Tomorrow's consumers

Joe Perkins profile photo

Joe Perkins

Partner, Analysis
14th March 2017
Areas covered:
Corporate
energy use
Today we published The futures of domestic energy consumption - the fourth paper in our Future Insights series. The paper examines how the landscape for domestic energy consumers could evolve, in light of developments such as smart technology, big data and new ways of purchasing energy.
 

We have already seen digital transformations in other retail markets from personal banking to travel. Over the next decade, domestic consumers should also expect significant changes to the ways in which they purchase energy and control their homes.

Smart meters

The smart meter rollout will be an essential element of this future energy infrastructure, enabling the appliances within our homes to adapt to our preferences. As of September 2016 there were almost 5 million smart and advanced meters operating across homes and businesses in Great Britain. This is the start of a wider transformation in which the prize on offer is greater comfort, simplicity and automation of energy consumption.

Greater control of our energy at home will be accompanied by new ways of purchasing energy. This could be in ‘by the day’ packages or in bundled offers that see energy sold alongside smart equipment and other utilities.

As energy is sold in new ways we will need to ensure that consumers get a fair deal – regardless of the type of offer or contract they enter into.

This could mean Ofgem working more closely with other sector regulators to protect consumers buying bundled offers.

big dataThe role of big data

The ability to create and analyse very large datasets may also enable offers to be targeted to specific customer groups on the basis of factors such as geography, behaviours or personal characteristics. While this could serve to open up new markets, it could lead to greater variation in prices and affect competition. For instance, existing suppliers could gain an increased competitive advantage through their knowledge of customer characteristics.

More broadly, we will need to ensure that the benefits of innovation are not confined to a select few. More than 40% of domestic consumers have never switched energy suppliers, and they may struggle to participate in a real-time, flexible energy system with even greater levels of choice. For some, the answer may be active disengagement – handing control over energy decisions to a trusted third party. In other areas, big data could enable more targeted and effective approaches to issues such as vulnerability and fuel poverty.

The pace of change

The technological changes we are witnessing have the potential to place consumers closer to the heart of the energy system as never before. In the context of these changes, our regulatory principles and frameworks will need to keep evolving to maximise the benefits for all consumers. This includes building a more flexible and consumer-focussed system for changing the energy industry rulebook where necessary.

If you are interested in any of the issues we raise in this paper and want to share your views, please get in touch at: energy.futures@ofgem.gov.uk or request to join our Future Insights LinkedIn discussion group.