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By Jesse Berst

Last year, I helped launch the Smart Grid Consumer Collaborative, which is now flourishing and making a real contribution in consumer research and education. One terrific side benefit was the chance to review the consumer research contributed by member companies. (Research that was nicely summarized in SGCC's State of the Smart Grid Consumer 2011 Report, which is free for download.)

 

After reading the latest findings and after talking to literally hundreds of experts, vendors and utility professionals, I've come to realize that the world has changed… but that many utilities have failed to notice.

 

To be fair, electric power was its own special world for decades. Until recently, electric power was a walled garden. Utilities did a nice job of tending the crops inside, but there was almost no cross-pollination with the world outside the walls.

 

Now those walls are crumbling. The same consumer attitudes and demand that operate in other markets are starting to profoundly affect electric power. Here are six of the most important changes that have yet to sink in with most utility professionals.

 

(Here's an irony. As you read the list, it may look obvious and familiar. That's because you are a consumer yourself, and you share all the same attitudes when shopping for other goods and services. But when you slip your utility hat back on, it drops down over your eyes and blinds you to the fact that the same attitudes are now at play in electric power.)

 

Consumers are energy aware. Gone are the days of "just keep the lights on and don't bother me." As Richard Thaler and Cass Sunstein explained in their bestseller Nudge, "Small changes to individuals’ perspectives can cascade into major shifts in behavioral patterns for entire populations." The first shift came with the oil shocks a few years back, which got people thinking about energy in general. Now the push for renewable energy and electric vehicles has made consumers aware of energy as a personal and national priority.

 

Consumers are engaged. Don't believe me? Just ask the folks at PG&E, who thought they'd sneak a smart meter upgrade past supposedly indifferent customers.

 

Consumers want perceived control. Consumers don't really want the hassle of micromanaging their energy usage. What they do want is the ability to 1) customize a set-and-forget program and 2) override utility demand response commands. Most consumers will never use either one… but they want to know they can.

 

Consumers are complex. As Accenture said in its 2010 study on understanding consumer preferences, "The historical view of customers as like minded is not sustainable." For 100 years, the industry has gotten away with putting customers into three buckets (commercial, industrial, residential). From here on out, we will have to do the same sophisticated segmentation as other consumer-facing businesses.

 

Consumers want customization. Utilities now compete against customer expectations derived from other industries. They compete against the choices offered by smart phones; against Home Depot's wide selection; against Google's lightning fast search; against Wal-Mart's always low prices; against Wendy's have-it-your-way attitude. For instance, most utilities realize that consumers want much more information about their utility bills. But many utilities think they can simply offer up a one-size-fits-all Web portal. In fact, consumers want highly personalized information and they want it at any time on any device – Web, TV, print, smart phone.

 

Consumers want choice. Here's the one that really hasn't sunk in yet. Yes, I know that consumers have been conditioned by decades of regulated monopolies where the only choice was take it or leave it. But they've also been bombarded by overwhelming choice in almost all other aspect of their lives – including areas such as television and telephones, which only 30 years ago were almost as restricted as electric power.

 

What will consumer choice mean to the industry? I will be back soon to talk about "calling plans for electricity" and other innovations that are beginning to take hold. For the time being, suffice it to say that utilities don't need to create all these choices themselves. Apple certainly didn't build the hundreds of thousands of apps for its iPhone. Likewise, utilities will be much better off partnering to get their customers the choices they want and deserve.

 

If you have been watching the Arab Dawn spread across the Middle East, then you are familiar with the tipping point phenomenon. The consumer changes described above are at such a tipping point. Skeptical? I will grant you this much. These changes are happening at different rates in different parts of the country. But even in the areas of slowest progress, they are visible already and will only grow over time.

 

Use the comment form to tell me if you've noticed other blind spots when it comes to our industry's understanding of the new energy consumer.

 

Jesse Berst is founding editor and chief analyst of Smart Grid News.

 

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Talk Back to the Author

Current Comments (14)

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Learning Fast About Consumers

Jesse, My compliments for adding so much to the discussion about changes in consumer attitudes, which are being driven by rising expectations resulting from, yes, better technology and better consumer experience in OTHER industries. Your comments are absolutely on target: the Apple product line and retail stores, Amazon.com, Google, Wal-mart and Wendy's (to name just a few) are raising the bar as consumer expectations rise for other industries, including regulated utilities!

Eric Meyer - 04/06/2011 - 07:00

?

Customers are tired of rising energy prices. Which is at the real really behind the "smart metering" movement.

The seventh thing - 04/06/2011 - 07:01

Utility Consumer blind spots

Jesse, This is one of your best and most prescient columms...and I woke up this morning thinking about many of the same issues. For me the whole problem with Smart Meter deployment is that few attempts are being made to show customers HOW this improves their service. Regulators promote price signals (to force behavior change--people resist vhange like that). Utilities tout labor savings and system efficiencies. Ask me if I care. Develop the consumer benefit argument! I just heard about a Duke Energy result of using meters in a voltage stability feedback loop to save up to 5 percent of energy in the homes. No behavior change and no threat of punitive TOU rates. More please

Arthur O'Donnell - 04/06/2011 - 07:12

Who delivers the choice?

The utility industry equivalent to Apple's App Store is a regulatory framework where the utilities provide interruptible bulk power and a new industry of micro-grids provides a wide variety of solutions that are customized for the individual based on DG, EVs, and demand response managed at the micro-grid level. This isn't quite cost-effective yet, but the advances in PV and storage will make it cost-effective faster than the utilities can build new transmission.

Peter Lilienthal - 04/06/2011 - 08:26

Choice comes at a cost

Some utilties migrated long ago to a situation where they don't rely on increasing kWh sales as part of their business model to provide low bills and reliable service. Energy efficiency and openness to customer choice has been around awhile. For those utilities, customer choice hasn't been of concern. Those utilities do off a perspective on changes in industry and the impacts to utilities. Choice comes at a cost and its the responsibility of the utility to explain the costs of implementation. Why would a utility, for example, spend millions of dollars in resources to accomodate all the choice needs for a handful of customers. The issue isn't so much about the ability to have choice, but more who pays for it? The utility? Or the customer that has a lot of offline opportunities to make choices and get information without the utility having to make an investment? Utilities just need to be in a situation where choice is a non-issue and then it comes down to who pays for what.

Jeff Nelson - 04/06/2011 - 08:38

Response to Peter

Peter - I agree with your scenario in certain parts of the country. (It will take much longer in the Southeast, for instance.) But in that new world, utilities will have to do MUCH more than provide bulk power. They will have to balance all that supply and demand as it pours in from every direction and changes every second. They will also have to create a "market" so you have somewhere to send your excess power when available and to get extra power when needed. Net metering has no value unless there's somebody at the other end to take your power and pay you for it.

Jesse Berst - 04/06/2011 - 08:50

Response to choice at a cost

Jeff - Being neutral or indifferent to customer choice is much different than actively working your hardest to make sure that your customers have the best and biggest selection of energy apps. To get that attitude, we need to give utilities incentives. Nobody objects when a Google or an Apple makes huge piles of money by delivering valuable consumer services. But current regulations don't allow utilities to reap the rewards of taking that kind of risk. I understand that it is a complex problem and I agree that decoupling is a step in the right direction... but it is not the ultimate destination we need.

Jesse Berst - 04/06/2011 - 08:53

Consumers want choice

Jesse, Good point on consumers wanting choice. But when it comes to energy, what possible service offerings could utilities offer, and how would they offer them seamlessly so that the your other point about consumers: "Consumers want perceived control. Consumers don't really want the hassle of micromanaging their energy usage" is not violated? What one needs is a whole new business model, and technological tools to exploit them, along the lines of what Peter Fox-Penner of Brattle group calls the energy services model, where consumers are not offered KWhrs, but units of "lumens" (light energy, or units of phev charging hours etc. But aren't we miles away from such kind of novel business models that mimic say those that mobile carrier operators offer consumers. Cheers Ram

Ram Sastry - 04/06/2011 - 11:25

Someone pays for incentives

Jesse - perhaps you and I are saying the same thing, but in a different way. When I hear giving utilties incentives to promote mega apps I hear "tax dollars" or "ratepayer dollars". But perhaps you mean "personal incentives". Individual customers would drive the behind the meter information market (internal monitoring devices in the home, more programable thermostats, more plug and play energy usage trackers, etc... All on the customer side of the meter). The tech exists today. That being said utilities may find themselves encouraged to go in certain directions over time. For example, some customers are seeking additional information on usage on an aggregate level. On line display of bill and usage information reduces the need to respond to a potential growing request for the information (e.g. a plant engineer can be given a user and password from the plant manager on the account and then access the last X number of bills online to collect usage data.) This isn't earthshattering by any means (and just an example), but I think utilities will adapt to the majority of needs expressed by customers. Particularly consumer-owned utilities where the elected board is made up of customers, the board hires a general manager,and staff are directed to meed the needs of the board (the customers).

Jeff Nelson - 04/06/2011 - 15:57

4/6/11 column by Jeff

Jeff, best column yet. Utilities had best become familiar with the term and concept of "mass customization", for it is on their doorstep.

Shirley J. Hansen - 04/06/2011 - 18:31

One more

Consumers want total lowest cost of energy, in whatever form, and however delivered. Utilities struggle to demonstrate this with tech upgrades to an obsolete architecture, yet continue to market tech advances under the guise of saving energy (metering etc...) without providing a total lower overall cost to the consumer (rather increased rates, fees, distribution charges, etc..). The topic of alternate energy architecture to address the main 'flash' points of saving the world, via energy efficiency gains and energy independence is not addressed nor encouraged due to the utility monopoly. Ed Legge of the Edison Electric Institute, the lobbying org of the utility industry (and leader of the national effort to oppose federal renewables targets): "We're probably not going to be in favor of anything that shrinks our business. All investor owned utilities are built on the central-generation model that Thomas Edison created: You have a big central power plant and distribute it". Fast Company Jul/Aug 2009 This position by the industry, while at same time of trying to 'convince' the consumer they have the consumer's and the world energy / environment situation at heart, creates distrust with the consumer. The Utility Industry needs to think like a tech industry and design their own architectural replacement - whether microgrids, scalable modular units per dwelling etc - before they are.

Mark Pugacz - 04/06/2011 - 19:14

Changing Game Conditions?

Great article. The article and the comments it triggered are insightful. It’s clear that innovation and imaginative marketing will be much more important for all market participants in the electric industry of tomorrow. An important unknown is whether this powerful industry that still exhibits some monopolistic tendencies can hold back—or reshape—the rising tide of change. Technology and customer choice have the potential to at least counterbalance and perhaps overwhelm the industry’s influence with political and regulatory gatekeepers … but maybe not. “The game is afoot” as Sherlock Holmes used to say. The historic convergence of some powerful forces—including rising costs and reliability challenges (that are changing the industry’s value equation) coupled with technological advances (and not just in ICT) on top of relentless demand growth and the emergence of electricity as the undisputed premier form of energy as well as the implications of global warming and climate change—have the potential to change the game conditions that have ruled the industry for the past century. Did I hear someone say “inflection point”?

Jim Hogan - 04/06/2011 - 21:50

and One More

Remember the days when all we had was a "Ma Bell". Now we can pick and choose many options. We are seeing this with cable/satel/etc. Is energy next?

D Tucker - 04/07/2011 - 06:20

GREAT Article!

Hugely insightful, and provides outstanding marketing insight. For the reason(s)you cite, few will recognize the tremendous power that companies can leverage if they can simply recognize what you have so clearly stated. Yet another example of the "MBA Failure" so prevalent in American enterprise, eh?

Richard Louis - 05/09/2011 - 17:58

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