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Study Finds Higher US Consumer Receptivity to Smart Grid

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October 31, 2011

Study Finds Higher US Consumer Receptivity to Smart Grid

By Cheryl Kaften, TMCnet Contributor

A report sponsored by Atlanta-based Smart Grid Consumer Collaborative (SGCC) has found that utilities are improving customer understanding of the near-term benefits of smart grid programs by upgrading their communications, service response, incentive programs, and internal consumer engagement processes. 

The SGCC is a nonprofit organization that is dedicated to helping educate the public and engage consumers about the benefits of the smart grid. The report, Excellence in Consumer Engagement, which examined consumer acceptance of more than 10 million smart meters deployed by over 20 U.S. electric utilities, was released at Smart Energy International 2011, in San Francisco on Oct. 24.

“The report clearly shows that utilities are making a shift toward new and fundamentally different consumer engagement best practices,” said Patty Durand, executive director of the Smart Grid Consumer Collaborative. “As a result, consumers are responding positively to new energy programs that offer direct, immediate, and deliverable value.”

The study, conducted by the Boston-based strategy consulting firm Altman Vilandrie & Co., highlights 10 core findings and recommendations dealing with smart grid consumer engagement issues involving advanced metering infrastructure (AMI), demand response (DR), and energy efficiency (EE) programs, among them:

  1. Utilities can address most customer complaints: Utilities with customer-centric engagement programs and complaint resolution processes have responded to customer concerns and complaints effectively;
  2. Staged messaging helps manage expectations: Nearly all successful AMI deployments have leveraged staged messaging programs to set expectations that can be met promptly, focusing messages on deployment logistics and near-term benefits that are immediately relevant to consumers;
  3. Internal messaging and education improve engagement: Utilities that educate their employees about their smart grid activities present a more consistent message and are better prepared to handle customer complaints;
  4. Fostering goodwill establishes a foundation for success: Developing goodwill with customers appeared to minimize complaints and to make customers more receptive to smart grid messages and programs;
  5. Messages about saving money are applicable to all customers: Messages promoting saving money have broad appeal and have proven more effective at driving enrollment than other messages;
  6. Increasing incentives offer diminishing returns to enrollment: While incentives help drive program enrollment, small incentives can be sufficient to pique consumer interest;
  7. Simplicity facilitates program enrollment: Simple smart grid programs that communicate benefits clearly and are easy to enroll in have higher participation;
  8. Urgency and purpose spur customers to act: Customers are more likely to enroll in programs and change their behavior when there is an impetus to do so;
  9.  Attitudinal segmentation may improve program messaging: Preliminary evidence suggests that attitudinal segmentation might improve program performance; and
  10. Utility channels can transition from service to sales: Utilities have seen promising results from building sales capabilities to drive smart grid program enrollment.

“The industry is beginning to transition to a more consumer-centric service delivery model -- moving away from the ‘install and repair’ model to more proactive customer engagement,” said Matt Dinsmore, director of Altman Vilandrie’s energy practice. “This is a fundamental shift in how customers interact with energy and their energy companies.”

Overall, while messages about environmental impact and users’ ability to control their energy consumption influence some consumers, communication about near-term cost savings resonated with the most consumers. In addition, moving consumers into new smart grid programs — such as demand response — involved direct messaging, easy-to-understand program information and options, basic incentives, and frequent communications that emphasize a sense of immediacy to adopt.

Very few utilities have used demographic segmentation at all as part of their customer outreach programs and its impact is yet to be determined on a wide scale. The report found that attitudinal segmentation may be more effective than demographic segmentation because “cost consciousness, comfort, green altruism, tech enthusiasm, indifference, and resistance…persist across cultures, income levels, and education while the percentage mix varies locally.”

Utilities -- including AEP Ohio, Arizona Public Service (APS), and Southern California Edison (News - Alert) -- believe attitudinal segmentation can help them to improve their outreach and are beginning to incorporate it into their smart grid programs. For example, AEP Ohio believes their attitudinal segmentation framework is showing promise as in their pilot and they plan to use it for targeting purposes in the future. One utility in this study, Salt River Project (SRP), has incorporated attitudinal segmentation into its outreach efforts for its highly successfully time-of-use (TOU) pricing program, creating up to six targeted direct mail messages each month that promote different benefits (e.g., environmental benefits and user control).

Some utilities are using external referral programs with success, for example, partnering with real estate companies, which refer new homeowners to new energy programs. This makes sense, because, perhaps the most convenient time to enroll customers in smart grid programs is when they sign up for electric service (as in, when they buy a home).

For example, APS and SRP have used the original electric sign-up to drive enrollment in their pricing programs, helping them achieve leading participation rates of 50 percent and 22 percent, respectively. Focusing on APS, it presents all pricing plans as equal and helps customers identify which rates would best suit them, rather than leading with their basic service plan and promoting other plans only as alternatives to this lead offer. Given APS’s high customer turnover (about 50 percent annually), this acquisition strategy has been instrumental in achieving high enrollment, with the majority of program participants enrolling during the electricity sign-up process. These results are especially impressive, given other pricing programs’ struggles to enroll customers. APS’ success suggests that customers are not inherently opposed to pricing programs and can be enrolled in large numbers.

In addition, according to the report, utilities have experienced success by taking advantage of existing customer touch points to promote smart grid programs. For example, Austin Energy (News - Alert) refers customers to their program through their call center, helping it achieve 22 percent participation. Similarly, Conesus Energy finds that customers receiving energy reports are 15 percent more likely to enroll in smart grid programs than other customers, and plan to use the “tips” section of the report as a referral channel in the future.

The study examined initiatives and included interviews with representatives from AEP Ohio; Arizona Public Service; Austin Energy; Center point; Central Maine Power; The Climate & Energy Project; Comedy; Conesus Energy; Duke Energy (News - Alert); Memphis Light, Gas & Power; Oklahoma Gas & Electric; Once; Pacific Gas & Electric; Portland General Electric; Reliant Energy; Sacramento Municipal Utility District; Salt River Project; San Diego Gas & Electric; Southern California Edison; Wright-Hennepin CEA; and Xcel Energy

Cheryl Kaften is an accomplished communicator who has written for consumer and corporate audiences. She has worked extensively for MasterCard (News - Alert) Worldwide, Philip Morris USA (Altria), and KPMG, and has consulted for Estee Lauder and the Philadelphia Inquirer Newspapers. To read more of her articles, please visit her columnist page.

Edited by Tammy Wolf

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