One year later: economics or environment?

Survey linked energy behavior with disparate motivations

Phil Carson | May 23, 2012

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On a whim—okay, I was desperate—I looked back to see what we'd covered today, exactly one year ago. 

It certainly seemed as if I'd hit the jackpot, because that column described a Deloitte survey of energy consumers, who weighed various motivating factors driving their potential to manage energy consumption. 

Certainly the factors have not changed appreciably, although the rankings may have. But I offer up a few highlights for our readers to chew on today, as we all ponder whether we're actually moving out of recessionary times—and some of us consider whether that may influence consumer rankings of the same factors.

The column had a flashy, provocative title: "Survey: Economics Influence Energy Behaviors." I jest, of course, as that's about as flat and intuitive as one gets. But the findings are worth looking back on, because if they have not changed, utilities may have their work cut out for themselves. Let's limit ourselves to three findings and their upshots.

First, consumers did not underestimate the difficulty of making meaningful reductions in their electricity bills. Only 17 percent said it wouldn't be difficult. Fifty percent said it would be "somewhat" difficult, while 33 percent said it would be "extremely" or "very" difficult. 

I don't think this means that consumers really know, because they haven't been offered options and tools with which to explore the proposition. But I think these responses do reflect skepticism that much can be done. Also, it's in the nature of surveys to ask what "meaningful reductions" actually mean and whether it means the same thing to everyone. (I doubt it.) Still, this result seems to pose a serious challenge to utilities that are proposing or implementing a number of steps, including installing and charging customers for smart meters and other technologies. 

Second, Deloitte asked what factors would motivate consumers to change current practices and embrace alternative sources of energy. (The following answer reveals that respondents could select several factors, thus the rankings add up to more than 100 percent.) Nearly 70 percent cited "jobs" and "energy independence," nearly 60 percent cited "future economic health" and "national security," while 50 percent cited reduced risk of another BP-like offshore oil spill and 44 percent cited global pollution and global warming. 

Does that mean that Americans in recessionary times don't hold environmental values dear? I don't think so. Rather, depending on transient levels of hardship, Americans prioritize economic factors. The silver lining here, I'd suggest, is that consumers are motivated by a variety of factors, which is the basis for a strategy of segmentation and targeted messaging. Certainly, if consumers value "energy independence," "future economic health" and "national security," we've got the makings for a national energy policy—and the attendant debate that will clarify whether that policy should be forward-looking or just "drill, baby, drill." 

Third and last, only 18 percent said they'd purchase a "smart energy application"—admittedly, an amorphous phrase. However, when respondents were divvied up by age, 33 percent of Gen Y said yes, while only 16 percent of "Matures" agreed. Utilities might well take this as guidance on which demographic group to pursue with the mantra of energy management. On the other hand, "smart energy applications" might come from third parties seeking disintermediation, a wonderful term roughly translated as "stealing your customers." 

Two reader comments really highlighted that significant energy savings might better be implemented in a way that bypasses or flies under the radar of consumer involvement or attention. 

"The key is to find some early adopters and let energy management spread virally," one reader wrote. "Home energy management users likely include consumers with air conditioning, pool pumps, electric hot water and electric heat. The cost of automating lights and other small appliances probably outweighs any savings.

"Over the longer term," this reader added, "stringent energy efficiency standards for appliances, stricter building codes and some form of energy efficiency labeling for new homes are essential elements of a long-term plan to cut energy use."

Another reader seemed to suggest that third parties will want to keep those "smart energy applications" quite cheap. (Say, 99 cents.) 

"Most end users arrive quickly at the reality that 15 percent savings only adds up to about $6 per month or $180 per year," our second correspondent wrote. "With that savings reality, one of the tough questions that should be asked is, `How much are end users willing to spend to capture that savings?' Past experience has shown at best that [end users will devote] one month's savings ($6) as a one-time capital cost, if a compelling product is offered. Most product offers I've seen fall way short of that price point and, thus, the market confusion and end user frustration."

Despite the widely acknowledged vagaries of surveying aside, I'd venture to suggest that not much has changed in a year. Utilities would like consumers to change behavior for utility-centric reasons that sometimes do and sometimes don't reflect broad societal priorities, although generalities in this instance are as suspect as surveys. 

By the same token, consumers who add to the demand for fewer coal plants and more renewables clearly don't understand the two-way street they're driving on. If you make those two demands, as majorities in a majority of states have, you also bear responsibility for working with the result, which is curbing peak demand or paying higher peak costs. 

A legacy of mistrust of regulated monopolies and energy illiteracy are the sticking points. Perhaps the bright spot in all this is that state-level and community-level conversations remain viable, even if the vitriol, noise and partisanship of national politics preclude any forward-looking solutions. 

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

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Comments

Customer motivations

Phil,

I think you pretty much hit the nail on the head when you said "Utilities would like consumers to change behavior for utility-centric reasons that sometimes do and sometimes don't reflect broad societal priorities."  Aside from a handful of what I will call energy afficionados, for most people electricity is little more than the provision of a necessity commodity.  They want it provided at a reasonable cost with minimal interference so that they can get on with the more important things in their lives.  Most don't want to make the utility's problem their problem and if they have to spend too much time dealing with it, for whatever reason, there is going to be a backlash.  Utilities, regulators, and other industry players need to recognize this.

Rich Mignogna

P.S. If you're really stuck for things to write about, check with me.  I still have a few things going on that could be more exciting  : )