Digital transformation in the energy sector is essential | NTT DATA

Fri, 13 January 2023

Energy modernisation is essential, but where do your customers want you to focus your efforts?

The energy sector has rarely seen a time of such unpredictability and change. The COVID-19 pandemic bolstered calls from regulators and consumers to double down on digitalisation and data-sharing efforts. Resolve from the public and private sectors to increase funding in green technology has strengthened, while macroeconomic events such as the war in Ukraine have shocked markets, increasing prices and significantly impacting customer behaviour and demands.

In previous blogs, we have discussed the need for and benefits of digital transformation and data sharing. However, we mustn’t forget the consumers who will ultimately be affected by these fundamental changes. Beyond legislation, it is consumer opinions on user experience, customer service or renewable energy that will drive real change.

We recently surveyed over 2,000 consumers on their energy habits to gain a deeper understanding of consumer behaviour, desires and expectations regarding their interactions with energy suppliers, and the findings were interesting:

A fear of the unknown

It’s unsurprising that for most customers, their habits have been altered by significant increases in their energy bills. Families are struggling with energy costs this year, and as a result, they have fewer options and are less likely to change their provider. Before 2021, almost half of consumers (48%) used to regularly change energy providers to seek the best fixed deal. Today, however, 50% of consumers have remained with their energy supplier since their fixed deal expired, with a further 29% remaining with the same supplier as their fixed deal continues, and 15% moving because their previous supplier went out of business.

The bottom line is that most customers simply aren’t expecting to see significant value for money in their energy bills, regardless of what provider they are with. Over two-thirds of consumers (67%) are currently on their energy supplier’s standard variable tariff, and 63% plan to stay on the standard variable because it’s cheaper and they’re not locked in.

Despite 23% of consumers saying it’s highly unlikely they’ll change energy suppliers next year, with over half (54%) saying they ‘probably won’t change’, our research suggests there are actions that energy companies can take to attract customers. These include introducing smart meters that can reduce bills, improving customer experience, and bolstering sustainability efforts.

The moment for smart meters

In November, Ofgem approved ESO’s proposal to create a demand flexibility service that will allow businesses and the public to be paid for the first time to reduce/move their electricity use out of peak hours following a signal from the ESO.

While this step will undoubtedly encourage the public to reduce their peak energy usage, questions remain. For example, how much money is enough to incentivise the public to change their electricity usage habits? Furthermore, What about the roughly half of households without smart meters? Is this the encouragement they need to finally install a smart meter?

Our research suggests that introducing savings through smart meters could be a significant motivator in changing energy habits and the widespread adoption of smart meters. This is positive news for a government rollout plagued with delays and setbacks resulting from COVID-19 and technical issues.

Significantly, over three quarters (77%) of consumers would consider switching energy suppliers if paid to reduce their peak rate usage. Even more interesting, 94% would change their habits to avoid using electricity in peak hours if it saved them money. These statistics confirm that value is a crucial factor in selecting suppliers. Still, most simply aren’t seeing that value in today’s market, providing an opportunity for energy companies that are prepared to offer flexibility.

That flexibility for savings needs to provide real value, however, and a couple of pounds here or there won’t be enough to push behavioural change. So, how much will it take? 

While the figure consumers need to change behaviour varies by age group, on average, it would need to be around £26 per month.

Interestingly, on top of the potential to attract new customers through smart meter savings, the cashback on bills could also be the incentive to finally reach the 42% of households that still need to install a smart meter. Almost two-thirds of these households (61%) claim they would install one if it saved them money.

These statistics will encourage those within the energy sector and the government, who have rightly been calling for the modernisation of the energy grid. While many consumers have hesitated to uptake smart meters, the potential for savings during a harsh winter could be a nudge in the right direction while providing some energy bill relief.

It’s not all about the money

Despite conversations surrounding energy this year being dominated by cost increases, there are other issues within the sector that are very important to consumers. People still expect high-quality service from their suppliers, and if they don’t get it, they will be more than happy to take their business elsewhere. In fact, two-thirds (66%) of customers say that a poor customer experience would make them change their energy provider, with a further 16% saying that they already have.

Additionally, as the climate crisis continues and sustainability begins to influence mainstream consumer behaviour, more energy customers are looking for more green alternatives. Almost half of consumers (45%) would like to change to a more sustainable energy supplier. With bills currently so high, however, most people are unlikely to pay a premium for cleaner energy. 10% say they have already switched to ensure their energy is sustainable despite paying a premium to do so, with a further 6% saying they would be willing to pay the premium to make the switch.

Digitalisation offers better ways to engage

There is a certain element of apathy to current consumer behaviour that comes from a lack of significant value in energy bills. People simply aren’t seeing enough of a reason to make the switch. These findings, however, highlight that the digitalisation of services beyond billing offers solutions that customers care about and are willing to engage in.

Replatforming archaic systems and implementing new operating models will offer customers more self-service options in an easy-to-use interface. In our experience, the use of cloud-based solutions and the implementation of data-driven decisions have improved customer satisfaction by up to 100% for some of our customers. In addition, customer retention and attraction statistics have increased by up to 40%, with more agile systems easily able to deploy new services and tariffs.

Whether it’s resilience, cost efficiency, sustainability or security, digitalisation presents opportunities and optimism to a sector that is in an excellent place to help address significant societal issues. As a result, there is a fantastic opportunity for suppliers to address the issues consumers care about. In doing so, they will gain a competitive advantage while improving customer satisfaction.

If you would like an initial discussion on how to enhance customer services through automation and data insights, please book an initial 30-minute consultation with us today.

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