move towards partial-grid generation systems is going to be a fairly small niche market. Ironically, it solves one problem and creates another on the grid. From a grid perspective, solar really just moves the peak to a different time, but you still have a peak. It might be 4pm, but as solar consumption increases within Australia that peak moves from 4pm or 4:30pm to 5:30pm to 6:30pm, because that’s when the sun goes down. With storage coming along, it offers the opportunity for the peak to disappear and that is a real game changer in terms of the economics of how you run the grid.
What type of consumer is driving this push towards off-grid and partial-grid technologies?
We are still in the early adoption phase, so what we’re seeing is distributed generation is being driven by tech-savvy consumers, green consumers and those interested in privacy and control. We haven’t got to the next phase yet, which would be the fast followers – that’s when the economics of this is going to become more important.
There are many things we still need to learn about consumer behaviour and demographics in this area. One issue that has been very interesting for us is what we’ve coined ‘curb appeal’. We do know that many consumers find solar panels on the front of their home ugly, which would be why some are hesitant to investigate rooftop solar or solar array further. This is just one of the types of buyer values we need to investigate further.
Does this mean the average energy consumer is becoming more knowledge-rich?
Vocal, energy-literate consumers do represent a growing portion of consumers – one gravitating to more active engagement with their providers. These consumers have a perspective on energy that extends beyond price; they are interested in monitoring energy usage in their homes, different types of payment options and they are increasingly aware of where their energy comes from. While a growing group, these consumers are still in the minority.
On the other end of the spectrum is a large, but shrinking group that views energy as a commodity – as simply ‘there’. We define these consumers as energy agnostic; two-thirds of Australian consumers who just want low cost, reliable and safe energy and who aren’t motivated to switch unless it’s a price shock. They don’t have a preference for where it was generated or how it gets to them and they are not interested in any additional products and services.
If the majority of consumers are “energy agnostic” should providers be focused on reducing complexity and streamlining interactions?
Definitely. Utilities are often encumbered by layers of complicated regulations and processes. Successful energy providers will be those that relentlessly focus on what Accenture calls “the economics of dissatisfaction” – a mindset of continuous improvement, automation and process excellence. Getting the basics right is essential and the foundation for enhanced consumer interaction and profitable growth.
How big a role does the digital space play in terms of making interactions seamless, easy and convenient?
For the next generation of consumers, digital is more than a channel, it has become a way of life with consumers. The era of the traditional call centre and paper bill experience is coming to an end. Today, consumers expect anytime, anywhere interaction – they are always available and online and move between the web, telephony, social media and messaging. They have a digital experience with everything from their telco to their banks – yet utilities still struggle in this area. In fact, in Australia, 90 per cent of banking transactions of all kinds can be done electronically, but only 30 per cent of energy provider transactions can be effectively done – that’s a hue gap.
The study suggests consumers are quickly becoming ‘prosumers’. What kind of new consumer does this term describe and how quickly will it materialise?
With growing adoption of residential solar and other forms of distributed generation, as well as environmental awareness, providers are facing a new dynamic. Consumers are becoming “prosumers” who are creating their own energy and, in some cases, selling it back into the grid. Meanwhile, electric vehicles are enabling a new breed of roaming consumers who are using energy services in various places – further creating even more complex consumer relationships that emphasise greater personalisation and connectedness.
As consumers move away from traditional one-way relationships, these forces are driving more complex, interactive relationships both with individuals and with certain communities of consumers. What will ultimately emerge are more active, multi-way relationships – necessitating an entirely different, and more complex, set of customer insights.
Consumers are still trying to figure out what it means to be a ‘prosumer’, however, it will take a while for the education cycle to help people understand they can generate energy on their roof and then sell it back, or offset costs with their energy provider. Currently, less than a third of all consumers really understand this value proposition, so this is not something that will materialise instantly.
What kinds of expectations will this new consumer have of energy providers?
The market likes to talk about customer choice and customer engagement, but actually, our research shows two-thirds of consumers in Australia don’t really want to be engaged. They don’t want choice, they want low-cost and reliable energy and they want to be then left alone. If they have a problem, they want it solved ASAP and have the least amount of customer effort expended in doing so.
Conventional wisdom from the past five-10 years suggests if we gave consumers lots of choice, lots of data, lots of fancy bar charts, whiz-bang websites and so on, they would become very engaged, very satisfied, sticky and would change their behaviour. To some extent that has happened, but it’s fallen short of being a raging success. Now, we realise customers really want set and forget technology. They don’t want to go home at night after a really long day at work and sit by their computer and study their week’s worth of energy and make their children eat dinner at 2pm – it’s just not going to happen. They will pay their energy provider a premium to have their provider automatically control their electronic devices so they don’t have to. And, consumers can override it so there is a level of control to it. With the right privacy protection, this could be a real value add that is seen as a differentiator.
Read the full The New Energy Consumer – Architecting for the Future report at www.accenture.com.