The race for smart energy profits

The Business Spectator has an article on the need to educate consumers about energy usage and the opportunity for smart appliance vendors to disrupt the electricity industry -The race for smart energy profits.

We’re going to hear a lot about the potential of smart meters and smart grids to help solve some of the colossal challenges faced in the energy sector. But nothing much will be achieved without smart consumers and smart businesses. And right now, it seems, we don’t have enough of either.

A survey by Accenture finds that Australian consumers are not as smart about energy consumption as they think they are. And it also highlights how the utilities that are supposed to lead into this exciting new era are ill-equipped to cope with the business models of the future, and how they may lose much of their business to retailers, appliance manufacturers and software groups in one of the biggest business disruptions since the entry of the mobile phone.

The Accenture survey found that three quarters of Australians thought they understood enough about the actions they could take to optimise their energy consumption. But most of them were wrong.

When pressed, only about one third were actually aware of the measures they could take, and many confused actions on recycling papers and plastics, fuel efficiency in cars, and water conservation with energy use.

“They think they know, but they don’t,” says Greg Guthridge, the global head of utilities customer care at Accenture. “They all think they do their part to save the environment, but they are talking about recycling, water and petrol usage. They don’t realise that running washing machines at different times of day would save money.”

What worries Guthridge is that this lack of education around energy consumption could cause a backlash against the smart meter concept when it is introduced, possibly due to fears of a lack of control, loss of lifestyle, and privacy issues.

Part of the problem, he says, is a lack of education. And this, in turn, is caused in part because utilities don’t talk to their consumers, except when the consumer has a problem such as a blackout, a high bill or metering problems. It’s a negative relationship, and only 23 per cent of consumers trust the energy utilities they deal with.

Guthridge points out that large petrol companies have done a great job of advertising all alternative fuel options, which is emphasising the point with their end consumers that there are options available that do not have the effect of changing their lifestyle. The energy utilities have not done this as effectively.

This lack of engagement, and the fact that the internal business structures of energy utilities have been little changed for 30 years – unlike, for instance, the telecommunications industry – are going to present a massive opportunity for consumer savvy sectors such as retailers and telcos to muscle into their territory.

Consumers might be attracted to retailers such as Harvey Norman, who could offer – in partnership with appliance manufacturers such as Whirlpool or Fisher and Paykel and telco and software firms – a package of appliances, communications, and home entertainment that is integrated into the home energy management network.

“We are going to see a convergence where retailers will have the opportunity to create a valuable proposition that goes beyond pricing, and behind them you’ve got manufacturing companies like Whirlpool, GE, and Fisher and Paykel that will develop the appliances to talk to each other and manage energy consumption. They will own the home. The energy providers will have to evolve from their one-size-fits all business models.”

This is already happening in the US and elsewhere. The big barrier will be the extent to which utilities and providers will share their customer information, and as I wrote last week, there is a major battle between utilities trying to defend their turf and their future competitors, led by software companies such as Google, Microsoft, and Intel, along with the likes of GE, AT&T and Whirlpool over the release of detailed data on home energy usage.