As homes become smarter and more connected, this new level of data and control could lead to a profound change in the way consumers purchase energy.
There is an opportunity for service providers to use “connected home” data to discover consumers’ preferences to design and deliver better solutions.
Low-carbon heating will appeal to the consumer if they can dictate the level of heating experience they want, rather than the simple purchase units of fuel.
To tackle climate change in the UK, we need to effectively eliminate 20% of CO2 emissions that come from how we use heat in the home.
Two new insight reports, released today by the Energy Technologies Institute (ETI) suggests that consumers could be ready to move to low-carbon heat if industry rethinks the consumer proposition. By utilising the emergence of “connected home” data, energy providers can look towards providing heat and comfort as a packaged service rather than simply the selling of units of fuel.
The insight reports are based on outputs from the Home Energy Management Systems and Consumer Behaviour Study projects which form part of the ETI’s Smart Systems and Heat programme. The programme is being delivered by the Energy Systems Catapult on behalf of the ETI and the Catapult have analysed ETI data in the context of decarbonising electricity supply to author these two reports.
The consumer insights report “How can people get the heat they want at home, without the carbon?” reveals that consumers care more about their experience of using heat, than how it is delivered. From enjoying a hot shower to using heat to relieve pain, consumers were initially unaware of the value that heat is adding to their lives. The research demonstrated that smart technology could help consumers understand their heating options, turning passive bill-payers into discerning customers.
Exploring the potential of the “connected home” of the 2020’s, the second insight report “Domestic Energy Services” examines how data could be used by service providers to deliver a proposition that consumers really value, and how this could be used to accelerate the switch from gas central heating to low-carbon alternatives.
Both reports suggest that this shift may naturally occur over time, but it is unlikely to happen at sufficient pace to establish the conditions required to decarbonise heat and meet UK climate targets. Therefore, there is an opportunity for policy and regulatory bodies to change the way in which they think, which will allow commercial innovators to engage and help construct a new energy retail proposition for the consumer.
Programme Manager - ESD&SSH
In the UK, heating is the largest single user of energy, and the largest single emitter of greenhouse gases. In fact, household heating alone is responsible for 20 per cent of the UK’s overall national carbon emissions. This is why it is vital that we decarbonise domestic heat.
A central challenge to decarbonising heat in the home is its appeal to the consumer. Purchasing units of fuel can be seen as a distress purchase but we have found that consumers become more discerning when engaged in activity that is meaningful to them. However, to move away from simply being passive bill payers, consumers must become aware of the cost for alternative energy services and be able to dictate the level of heating experience they want. Because of this it is important that industry determines what consumers really value, so that it can design low-carbon solutions and heating packages that people really want to buy.
We know that consumer-centric markets such as phone and internet providers, compete to increase customer satisfaction and loyalty by differentiating their offerings. This does not happen today with heat. So there is an opportunity for businesses to utilise the growth in the “connected home” to capture new value beyond the meter to deliver appealing, low-carbon consumer heat and comfort as a package.
Our research suggests that consumers will value getting the heat experiences they want more than purchasing units of fuel. Therefore, policy makers could look to create markets in which consumers pay businesses to deliver energy experiences, and service providers compete to decarbonise at least cost. And to protect both consumer and commercial interests the Government could also look to contract with service providers to make sure everyone has a minimum standard of heat and comfort provision to meet their particular needs, so the vulnerable do not miss out.
Moving forward, the Energy Systems Catapult is building on the learnings from the ETI’s Home Energy Management Systems project to establish a “living lab” of 100 homes which will be available to innovators to help businesses, policy makers and regulators develop new business models, products, policy options and regulatory frameworks. This is part of phase two of the Smart Systems and Heat programme which the Catapult is taking forward with funding from the Department of Business, Energy and Industrial Strategy and independent of the ETI.