Geoff Childs considers how the UK energy retail sector has been transformed over the past decade with technology advances, increased competition, and regulation designed to drive low carbon energy production and use. Some people believe this has created a generation of Prosumers. To what extent should energy retailers’ investment decisions be influenced to balance their needs with those of other less engaged customers?
Prosumers or consumers?
Imagine the following scenario. You walk through your door at the end of a long day. Your electric vehicle is garaged and plugged in, your calendar is up to date and tracks your days down to the minute and your washing machine and dishwasher are internet enabled and pre-programmed to start. You’ve switched to the energy supplier offering you the best time of use tariff that suits your needs.
In this perfect future, your appliances are being controlled by your digital assistant, who politely tells you when your washing machine will function, when your car will be charged and at what cost, based on your calendar, and all in line with the settings you’ve selected to help you use the lowest amount of energy at the best price.
You may have selected those settings yourself (unlikely) or you may have delegated this decision to your energy supplier based on the agreed desired outcomes. I say it’s unlikely that you’ll have known what settings to choose yourself as, sadly, so few consumers are engaged with energy.
Ofgem found in its latest Consumer Engagement Survey that in 2018, almost 70% of consumers were not in its “Happy Shopper” or “Savvy Searcher” segments. Those are the ones most likely to switch energy supplier and arguably the most engaged about managing their home energy. They are the group most likely to imagine themselves in our scenario and are a small segment being labelled Prosumers.
We’ve come a long way
But Prosumers account for such a small number of consumers with the majority still mostly disengaged about their energy use. So the question is – should the energy retail industry and its technology partners be investing in the engaged consumers to make this futuristic scenario possible? Should we be trying to engage with the low number of consumers who are engaged with energy and somehow grow membership of this group to the majority who are not currently in it? Or should we be making it no-brainer easy for everyone to benefit from this type of automated energy efficiency planning and consumption management? It’s a current dilemma facing energy suppliers, who need to satisfy both today’s consumers and plan for changing consumer behaviour in the future.
We’ve come a long way from the first days of an open market, but in some ways, not much has changed. It’s perhaps hard for some people to remember what the market was like 20 years ago when all UK residential and business customers could finally choose their energy supplier. Energy companies still had shops in the high street and most people changed energy supplier following a visit from a sales person on their doorstep. Price comparison sites did not exist, there were no smart phones and 4G was just a dream.
The UK energy market is now one of the most competitive in the world – with almost three times as many supplier choices as there were 6 years ago. But the number of consumers changing energy supplier per year has never again reached the level it first achieved one year after market opening, although it has risen every year since 2014. Very few customers actively speak to an energy supplier about switching, with most preferring to engage with a price comparison website (one good example of technology supporting engagement).
Better engaged = better informed
So back to our dilemma of which group to bet on – the engaged and few Prosumers who will make their own choices and actively engage in managing their energy consumption, contract and behaviour? Or the vast majority of consumers for whom energy is a commodity purchase that occupies little brain space? If it’s a question of the overall potential impact, and the biggest potential return on investment, I say we focus on the majority and we make it easy for everyone to engage with energy. That’s how our future scenario of connected prosumers can become a reality.
And here’s our challenge; what do you think it would take to engage consumers more with energy? and where do you think energy suppliers should invest? Being better informed on any subject helps us make better decisions. Even if we can’t all see ourselves becoming Prosumers in the near future, we can all agree that we need to make informed decisions. And surely that’s the most important benefit of being engaged.