Factors influencing consumer engagement in delivering the energy transition

How does consumer engagement help utilities to address energy market challenges in an increasingly digital landscape, especially as more distributed energy resources are integrated posing huge challenges to utility operations?

This question was answered during a panel discussion held at Enlit Europe in Milan, where Annelies Delnooz, project manager of energy technology at research institution VITO, explained the role of consumer engagement in a decentralised energy world and how it can ensure energy markets work effectively and drive benefits for both utilities and consumers.

According to Delnooz, for consumers to be engaged and to participate in the development of future-proofed resilient energy systems, utilities need to put in place adequate infrastructure, technologies, elements, and an environment that is safe for consumer buy-in.

Utilities must also provide adequate information regarding their services and use of consumer data, a critical step to establish consumer trust.

Delnooz: “We see consumers ask themselves three key questions – one: What is it; two: Is it worth it and three: What if it goes wrong?”

She explained the several factors that influence the customer engagement process and these include:

The level of knowledge amongst consumers

She said engagement is particularly influenced by the level of knowledge amongst customers evidenced by the fact that educated and conscious consumers are more willing to invest time and financial means to assist energy markets to deliver the energy transition and transformation of business models.

Inclusivity and diversity

Delnooz added that utility companies need to dedicate sufficient time and resources to ensure their energy and business transformation are just and inclusive by involving all consumers.

Despite the complexity of energy markets, she said energy firms need to “pay attention to the potential risks of new technologies on vulnerable consumers, as they are more likely to be confronted with difficulties in accessing energy and these new smart grid opportunities.”

A study conducted by UK regulator Ofgem found that low-income consumers are adversely affected by new pricing practices due to their inability to adapt energy usage behavior in line with demand response or Time of Use signals, according to Delnooz.

The study found that low-income customers struggle to invest in smart appliances that are energy efficient and able to help them shift heavy energy usage to off-peak periods.

As a result, Delnooz said they “are often compelled to consume at only the more expensive peak times,” resulting in high energy prices and an increase in energy poverty.

What’s in it for the consumer

Delnooz said financial incentives alone are not strong enough to encourage consumer buy-in in utility programmes such as energy management.

“Analysing the consumer behavior, we see that other incentives are often perceived as a much stronger signal for the consumer. In the Netherlands, for example, where parking is a big issue in the city of Amsterdam, electric vehicle owners are awarded non-financial benefits in the form of a priority parking license or even a reserved parking spot.”

She highlighted the impact non-monetary triggers are having on consumer engagement. For instance, consumers want comfort and convenience and utilities, by investing in the two, will record an uptick in customer engagement and improvement in customer experience.

“We should invest in increasing comfort and increasing convenience rather than command unwanted behavioral changes in a smart grid context.”

She added that energy services need to have a higher degree of consumer centricity and give consumers control for them to trust in products and services.

Delnooz gave an example of the manual process involved in utilities’ demand response programmes in the early days when energy firms communicated with customers via phone or email to notify them of signal changes.

Technology innovation has today changed the landscape with demand response now being automated, however, consumers still have the option to override or manually influence the reaction of their smart appliances to utility demand-side management signals.

Consumer priority

Delnooz added that consumer priority determines their usage behavior in spite of recommendations, services or products utilities offer in attempts to influence their consumption patterns.

And as such, she said energy generators, transporters, retailers and policymakers need to develop services and policies that empower consumers and ensure the energy transition is fair and just.

For instance, the creation of energy communities, dynamic pricing, onsite energy generation and storage and electric vehicles services, enable consumers to make their own choices and facilitate the participation in flexibility markets for grids reliabilities.

Delnooz reiterated that utilities need to increase their pace of digitalisation and business transformation to keep pace with consumers’ digitalisation and demand for innovative services.

She said consumers are more energy-savvy and environmentally conscious but the slow pace at which utilities are digitising operations is limiting consumer participation and engagement to deliver the energy transition.

Delnooz was speaking during the session: How to achieve greater consumer engagement in which Philippe Garrec, Senior EU Policy Advisor – GRDF and Sergio Olivero, Business & Finance Innovation Manager – Energy Center of the Politecnico di Torino also participated.