The second in our series of conference blogs produced by authors who will be presenting their research at our September conference. This one is from Matthew Lipson Head of Consumer Insights at the Energy Systems Catapult. Matthew discusses the concept of energy ( heat specifically ) as a service and shares some of the findings from the Catapult’s Heat Plan trials.
We need to change how we generate, transport and use energy to decarbonise and tackle climate change. There are many options. The choices made in each area and by every household have different implications for how people will be able to use energy in the future to get comfortable, move around and so on.
In the end, whether by taxation or through their bills, people will pay for transforming the energy system. This raises challenging questions:
How can businesses design energy products and services consumers will want to pay for?
How can Governments introduce low carbon policies that citizens will support?
How can engineers build a system that will deliver reliable, affordable and low carbon energy?
There is a growing consensus that we need to know what people want from energy to provide the answers. The only other question is, how can we find out?
Standard consumer research is instructive, but struggles to guide the complex choices that need to be made about the future energy system. For instance, what combination of generation and storage should we build where; what networks should we invest in; how much capacity should we build; what’s the best way to upgrade each home? People do not know exactly what they want and cannot say which option they will prefer of futures they can barely imagine.
Consumer choices have helped guide similar decisions in other sectors.[i] The telecoms sector sells different levels of service at different prices. The market response helps investors decide what networks and how much capacity to build. This has revealed consumers are willing to pay for unlimited broadband access and mobile coverage. Similar techniques could help the energy sector decide how to transform the system.
Digital technology has changed every aspect of our lives. Google, Uber, Airbnb, Amazon, eBay, Facebook, Twitter, Netflix and others have transformed how we travel, shop, communicate and relax. So far, energy seems stuck in the past. Could similar disruption help us decide how to transform the energy system?
Experience : Enjoying the experience of a hot bath
Delivery: A gas boiler that delivers hot baths
People care more about their experiences using energy, than the systems that deliver those experiences (see Figure 1). After all, if you enjoy a meal, you don’t care what oven it was cooked in. Most people like the idea of buying services, like a warm home, rather than units of fuel. They prefer to talk about how warm they want their home at different times rather than kWh, and don’t really care what technology their provider uses, as long as they can get the experiences they want.
Energy services create opportunities for entirely new business models and policy options. Businesses who can sell high quality energy services will find it easier to attract and keep customers who will complain less and be more loyal. The levels of service customers choose to pay for will reveal what they want from the energy system. Will they prefer to pay more for the freedom to use energy however they like, or pay less and put up with constraints?
Services also create opportunities across the energy system. Product vendors could apply real usage information to guide their development roadmaps and build relationships with service providers to open a new channel to market. Network investors and operators could work with energy service providers to plan network upgrades that deliver service levels consumers want to pay for. Long-term, technology-neutral, carbon targets could persuade providers to decarbonise their services, as they have for car manufacturers.
The concept of energy services is not new, but maturing ‘smart home’ technologies means they are becoming commercially viable and technically feasible. With the support of our partners[ii], we have built a capability to help companies develop advanced, low carbon, smart home energy products and services.
Figure 2– Three of the Heat Plans we trialled last winter
Last winter we recruited a hundred mainstream consumers and fitted their homes with zonal heating controls and room sensors so they could experience what it will be like to live in the near future. We offered each home bespoke Heat Plans using their data to tailor each one (see Figure 2). They could choose to pay more to use heating whenever they liked, or pay less and fix their heating schedule in advance.
Their reactions were fascinating. Understanding the costs of heating their home in different ways converted passive billpayers into discerning customers who knew which alternative they preferred. They discovered the limits of their heating systems and were open to making changes to improve their experiences, like increasing the size of radiators that were too small to make rooms feel more comfortable.
The vast majority enjoyed the trial so much that they wanted to stay involved. Building on their enthusiasm, and with their permission, we are now converting our connected home trial into a ‘Living Lab’ that companies can use to co-create energy innovations with real people.
Twenty years ago, we were told not to meet up with strangers we found on the internet. Today people use the internet to find strangers to meet, travel in strangers’ cars and stay in strangers’ homes. Looking ahead twenty years, decarbonisation, digitalisation and decentralisation will have transformed the energy sector; we just don’t know how. We need to test ideas out in the real world, so we can adapt as this disruption evolves, and build an energy system citizens will support and consumers will want to pay for.
Our role as a Catapult is to help others grow their businesses. Innovators can use the data and insight we have collected to design high quality, low carbon products and services. They can use our ‘Living Lab’ to get consumer feedback on their offers and decide how to enter the market. If energy services take off, then the levels consumers choose to buy – whether to pay more for unlimited offers, or less but put up with constraints – could reveal their requirements for a low carbon energy system. So, get in touch if you want to find out how we can help you take your ideas to market faster, better and more cheaply.
[i] The automotive sector knows exactly how much different types of consumer are prepared to pay for innumerable attributes of their cars from acceleration to upholstery.
Matthew Lipson is Head of Consumer Insight at the UK’s Energy Systems Catapult (ESC) bringing industry, academia and Government together to help the energy sector apply consumer-centred innovation. Matthew has spent the last 20 years working with Universities and businesses for DECC, the Committee on Climate Change, the Energy Technologies Institute and Orange (amongst others) to design energy policies and commercial propositions that people love. He is now applying his experience to help others design delightful, intuitive low carbon energy products and services.