Pilot projects show that engaging with customers individually to encourage them to shift energy use from peak periods can have big environmental – and financial – benefits as Joe Tabita, energy leader for EMEA and APAC at Publicis Sapient explains.
Retail energy providers have done much to aid the transition that every country must make to clean energy. In the United Kingdom, around 15 per cent of households are on green tariffs, and renewables account for almost half the power generated. But they have another major opportunity to accelerate this transition, although this one is much less talked about than renewables.
Research projects by Publicis Sapient and others have shown that if energy providers work with consumers to shift consumption away from peak demand periods – when more expensive and polluting sources are needed to complement cleaner ones – the results can be dramatic.
Shifting peak energy use
Working with Oshawa Power in Canada, Publicis Sapient found that by using a combination of smart meters, dynamic tariffs, and customer engagement, up to 10 per cent of domestic energy consumption could be shifted from peak periods.
Studies in the United States and Northern Europe have produced similar results – another time-of-use pilot in Gotland, Sweden, reduced peak usage from 23 per cent to 20 per cent of total load over two years, while a demand response program by Con Ed in Illinois enabled consumers to cut their electricity bills by about 15 per cent.
Smoothing energy demand to that extent leads to reduced infrastructure investment, drives down wholesale electricity costs and minimizes the use of dirtier power sources. This brings big reductions in greenhouse gas emissions and huge efficiency savings from reduced balancing costs – the premium on wholesale prices that energy companies pay to balance energy supply and demand, due to the variability of renewable sources.
The financial and environmental benefits are clear. However, in many markets key elements required to deliver large-scale demand-shift programs, including dynamic tariffs and full deployment of smart meters, are not in place.
Apart from the main driver – the opportunity to make a significant contribution to reducing carbon emissions, for energy retailers, there are other excellent reasons to consider shifting domestic demand from peak periods.
Initiatives aimed at helping customers use less energy create more active, engaged relationships with customers that can lead to improved retention, reduced cost-to-serve and increased sales of zero-carbon products.
By engaging with their customers to encourage and enable them to use electricity in a more sustainable way – using alerts and personalized insights on energy efficiency – energy retailers can improve their relationships with customers, evolving them from low-engagement relationships, solely based on billing and customer service conversations, to a virtuous circle of more frequent and fruitful interactions.
Research by Bidgely, an artificial intelligence partner for utilities, found that 40 per cent of European residential customers would be more likely to stay with their energy retailer if they received proactive energy information and alerts. Personalised energy insights can bring recall rates to 80 per cent, which, in turn, sets the path to cross-selling.
The personal touch
The best approach is to focus on the elements of these programs that can deliver measurable results quickly, particularly customer engagement and personalization for households already using smart meters.
With great success, the pilot project we led for Oshawa Power pilot project used SMS, push notifications and prompts on the mobile app. Badges, leader boards and personalized messages brought colour to each interaction. The results demonstrated the power of this approach: engaging customers digitally via the website, app and cell phone proved far more effective in changing behaviour than pricing tools alone. For example, digitally engaged participants reduced their electricity consumption twice as much as the average of all participants.
When working with Oshawa Power, we found that an incremental process to encourage demand-shifting works best, one that starts to deliver tangible change quickly, while providing the foundation for the full solution that will ultimately follow.
The three steps to shifting demand down
1: Essential digital engagement tools
Ensure tools allow comparison on a daily, weekly and monthly basis, so that retailers can bring their billing and usage data to life with more precise messaging and can reward households when they make progress.
We have chosen leader boards and rewards based on positive feedback in the Oshawa pilot. The aim of the initial step is to demonstrate tangible progress in sustainable usage initiatives quickly and galvanize organizations to go further.
2: Scale digital engagement tools
Deliver measurable shifts in peak demand, retention rates and cross-selling revenue by scaling the digital engagement tools to deliver personalized saving strategies and nudges. At this stage there are no changes to tariff structures or wholesale buying, but the organization needs to decide on the technology stack that will be required; it needs to ensure collaboration between data, engineering, digital and marketing teams to make the initiative an integral part of how the business operates; and it needs to commit to several months of refinement and optimization work around data sources, algorithms, engagement mechanics and content to deliver better insights for customers.
3: Pilot and roll out a full-scale solution
This should combine digital engagement tools with the billing technology to support dynamic tariffs, along with a switch to more frequent wholesale market settlements that take advantage of the dynamic tariffs and minimise risk. Programs can be further widened by integrating them with zero-carbon product propositions, especially where these can simplify and automate household decisions on energy use and efficiency.
With the urgency of energy transition becoming clearer all the time, we believe that acting now and showing customers how to use energy more efficiently can significantly contribute to the world’s energy transition.