Consumers should be at the heart of transforming the UK energy system to meet carbon reduction targets and achieve our clean growth ambitions.
Energy Systems Catapult has developed a specialism in Energy Services to help energy innovators to accelerate new services and business models to market, by offering research, design and consumer trials in real-world homes.
The Challenge and Opportunity
Transforming the UK energy system to be clean, secure and affordable, requires innovators to develop appealing energy products and services for which consumer are willing to pay.
Domestic heating accounts for 20% of carbon emissions so reducing this source of carbon is important for meeting targets. Extensive research tells us that people care more about their heat experience than the technology that keeps them warm. As long as people are warm and comfortable at home, then energy providers could deliver these outcomes using a low carbon heating system – as long as it was as good or better experience, than their existing gas boiler.
However, different consumers do want different heat outcomes, with some primarily interested in cost, others prioritising comfort over cost, some valuing heating for health reasons and some not being interested in heating at all. But currently energy providers cannot offer different outcomes to different customers, they can only sell energy to consumers in units of fuel called kilowatt hours (kWh) – which nobody understands.
Other industries, like telecommunications, historically charged per unit, but consumers can now choose from a range of plans for mobile phones, including packages phone, data and text service contracts. Energy Systems Catapult has been working with consumers to develop services for energy. Where consumers pay for an outcome – such as a warm home – rather than for units of fuel.
Support by a decade of consumer research at Energy Systems Catapult and previously the Energy Technologies Institute, we have developed unparalleled insights into Energy Services – working on propositions such as Heat as a Service (HaaS).
The concept of energy services is not new, but the maturing of smart homes, AI and data science are providing an opportunity to make the energy sector much more consumer-focused, with energy services that can be commercially viable and technically feasible.
The advantages of Energy Services may include:
- Vastly improved consumer control over cost and comfort levels, transforms people from passive billpayers into discerning customers.;
- Better understanding the thermal performance of each individual home and how to improve energy efficiency;
- Data insight to help energy providers really understand customer needs, to create services tailored specifically to lifestyle preferences and home thermal performance;
- Opening up a whole new range of business models so energy providers can sell innovative high quality services to attract and keep customers;
- Allowing energy suppliers to differentiate themselves from competitors;
- Providing a route to market for low carbon technologies,;
- Improved end-to-end energy system productivity, efficiency and reduced waste.
As part of the Smart Systems and Heat programme, supported by the Department for Business, Energy and Industrial Strategy, the Catapult has developed energy service propositions and trialed them with consumers to develop a proof of concept and the capability to enable businesses to sell energy as a service.
Energy Systems Catapult specialism draws on experts and assets from across the Catapult, such as Consumer Insight, Digital & Data, and Systems Integration, including our:
- Living Lab – over 100 real-world homes spread across the UK, with each property upgraded using HESG, to smart home levels that will be common by the middle of the 2020s.
- Home Energy Services Gateway (HESG) – a cloud-based, open, technology agnostic, digital platform, using extensive in-home IoT sensors/actuators, advanced data science and machine learning algorithms. Provides residents with room-by-room temperature control from a mobile app and interoperability between energy service providers and device manufacturers.
- Consumer Insight – expertise in helping innovators research, develop, design, price, and run energy service trials with consumers in the Living Lab.
- Data Science – drawing on over four million data points per home per day, our advanced data science helps develop, design, price, and analyse energy services using machine learning algorithms.
- Business Model Innovation – help with developing of innovative commercial solutions for energy services for both today’s market arrangements, and possible future markets.
Heat Plan trials – 2017/18
Over the past two winters in our Living Lab, we’ve utilised in-depth consumer research, user-experience design thinking and cutting-edge data science, to created a HaaS offering called Heat Plans. Tailored to the lifestyle and thermal performance of each home, the Heat Plan gives improved consumers control over cost and comfort levels.
Initial findings from last winter’s simulated Heat Plan trials in the Living Lab where, as an alternative to kWhs of energy, residents were offered three plans:
- Fixed – the cheapest plan where households paid a fixed price for a fixed heating schedule and were charged more for every Extra Warm Hour they used.
- Flexi – the mid-priced plan, where households paid a fixed price for their schedule and a bundle of Spare Warm Hours to use when they wanted. Again, they were charged for any Extra Warm Hours they used.
- Unlimited – the premium plan with no restrictions, where households paid a fixed price for an unlimited number of Warm Hours to use as they like.
NOTE: A ‘Warm Hour’ is an hour when any room is being kept warm, up to a maximum of 24 each day.
Results from last winter’s simulated Heat Plan trial include:
- Just under 50% of residents ‘opted-in’ to a Heat Plan:
- around 25% choosing a Fixed Plan
- around 25% choosing a Flexi Plan
- only 1 home chose an Unlimited Plan.
- Residents were able to be categorised based on whether they were motivated by comfort, cost or balancing both to get value for money.
- Comfort-focused participants were much more likely to choose a Heat Plan and enjoyed using the room-by-room zonal control to make their homes feel more comfortable.
- There may be simple ways to redesign Heat Plans to make them more appealing to cost and value focused participants.
- Very different factors determined the cost of delivering the warmth that residents wanted, including: weather, their schedule for heat throughout the day/week, and the thermal performance/insulation level of their home.