As utilities reach for mandated targets for energy efficiency and demand response, they should consider behavioral approaches to their customers and their energy use.
The utility sector is being required to meet mandated targets for energy efficiency and demand response, while these targets often double over time. Traditionally, utilities have used various engineering-driven measures to meet these targets; e.g., offering customers compact fluorescent light bulbs or pricing programs with incentives. These measures are straightforward to deploy and measure.
Today it is widely recognized that the traditional approach will not be enough to meet escalating targets, creating a need for a more diversified resource portfolio. New approaches are required.
Utilities have begun to experiment with pilot programs that embody a behavioral approach. These programs are designed to change consumer behavior towards energy consumption, resulting in load reduction. Such behavioral approaches include any program that initiates a change in behavior that doesn't require a widget or a rebate on a "widget-based" program. A behavioral approach is not technology based.
New behavioral approaches to energy conservation represent an opportunity and a challenge to traditional management of the demand side management (DSM) portfolio. These behavioral approaches should be considered in a strategic context, tying together pieces of the DSM portfolio, leveraging real-time information from smart grid systems and then further tying into customer service and marketing/communications efforts.
To date, utilities have largely focused on providing a consumer's energy use information through reports or other means and linking that information to comparative statistics from the consumer's community, creating a competitive lever to change behavior. This is one approach—a marker, if you will, on a behavioral landscape that would leverage motivations such as fear, persuasion, commitment, etc.
Overall, the utility sector's use of behavioral approaches has been largely limited to pilots, but the savings so far are real and significant—2 percent, on average. The new behavioral approaches have quickly become one of the more important initiatives to drive savings in the residential sector, especially for utilities serving urban service territories where the savings potential is limited by the number of apartment dwellers or addressable loads (namely, air conditioning).
Our interviews with utility managers also point to specific benefits to behavioral approaches. They are:
The experience of utility portfolio managers implementing behavior-based pilots have largely been positive.
The way that utilities think about energy consumers is often dramatically different than the way energy consumers think about themselves. This thinking gap makes it difficult for utilities to fully understand their customers and to create strategies that will effectively motivate behavior change. To drive the future consumer behavior change that leads to demand reduction will require a more "customer-centric" perspective from utility providers across all programs and for all customer types (residential/business, rural/urban, etc.).
From a utility manager's perspective, the biggest challenge is that the sector's experience with behavioral approaches has been limited to a year or two (i.e., their initial pilot programs), yet their planning horizons are three to five years. There are many open questions: Will the savings impact persist or degrade over time? Will cost effectiveness be maintained over time? How will behavioral approaches integrate with back office systems and other parts of the enterprise? When these questions are addressed at scale, they become challenges to overcome.
If behavioral programs are going to be effective tools for demand reduction, they need to be big, sustainable, relatively cheap and well-received by customers.
Looking beyond a stand-alone approach to behavioral program design, we suggest consideration of what I call a "+" strategy. In other words, use a behavioral approach connected to another part of the energy efficiency (EE) portfolio or utility offering to either optimize the underlying program or to serve as a glue to hold pieces of the offering together in new, stronger ways.
A "+" strategy would encompass:
Behavioral approaches represent a significant opportunity for both energy savings and re-examining the utility's customer strategy. Taking a strategic view, many utilities now aspire to become the "trusted energy advisor" to their customers, with trust becoming the currency of a more engaged customer relationship that creates value for both the utility and the customer. Trust is difficult to gain, yet behavioral approaches tied to the DSM offering and to customer service represent a good base to start.
Jamie Wimberly is CEO of DEFG EcoAlign, a management consulting firm focused on the energy sector.