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.
Retail energy providers have done much to aid the transition that every country must make to clean energy. In the United Kingdom, around 15 percent 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.
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A project that Publicis Sapient carried out for Oshawa Power in Canada found that by using a combination of smart meters, dynamic tariffs and customer engagement, up to 10 percent of domestic energy consumption could be shifted from peak periods. By using a combination of smart meters, dynamic tariffs and customer engagement, up to 10 percent 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 percent to 20 percent 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 percent.
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.
This will delay the moment when the full benefits of demand-shift programs can be captured. But for energy retailers, there are other important reasons to consider shifting domestic demand from peak periods. The key one is the opportunity these initiatives bring to create more active, engaged relationships with customers that can lead to improved retention, reduced cost-to-serve and increased sales of zero-carbon products.
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 replace low-engagement relationships based on billing and customer service conversations with a virtuous circle of more frequent and fruitful interactions.
For example, research by Bidgely, an artificial intelligence partner for utilities, found that 40 percent of European residential customers would be more likely to stay with their energy retailer if they received proactive energy insights and alerts. Personalized energy insights can achieve open and recall rates above 80 percent, creating ideal conditions for cross-selling.
The key, therefore, is to focus on the elements of these programs that can deliver measurable results quickly, particularly customer engagement and personalization for those households already using smart meters. Our Oshawa Power pilot project used SMS, push notifications and prompts when customers are looking at their bill on the mobile app to create engagement. Badges, leader boards and personalized messages brought color 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 behavior than pricing tools alone. For example, digitally engaged participants in the pilot reduced their electricity consumption twice as much as the average of all participants within their user groups.
Drawing on our experience of working with Oshawa Power, we propose an incremental process to encourage demand-shifting. One that starts to deliver tangible change quickly while providing the foundation for the full solution that will ultimately follow:
Sergio Falletti
Director of Technology
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