Utilities need to focus on energy ABCs for customers

Utility companies need to get back to communications basics and keep human psychology in mind when trying to engage customers in energy conservation efforts and smart-grid technology projects.

Currently, many people around the world still don’t understand even the basics of how electricity is priced, much less concepts like advanced metering infrastructure (smart meters) and smart grids, according to the 2011 IBM Global Utility Consumer Survey. Furthermore, the survey found, the less familiar people are with new energy technologies, the less supportive of them they are likely to be.

Those attitudes could prove to be daunting hurdles for utilities launching energy conservation and smart-grid programs. To overcome those hurdles, electricity companies will need to do a better job of “getting into the heads” of their customers.

“There have been major strides with new energy saving technologies, new programs and incentives, but in many cases the market is seeing more confusion amongst consumers than expected,” said Michael Valocchi, vice president, Global Energy & Utilities Industry Leader for IBM Global Business Services. “This year’s survey points to a need and an opportunity to go back to basics and educate consumers by using terms that they understand, behavioral triggers and channels they already use. People want to conserve energy; we just need to get better at showing them how.”

Currently, for example, more than 30 percent of the 10,000-plus people in 15 countries polled by IBM said they’d never heard the term, “dollar per kilowatt-hour” or an equivalent energy consumption measure. More than 60 percent were unfamiliar with smart meters or smart grids.

Such unfamiliarity can lead to consumer resistance, the survey found. While 61 percent of respondents with a strong knowledge of energy technology and pricing terms viewed smart meters and smart-grid deployment plans positively, only 43 percent of those with minimal knowledge expressed the same support.

According to IBM, utilities could better engage customers by using behavioral economics to first understand their thoughts, motivations, misconceptions and motivations for change. Factors to keep in mind include:

• It’s about more than money: The latest survey found that money no longer dominates the decision-making process compared to years prior. Instead, more younger consumers are making choices based on the environment while those over 55 said the health of their national economy was a key motivator. As a result, IBM says, to encourage customers to change their habits, utilities must first recognize that people are motivated not just by money but also by comfort, sustainability, and confidence in their nation’s economic prospects.
• TMI (as in, “too much information”): While offering consumers more choices is usually considered a good thing, providing too many options can backfire on a utility. The IBM survey found that, in particular, customers under 25 tend to follow the lead of others rather than sort through the options on their own. In fact, they’re two-and-one-half times more likely to rely on their personal networks as a primary source for information than those 55 or older.  Presenting the right balance could help utilities reduce customers’ need to weigh complex, time-consuming decisions, which could hinder their interest in changing energy consumption habits.
• Conserving like the Joneses: People rely on social proof — that is, the behavior of others — to determine the right ways to act in many situations. That’s the concept behind utility programs like online portals that let customers see and compare their energy use to those of their neighbors. In fact, utilities in Malta, which is in the middle of a smart-grid project with IBM’s help, have found such portals help encourage customers to adopt new habits and lower consumption.

IBM is currently involved in more than 150 smart-grid projects around the world.