1 November 2018

The Evolving Role of the Energy Consumer

The consumption of power – turning on a light, watching TV and making a cuppa – underpins the very basics of life for most in the UK. It is a facet of our day-to-day which as a nation of consumers we do not consciously consider, yet it holds significant importance over our quality of life. How long could we each last without a charged mobile device, never mind no cooker or good in-home refrigeration?

Let’s set some context…

Nationally, consumption of energy can be seen as a cyclical wave of peaks and troughs driven by the total demand of all customers. It must be constantly managed by the National Grid to balance the supply of power with this demand.

The ‘3Ds’ – decarbonisation, decentralisation and digitalisation – are driving change within the energy industry, fundamentally evolving the mix and scale of generation assets connected to the network throughout the UK . A point which exacerbates the challenge of system management. For example, around 25% of power is currently generated by renewable resources within the UK. This is in parallel with many of the ageing centralised ‘dirty’ assets such as coal plants being decommissioned – all factors which help in driving down the carbon intensity of our energy system*.

A step in the right direction undoubtedly, although a challenge associated with renewable generation is presented via the intermittent nature of their output (when the sun shines or wind blows solar PV or wind assets generate power…). Technology therefore clearly has a place to support the continued decarbonisation of our power system, including managing this changing generation mix.

Industry experts also acknowledge that the third ‘D’ of digitalisation provides significant opportunities for the sector – data driven insights may well evolve how the system is operated, perhaps redefining the role(s) of new and existing stakeholders in the process, all whilst creating the space for the development of new business models and energy services. Time will tell if and how this version of the future matures.

Time to ask the ‘So What’ question

Perhaps then at this juncture we should collectively ask the simplest of questions… so what?

The recently published IPCC report clearly explains the impact of doing nothing, or something yet failing, with regard to climate change. It is therefore the final question which this blog broadly considers.

Moving from passive to active consumers

Using one of Ofgem’s somewhat quizzical KPI’s which attempts to define levels of consumer (dis)interest, we see engagement measured as levels of annual supplier switching.

Some may argue this doesn’t demonstrate customer engagement at all, however it does serve to highlight that distorted and unreasonable tariffs operate within the market. This functions only as a proxy (or ‘incentive’) in a poorly configured attempt to ensure households annually switch their supplier, thus defining an ‘engaged’ consumer, or face the certainty of paying disproportionate amounts for their energy if they fail to participate. This ‘gameification’ of the system by the regulator would appear to be a symptom of an inefficient market, not something which should be heralded as a true measure of customer interaction. One for another day however…

In the same vain we are constantly reminded about the benefit of smart meters to help reduce our consumption in an effort to build awareness of energy costs and time of use consumption which will lead to true market-led Time of Use (ToU) pricing.

Other examples of active participation by consumers are becoming increasingly visible also – such as the increased penetration of micro-generation assets such as rooftop solar PV, all throughout a nation not famed for its particularly sunny climate, and leading to the creation of the energy ‘prosumer’. Naturally these decisions are, in 99% of cases, taken to deliver value through cost savings and/ or revenue potential, rather than being part of a wider low carbon initiative.

Should users become subservient to the energy system?

Whilst all of the above is very positive, should it now be asked are we as consumers fit for purpose for our future energy system?

It may sound like an odd question. After all, should such critical national infrastructure not be developed and maintained to suit our every need above all else?

Perhaps, and no doubt many will argue this should be the case. But, in an age of climate change, dwindling natural resources and socio-economic challenges such as fuel poverty, should we not all be empowered, or even expected, to take an active role in changing our habitual approach to energy consumption in support of a greater common goal?

Whilst technology will enable a low carbon energy system, the sustainability and longevity of such an endeavour will fundamentally rely on the participation of those it is built to serve.The consumers.

Andrew Smyth – Emerging Markets Programme Lead

The impact of not taking proactive measures regarding how and when we consume energy will likely be witnessed within many of our lives, and whilst this of itself is a cause for action, there is no doubt in my mind that today’s dependents will be those left with the legacy of our collective inaction if we fail to substantially adapt to the evolving requirements of the natural world.

The underlying requirement for flexibility

For all the context and positioning, what does this mean in reality? For me it comes down to flexibility.

The flexibility of mind to evaluate our lifestyles with respect to consumption – both in energy, but also ensuring our personal environmental impact is also considered.

The flexibility of cost to accept variable pricing tariffs within residential use – for example consumers should pay more per unit when the grid is under high load or stress, witness the introduction of genuine carbon taxation(s) and/ or increased rates during times of limited national renewable output resulting in increased emissions figures.

The flexibility of choice to consciously evolve how and when we consume; reacting to the above fiscal incentives to limit peaks and flattening the national load profile, all whilst proactively driving the retail energy markets towards low carbon supply as a result of consumer choice.

The flexibility of investment to drive technological development, reducing price points and ensuring wider access and increased penetration of low carbon technologies such as micro generation (solar PV et al), storage, electric vehicles, and increased alignment between previously independent energy systems such as power and gas for example). All of which limit the cost component noted in point two.

The flexibility of control – enabling assets of all sizes to become part of an active and interconnected power grid, simultaneously creating and providing access to new local and regional energy markets, giving power to consumers to monetise their own generation and consumption flexibility.

And, finally, the flexibility of culture to ensure our sound-bite driven politicians and industry stakeholders of all sizes feel the full weight of public pressure with respect to delivering the UK’s commitments on climate change and are subsequently held to account if they fail to enable this transition.

However, and perhaps this is as important if not more so, to facilitate genuine consumer-led culture change. We must collectively own the problem and individually lead by example to create a culture which aborts the demand-led philosophy of today to one of an engaged consumer role who operates in collaboration with the low carbon energy system. Failure to do so will bring humanity one significant step closer to leaving an unmanageable legacy of climate change for future generations.

Therefore, as consumers we must be cognisant of the impacts of not acting responsibly, similarly, as engineers we must drive to enable new and innovative solutions which tackle challenges such as climate change, all whilst making these outcomes commercially, technically and politically viable.

So, no pressure then…

*Check out www.carbonintensity.org.uk or @mygridGB on Twitter to keep an eye on how carbon intensity levels change throughout the day. Also consider that we (UK) are striving to reach average carbon intensity per generated unit of power of 100gCO2/kWh by 2030.

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