Changing Consumer Behavior: Nothing New Under the Sun

Phil Carson | May 04, 2010

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Myriad forces are driving the electric utility and its consumer class of customers into each others arms. But an embrace is far from a sure thing.

As utilities sort out the evolving, smart grid business case, they will seek to maintain ownership of their consumer base even as intermediaries vie for the same position. The utility needs the consumer's attention to, and behavioral changes around, the onset of "smart" technology, including dynamic pricing, peak load shaving and demand response.

Not least, utilities need consumers in their corner for political and financial reasons as they roll out smarter grids and seek rate increases to pay for them.

So, what do utilities have to do to turn a relatively cool relationship into something a bit more enthusiastic?

"The residential sector needs to be engaged for utilities to do smart grid," editor and consultant Christine Hertzog told me earlier this week, recounting her participation on a panel at the Peak Load Management Association's (PLMA) spring conference last Friday.

(Hertzog created The Smart Grid Dictionary and consults on customer relations insights based on her experience in the electric, water and telecom industries.)

"Demand response, for instance, is a relatively dense topic," Hertzog said. "Consumers must understand the variable costs of electricity. But most consumers don't know that peak electricity is more expensive than nighttime electricity. That's an economics lesson - if the utility pays more for that electricity, then you will, too."

Hertzog cited a Sacramento Municipal Utility District (SMUD) program that couples subsidized energy audits and energy efficiency work for residents who agree to participate in a summer demand-response program. The latter includes the installation of smart thermostats and consumer acceptance of critical peak pricing (CPP) signals to help SMUD shift peak load.

One intriguing aspect presented by a SMUD representative at last week's conference, according to Hertzog: the utility's studies revealed that electricity usage data for the entire home had less of an impact on a homeowner's behavior than more granular data showing appliance-level use.

Hertzog used the foregoing example to underscore the need for utilities to understand retail communications strategies that can raise awareness of issues affecting the supply and demand for electricity and influence behavioral changes among consumers that might resolve those issues.

"The monopoly model doesn't provide the motivation for electric utilities to develop customer service," Hertzog said. "That's in contrast to the telecom industry, which is intensely competitive. They'll have to step it up a bit, especially if they are competing with other energy service providers."

And the electric utility today has to move the needle further than most businesses, few of which are attempting to get their customers to change their behavior, Hertzog added.

In Hertzog's view, the assumption that utilities need to have advanced metering infrastructure (AMI) in place before affecting consumer behavior simply doesn't hold up. (This echoes points made by many Intelligent Utility readers who've questioned the rush to embrace AMI as the de facto first step in smartening the grid and serving consumer needs.)

The most effective technology - given the SMUD finding that appliance-level granularity motivates homeowners - would be robust home area networks, with smart thermostats and sensors on major appliances, Hertzog suggested.

Getting consumers to change their behavior around electricity use can simply borrow from lessons learned in other industries, she said.

"You are not alone, not unique," Hertzog told the utilities in her audience last week. "There's not much new under the sun."

In fact, other panelists in last Friday's session came to share their experiences in high-tech, the medical device market and financial services.

A quick-hit list of actions to take, according to Hertzog: start a dialogue by asking customers about their wants, needs and expectations; use educational materials designed for various demographics in your customer base; and revamp call centers - an online presence is complementary, but unlikely to change consumer behavior on its own.

"Spend as much time on internal change management as you do on external work," Hertzog recommended.

That means tried-and-true change management processes such as cultivating C-level executive buy-in, defining the available budget, forming a cross-departmental team and spreading responsibility to encourage success. 

"Time is of the essence" not just to protect the bottom line from intermediaries seeking to claim utility customers as their own, Hertzog concluded, but for environmental reasons as well, because "we all inhabit the same planet and breathe the same air."

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757   

 

 

 

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Comments

Set and Forget

Regarding the issue of "set and forget" that Jack raised, the following article describes an approach that seems to address that very effectively: http://www.greentechmedia.com/articles/read/passivsystems

 

Niall McShane

Arlington Heights IL

Customer Engagement

I'd like to react to a couple of items from your discussion with Ms. Hertzog.

First, utilities should not depend on receiving appliance level data from consumers.  Simply acknowledging that Smart Meters have the ability to collect this information has already set off a firestorm of protests, most notably from privacy advocates who point out the dangers if this information is not handled with the utmost care.  The cost of gathering and protecting that data is probably not worth the benefit other than in limited amounts for research purposes.

Second, I think automation is more important than some sort of in-home display.  Consumers need to be able to "set and forget" major energy-consuming appliances.  For consumers that might want to adopt precooling in conjunction with TOU or dynamic pricing, a gadget that replaces their thermostat should be relatively inexpensive and could provide benefits to consumers and utilities far out of proportion to its likely cost.

Third, I challenge any assertion that utilities will be worse off if consumers turn to third parties for help managing their energy bills.  Has any utility conducted an objective analysis to determine how their earnings and growth prospects would be impacted if consumers employ third parties to provide commodity and energy management advice?  I think utility managements and your readers should be skeptical of any claim that customer control is necessary - much less essential - until proved otherwise.

Jack Ellis, Tahoe City, CA

Thanks Jack

As usual, a succinct commentary.

I don't think Hertzog is suggesting that utilities would want appliance-level data, just that that data be available to the homeowner for the best possible effect on behavior changes that will aid in peak-load shifting.

Second, I should think that "set and forget" would have a display function for the "setting and forgetting" action, but not to stare at, biting nails, etc. Many of our readers seem to think folks are going to be tiptoeing around, doing laundry at midnight. Not.

Your last point is also good -- not sure what the utility concern is, though I have anticipated that there would be a concern. Objective analysis called for, for sure.

Regards, Phil Carson