Energy costs in the UK have fluctuated drastically over the past year, driven by geopolitical events that resulted in a limited supply of natural gas while demand remained high. The long-term solution is to reduce dependency on fossil fuels altogether and move towards more sustainable energy sources. However, in the short-term energy providers are facing a challenging environment that requires a careful management of consumers’ energy demand and the financial impact of soaring prices. To minimise the financial burden, the UK government intervened by setting an energy cap at £2,500 for the average household and introduced different support schemes to offset price increases. However, financial aid is only a temporary fix, and the long-term solution requires a fundamental shift in how we consume energy.
What does this mean for energy consumers?
Since the scheme has been rolled out, there has been a push from both government and energy providers to educate consumers on how to reduce their energy use through a variety of energy saving measures. As KPMG’s latest Consumer Pulse Survey found that 38% of consumers agreed their utilities bills were a deterrent to non-essential spending, some energy providers have invited consumers to take part in ‘saving sessions’ to minimise their electricity usage where possible.
Consumer outlook at a glance
of bill payers made changes to try and save energy over the winter months
of bill payers agreed that their energy costs were higher than they expected over the winter
believed they had cut back their energy use over that period
made changes to their home and the same amount purchased items to help reduce energy use
The demand flexibility scheme:
The demand flexibility scheme, which was initiated in early 2023, rewarded consumers for reducing electricity demand by providing consumer with the opportunity to earn money back on saved energy. The goal of this being for consumers to use less electricity during peak hours and therefore spreading the demand curve.
Naturally the Scheme’s proposal of earning money back on saved energy comes across as intriguing if not exciting as consumers are ‘incentivised for voluntarily flexing the time when they use their electricity’ (National Grid ESO). The aim for consumers to use less electricity during peak hours, would help sustain supply in the country and keep money in the bank for consumers.
The pilot of the Scheme has been deemed a success with ESO reporting that it helped save over 780 KWh across 1 million households and businesses. The scheme was implemented across 26 providers and engagement from consumers was 35% higher than targeted. However, despite the positive outcome of the pilot, the next steps of the programme remain to be determined.
What are the future considerations for the flexibility scheme?
To ensure success in future iterations the demand flexibility scheme, energy providers should consider the next steps to grow beyond the 1 million pilot participants by:
- Designing a tailored reward programme to build further consumer engagement and rewarding loyalty and consumers investment level to the programme.
- Segmentation of those participating in the Scheme means that specific customer groups can have services and communications tailored to them.
- Measuring participation in the Scheme to know if the uptake is located in certain areas or demographics and if further education to that audience is needed.
- Programme inclusivity and accessibility is needed to reach a wide audience and be seen as applicable for them.
Energy providers have a central role in orchestrating the transition towards more efficient energy use through innovative and customer-centric experiences. The Scheme is designed to sustain and promote behaviours that save energy and money at the same time but as we know changing usual dynamics is not an easy feat. It needs to be approached as it would a long-distance run with a build up over time.
We know that energy usage and bills are still at the front of consumers’ minds with 46% of surveyed consumers citing that Energy bills are their biggest spend right now. Consumers want help and information to keep bills down and want to feel supported to make energy efficient choices.
To do that, energy providers can build on existing pathways such as the Flexibility scheme as well as provide innovative solutions, aligning all actions to be customer centric.
Below are some of the key steps energy providers should take to support their customers:
What does this mean for consumer business leaders?
In these times of uncertainty and with consumers changing their opinion on spending every month, understanding your customers will be critical!
Reshape your costs to find growth
Fundamental shifts in customer values mean your business can no longer rely on the traditional sales functions. Instead, businesses need a new approach to sales and customer relationship management with insights, connection and transformation.
Digitise your business
The emerging new customer is accelerating change - they seek a seamless digital experience and additional value from every transaction. We can provide a fresh perspective for your customer experience and redirect your focus on where it needs to be, rather than where it is.
Harmonise pricing and profit
Our research shows that only 40% of promotional activity is effective. Suppliers and retailers can unlock a sales and margin uplift, by working on their pricing and promotion strategy together.