FAVOURITES  – 1 June 2010 – Smart meters are going in and smart grids are receiving government funding. But will consumers change their habits in the battle for energy efficiency? The latest evidence indicates that Australians need some convincing.

The new energy era will be enabled by intelligent grids and connected meters, as well as new sources of renewable energy. But at the heart of this revolution will be a new dynamic relationship between households and electricity providers. And a transformation in consumption habits can only be achieved if this relationship works.

Central to the task is persuading consumers to reduce their electricity demand, in particular, at peak times. Electricity management plans will play a crucial role in allowing utilities to help consumers modify their habits. For some, this means agreeing to limits on the use of certain household appliances. A consumer may agree to restrict their dishwasher use to the early hours of the morning, for instance.

But only nine per cent of Australians would enrol in electricity management plans where utilities had such control of their appliances, according to research carried out by Accenture. Even when no such limits are introduced, only 30 per cent of Australians would sign up.

Big discounts may go some way to encourage consumers, but of 9000 people Accenture polled around the world, only a quarter would sign up to plans that include such usage restrictions even at a discount of 10 per cent.  Double the discount and you would still only secure 35 per cent participation.

Consumers are also deterred by the possibility that their provider could have greater access to their usage data.  A third of Australians cite this as a barrier to using electricity management programs.

There’s no doubt consumers can be shown how this new energy era can make their lives more convenient and cost effective. And there’s no reason why they cannot be convinced that sharing usage data will result in more relevant tailored services.

But utilities have their work cut out. Levels of trust in utilities remains low – 29 per cent of Australians state that they do not trust electricity companies to inform them about how they can use their electricity more efficiently.  Nearly a quarter do trust their electricity companies to do so, but households would rather turn to environmental, academic and scientific organisations.

The good news is that the new era of smart technology will improve the relationship between electricity providers and their customers.  It will create easier ways for households to manage their consumption, new channels for them to communicate with their provider and new services tailored to their needs.
So what do our electricity providers need to do?

Education is the first step.  According to our survey, three quarters of Australians said they understood what actions they need to take to improve their energy efficiency. But only 26 per cent had actually heard of and understood electricity management programs that help them do so.

Providers could be clearer on the benefits of improving energy efficiency and should be open about why and where bills will rise or fall in the future. It is instructive that much of the work we are undertaking in the implementation of smart meters around the world is focused on consumer engagement and communication.

Control and privacy are clearly barriers to adoption of electricity management plans and are the next priorities to address. Although our survey suggests consumers will demand large discounts in return for some limitation on the use of certain household appliances, this need not be the case.

On these two issues, electricity providers could learn a thing or two from the telecoms industry, in which consumers’ calls are logged and where tariffs drive usage at certain times of the day.  And here, of course, it was not merely a story of technology, but of a revolution in consumer centricity that transformed that entire industry for the better.

Customer segmentation is inevitable as customers become more active and diverse. The end is in sight for the “one-size-fits-all” service model. Some consumers will wish to improve their energy efficiency more than others; some may be prepared to pay a premium for certain services while others will seek discounts in return for caps on their peak time use.

And as energy efficiency advice becomes central to customer relationships, providers will have to invest in an entirely new set of consumer facing skills, backed up by analytic capabilities that enable them to turn customer diversity into competitive advantage.

So, for all the talk of smart meter pilots and trials, the real test for energy providers is one of consumer engagement and the design of energy management services that are supported not only by new technology, but by a new consumer culture. Pass this test and the industry will regain the trust of its customers and secure new revenue streams for the future.

The Accenture survey, Understanding consumer preferences in energy efficiency – Accenture end consumer observatory on electricity management 2010, can be found here.