Smart grid consumer behavior defined?
- Posted on January 31, 2011
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Having quietly succeeded in producing a reliable commodity at affordable rates for generations, electric utilities have had to ponder how to engage their customers as the world has changed, and new limits, demands and opportunities have emerged.
As a result, that customer—the elusive "consumer"—has been parsed at length this past year during industry discussions, until a flickering portrait has emerged, composed of fact, fiction and opinion.
How will the utility industry educate this person? What's the right message? How to influence the mysterious consumer's behavior? Are those really the right questions?
In my view, a heaping dose of real transparency, time, elbow grease and money must be expended to foster a sustainable, mutually beneficial relationship between an electric utility and its residential customer. New limits, demands and opportunities—some spawned by the consumer—require a new compact, with effort from both sides.
On the industry side, one fundamental question begs an answer: Who is this elusive creature, the consumer? (Rest assured, awakening consumers are beginning to ask the same question about their utility, particularly the investor-owned utility, or IOU.
As a new report—"2011 State of the Consumer Report"—released today makes clear, there's a lot of good information on the industry's question, as well as much that's not known.
What this report has done is gather all of the disparate sources of publicly available, reliable data on "the consumer" and synthesize it into easily understood points, some obvious, some thought-provoking, some contradictory. I place quotation marks around our quarry because the report makes clear that the United States' 300 million occupants are a multi-faceted bunch and concepts such as traditional demographics don't necessarily serve to define them. The report provides takeaways and identifies areas for further research.
The report's sponsor is the Smart Grid Consumer Collaborative, which has attracted many of its members from the utility and vendor space, as well as public service commissions, industry associations and consumer advocates. Its research committee touches on an admirable mix of industry sources. The mix of for-profit and public interests represented here is reassuring, given that the report finds that "urgency" in smart grid deployment is driven both by consumers' environmental concerns as well as for-profit companies' market incentives.
As I wrote recently in "Smart Grid Balance in 2011," however, the industry must decide whether it wants the consumer to dance to its tune (thus, how to affect consumer behavior) or whether this really is an era of partnership in which consumer options will provide value and fair play. When, for instance, large IOUs blatantly attempt to squelch the ability of communities to adopt the municipal utility model, it's fair to demand that the industry clearly define its motives.
I won't attempt a synopsis of the new SGCC report, as many complex points are made. Instead, I'll review a few key points that may lead you to plumb its worthwhile depths.
Though the report suggests the potential for "a new age of energy literacy," it realistically notes that "people can be responsible users of electricity without becoming experts in the intricacies of technical terminology."
The report also warns that emphasis on messaging that consumer behavioral changes will lead to "savings" on electric bills may be misleading. "Mitigating inevitable increases" stemming from grid modernization costs is more likely to match expectations to outcomes, the report notes. Some context, such as simple explanations for grid modernization—that it improves reliability, holds customer-paid utility investments in check and reduces pollution—is also in order, according to the report.
Two other generalizations, then the plunge into consumer complexity: The report finds that few Americans are energy literate, but once engaged, they generally are open to learning more. People's intentions (about environmental concerns, e.g.) aren't always matched by their behavior. This is the so-called "attitude-behavior gap."
An important concept elucidated in the report is that those with a sense of environmental urgency and those who love gadgets are two likely groups to embody early adopter attitudes—the first audience in a generation-long effort to instill responsive behavior among consumers.
Chapters titled "Long-term Adoption: How do we cross the chasm?" and "Customer Segmentation: Key to successful engagement" illustrate that motivational factors are more powerful in this case than old-school demographics as a guide to the proper approach to consumers and their responses.
In pursuit of long-term adoption—the big game—the report cites a few concepts that inform customer segmentation approaches. Among early adopters, action is most likely among those who feel that their actions will make a difference. Those with personal experience with extended electrical outages—perhaps in regions that experience severe storms—have a heightened awareness and understanding of the need to modernize the grid.
Some rather surprising demographic insights are cited here. For instance, African Americans in Arkansas, Indiana, Missouri and South Carolina believe that individuals can and should do something to mitigate climate change and are willing to pay more for electricity to do so. So there are some demographic granularities in play, as well as regional considerations for utilities to consider as they hone programs and messages.
But demographics bow to motivational factors when it comes to successful engagement, the report finds. The report cites several different studies that use different methodologies and yield different results that nonetheless add up to similar matrices, which frequently cite basic categories of consumers such as those that are cost-conscious, eco-savvy, comfort-loving or indifferent.
Last week, I interviewed report author Judith Schwartz, principal at To the Point, a strategic communications firm, and tomorrow we'll feature additional elements of the report—such as takeaways and further research—with her commentary.
Meanwhile, here is a smattering of consumer-related columns we've run in the recent past:
"Slice of Consumers Favor Prepayment"
"The Smart Grid Makes Presence Known at Consumer Electronics Show"
"Smart Grid Consumers Up for Grabs"
"Smart Grid Balance in 2011"
Intelligent Utility Daily