Why things can only get better for energy consumers – by Phil New
Energy Systems Catapult Chief Executive Officer, Philip New, writes for the World Economic Forum about putting people at the heart of the energy transition.
Despite its relative wealth, more than 50 million people across the EU live in ‘fuel poverty’. In the UK alone, five million adults – roughly 10% of the population – have never used the internet. Over a million people are unbanked. Will an increasingly “smart”, increasingly decentralised energy system entrench disadvantage, and leave more behind, or could it expand the solution set, and improve access to all the benefits that connection to a dependable energy supply brings?
Early adopters, the tech savvy, the credit-worthy and the relatively wealthy are clear potential beneficiaries of new technologies, services and business models of the changing energy system. There will be a range of options soon available to save or even make money from the monetisation of grid balancing services: from the already common practice of selling excess energy from rooftop solar installations, to the emerging use of demand side response using domestic energy storage, car batteries or household appliances, through to the benefits of increased competition that would come with a switch in market model to Energy Service Provision. Some communities are even looking at developing their own closed energy system, justified by the avoidance of transmission and other socialised system costs. Yet there remains a question whether all these emerging energy solutions will be remain closed to the poor.
There is a strong argument that resolving housing or social policy problems should not be the accountability of the energy system – that using energy market structures to address questions of poverty has a range of unintended consequences, including distorting market signals and driving perverse outcomes. But that does not provide license for the transformation of the energy system to make things worse – albeit inadvertently.
If left unaddressed, the default could be at best an increase in the gap in service benefit and value between the advantaged and disadvantaged. At worse, the potential for dependency on high-cost “rump” services reliant on stranded assets, exclusion and service denial could deepen the challenges faced by society’s most vulnerable. And of course the risk is that the already daunting task of adapting markets, institutions and regulation to accommodate a smooth and efficient transition to the low cost, low carbon, high-functioning energy future that is technically possible will be derailed by the imposition of regulatory remedies, responding to a broader societal backlash.
So what can be done?
The energy transition holds the possibility of improved outcomes for the vulnerable and disadvantaged. The same technology that opens the possibility of enabling a new wave of energy and domestic service providers to develop new business models, the technology that could convert passive bill-payers into discerning customers who understand their options and what each option costs, which they prefer and which they think is worth the price, as they do in all other consumer markets, the technology that enables the language of energy to move from Kwh to comfort, could be harnessed to inform and better empower the vulnerable and to enable care providers and service deliverers to design better interventions based on much richer insight into needs and outcomes.
The solution starts by designing the policies, regulations and architectures that encourage innovative consumer-centric technologies, services and business models that put consumers at the heart of energy transition planning, based on a robust understanding of the needs of all end-users, including vulnerable households. A new level of interaction with consumers – informed by technology – could mitigate the risk of people being left behind during the transition by considering the factors that may stop consumers being able to access the market and get the best price for the services they need.
The menu of options includes using technology to give people better control of how much they spend meeting their energy needs, ensuring data from smart home services is used to tailor government support to the individual needs of vulnerable people (such as the installation of low-carbon and energy efficient technologies based on deeper insights into behaviour patterns, homes and circumstances), and by designing services that focus on the outcome and minimise the risk of not having the intended effect (on health for instance).
We have already started to see these benefits being realised in the UK – with innovations including smart thermostats, energy budgeting systems, smart prepayment meter-only energy suppliers and not-for-profit energy suppliers that are owned by local authorities.
- Smart prepayment meters have allowed people to top up online and to know what they’re spending rather than get disconnected.
- Innovations such as boilers on prescription have enabled those with illnesses exacerbated by cold health to achieve warm temperatures in their home but smart technology could enable data to recognise activities or use patterns associated with different health conditions that could improve potential health outcomes and cost-effective delivery of support.
- Smart thermostats designed for social housing tenants enable people to access the services provided by smart technology that they wouldn’t usually have access to as they do not have an internet connection.
Being proactive, and leveraging the options and choices that are created by the emergence of new technologies, system architectures, business models and incentives opens the possibility of the energy transition improving lives across society. This could be an entirely benign side-effect of the system transformation, with the added appeal that risk of regulatory intervention to force a response to potential concerns is mitigated. But for this to happen, we would be well advised to be factoring this into our thinking from the get-go. If we leave some groups behind, we won’t achieve a low carbon energy system at the scale and pace required.
Catch up on the first article, ‘Hot showers, warm drinks and heating – let’s talk about energy how consumers do’ and second article, ‘How can we find out what people really want from energy?’.