What’s needed for ongoing energy flexibility – for consumers and industry?

Transport yourself forward to Monday 10th January 2035. The weather is grey, cold, and still. Not much has changed in twelve years for the millions of people going about their typical days, making a coffee, checking the news, going to work – except the electricity grid that powers all that mundanity is net zero. Wind turbines, solar panels, hydro, low-carbon nuclear, and Carbon Capture Usage and Storage (CCUS) all combine to give us the electricity we need every second of every day. But let’s get back to that weather forecast. When it is grey, cold, and still, with low wind and solar generation, how is our grid still running at net zero? The secret lies in the mass adoption of local sources of flexibility – EVs and home batteries operating as sources of electricity up and down the country for when we need the extra generation. Smart homes and buildings automatically optimising their energy usage to reduce demand when we need to flatten out demand peaks.

Returning to the present day, one of the components of this vision has been front and centre of our energy grid for the last six months – National Grid Electricity System Operator (ESO)’s Demand Flexibility Service (DFS). The DFS allows consumers and industrial and commercial users (through suppliers/aggregators) to be incentivised for voluntarily flexing the time when they use their electricity. Thus, helping the ESO to flatten out demand peaks in the case of shortages of supply on those same still, cold, grey days over the winter.

It is a huge success with more than one million households/businesses involved and over 3 GWh of demand reduction delivered, inspiring the public to take that active role in our energy system we need to meet our 2035 vision. However, over the 2022-23 winter, all the public needed to do was turn off their appliances, eat their evening meal a little later, and wash their clothes the following day. But to reach the 2035 vision, they will need to invest in assets – EVs, batteries, solar, heat pumps – and hand over their control so they can be co-ordinated remotely, presenting a huge shift.

As the main touchpoint between the consumer and the energy system, energy retailers must build on the public engagement sparked by the DFS to convince them to take the more active roles needed to get us to our net zero power system by 2035. But how?

Consumer engagement will be critical to the future of our energy system

The public engagement that DFS has harnessed will be critical to the uptake of future flexibility services. From what we’ve found, consumer feedback on the DFS has generally been quite varied, unsurprisingly correlated with the service standards provided by their energy retailer. Some consumers, for example, were confused about whether they were eligible for the DFS or whether their energy retailer was participating in the scheme. Conversely, many have appreciated the cost saving (however small that may be!) and the opportunity to engage with, and better understand, their energy usage.

Clearly, the DFS has created an impressive level of engagement, with those who couldn’t participate raising their disappointment. This presents a huge opportunity for energy retailers (and the wider industry!) to build on the successes and learnings of the service as they prepare to launch their own future flexibility offers. But what should they be looking to adopt?

As we’ve seen, it’s vital that energy retailers take the learnings from the DFS and use them to drive an ambition to get closer to their customers – to understand their needs, be more proactive in meeting them, and give them the tools and knowledge to easily engage with similar services in the future. Below, we set out what we think should be some key focus areas for energy retailers to improve their customer service standards and enable more personalised service offerings through future DFS-style initiatives, which will help consumers on their transition to a net-zero future.

Be more proactive

As mentioned above, one of the main criticisms from customers was that they were not told about the DFS or their eligibility to participate by their energy retailers – meaning they had to contact suppliers themselves to find out whether they were eligible. Of course, given the rapid nature in which the DFS was launched, and the fact that suppliers were not completely sure whether the service would come to fruition, teething problems in this area can be expected. Nonetheless, there are still huge learning opportunities to be had.

Energy retailers have an opportunity to overhaul their approach to communicating with their customers for similar initiatives, being more proactive and forthcoming with the information that customers need. This is exactly what we mean by the notion of getting closer to customers – giving them the information they need before they even think about asking for it! Things like proactive communications, links to intuitive FAQs, and even proactively reaching out to customers to have smart meters fitted so they can participate. All are likely to improve overall engagement and sentiment towards both the retailer and their net-zero initiatives and will have a positive impact on retaining and gaining customers.

Improve personalisation

The DFS has provided a unique opportunity for retailers to not only support and drive energy conservation during peak demand periods, but to engage directly with customers and influence their energy usage behaviours. Energy retailers generally have quite distinct target customer segments, and this has impacted the ability for retailers to successfully engage their customers. Some retailers, for example, tend to appeal to more ‘early adopting’ customers who are willing to try new things which could help explain why certain retailers have made such a success of the DFS. This illustrates that a one-size-fits-all approach to future flexibility and net-zero schemes like this will not be the most effective way of engaging customers moving forward.

In addition, there may be a perception that those who use more energy stand to gain more from the DFS, leaving little gain opportunity for those who use less energy. As flexibility and net-zero initiatives mature, energy retailers should consider segmenting their customers and leveraging customer behavioural science insights to better understand and improve customer decision-making, thus helping retailers to personalise their service to drive engagement and appetite in different customer groups. Could they, for example, encourage those who use less energy to participate with a higher reward? Could they better reward consistent energy reducing behaviours? Both are simple examples of how improved personalisation could improve consumer engagement and persuade customers to stay put with their current energy supplier when the market returns to a level of competitive normality.

Tap into the green energy eco-system

The DFS has illustrated that energy retailers can do more to directly impact consumer behaviours and this, in turn, presents an enticing opportunity for them to go further. As the ramp-up to energy transition and net-zero continues, energy retailers have an opportunity to reconsider their engagement with consumers.

High engagement in the DFS illustrates the demand for cost-saving and reduced energy usage, so retailers could capitalise on this by driving consumer engagement in green energy services like EV charging points and home battery storage. Tapping into the entire consumer lifecycle of green energy services would allow retailers to create more consistent, personalised offers and services, and increase market share in a world where selling a simple commodity is no longer a lucrative commercial opportunity.

Conclusion

The DFS and similar initiatives have proven that the transition to a more flexible, net zero power system which is built on the notion of the empowered consumer is a reality. It has also illustrated, though, that the industry – and particularly energy retailers – need to transform their end-to-end customer experience to ensure they secure the customer engagement needed for future flexibility and net-zero initiatives to be successful. We believe that customers and end consumers are the gateway to an effective transition to a flexible, net-zero energy network. As such, it’s vital that energy retailers get closer to consumers to drive more engagement in an increasingly flexible energy network as this will allow retailers to tap into this lucrative market.