What market research is telling utilities about consumers and solar, Part 2 | SEPA Skip to content

What market research is telling utilities about consumers and solar, Part 2

By Suzanne Shelton

Editor’s note: Market researchers are sending utilities a strong message about the direction they need to be heading with strategies for building customer relations and solar programs. A growing body of consumer research shows that both – customer engagement and solar — are critical for utilities evolution and ongoing financial viability in changing energy markets.

The Solar Electric Power Association (SEPA) recently hosted a webinar featuring two of the top market consultants in the industry, Bill LeBlanc, Chief Instigation Agent at E Source in Boulder, and Suzanne Shelton, President and CEO of the Shelton Group in Knoxville. Last week, we featured edited excerpts from LeBlanc’s webinar presentation. This second installment features edited excerpts from Shelton’s no-holds-barred presentation.

Read the first installment in this series here.

A full recording of the webinar — Utilities of the Future: Understanding customers and leveraging solar — and the accompanying slide deck are available on the SEPA website here.

Solar may save the utility business

Electric utilities today have a huge, but barely tapped opportunity in front of them: leveraging solar as a building block to forge customer loyalty and long-term customer engagement. With strong solar offerings, utilities can thrive in a changing electricity market. Without a strong solar strategy, the future role of electric utilities will be diminished.

At Shelton Group, we conduct three annual surveys of a cross section of Americans, assessing how attitudes and behavior regarding energy are changing over time. Frankly, the news for electric utilities from our recent surveys isn’t great.

From January 2013 to August 2014, the percentage of Americans who said that they are less than satisfied with their utility grew from 43 percent to 55 percent. An increasing number of people are falling from satisfaction into apathy — the “I don’t care, I just want my lights on” box.

Given how the market’s changing, that’s not a very good space for utilities. Competitors are entering the utility space — some are directly competing to sell electrons; others are trying to actively reduce customer loads while gaining a share of the wallet, minds and hearts of utility customers. No company wants high customer apathy when you have viable, aggressive competitors out there knocking on your customers’ doors.

Another important finding from the surveys: today, a majority of consumers blame the utility industry for higher energy costs. This wasn’t always the case. At Shelton, we’ve surveyed consumers on this point for 11 years, and for the first eight years, the U.S. government and oil companies traded the top spot. Three years ago the utility industry jumped to No. 1.

Shelton Figure 2
Source: The Shelton Group

Half of Americans say that they have taken active steps to make their homes more energy efficient, yet the vast majority claim their utility bills are going up, not down. People are concluding, “If I’m doing the right things, and yet my bill is getting more expensive, it must be the utility’s fault.”

It’s not surprising then that about a third of residential customers would like to get away from their current electricity provider, and of that group, 64 percent want to get away from the utility industry all together. They’d prefer to buy from a non-utility, such as SolarCity, Google or Comcast. On the commercial side, 52 percent would buy energy or energy management services from a different provider, and of that group, 67 percent would choose to buy from someone other than a utility.

Utilities’ Achilles’ heel: Commercial customers

In fact, the biggest Achilles heel of the utility industry is the current state of its relationship with mid-to-large-size commercial customers. Utilities generally see these businesses as not quite big enough to be considered key accounts that are assigned a customer representative, but from the customers’ perspectives, they are big enough that energy costs are a significant part of their balance sheets.

Other than paying their monthly bill, these commercial customers have no relationship with their utilities. When we ask them, the majority say that they are certain that they can get a better deal elsewhere. A better deal to them is partly a better price, but it is also perceived value. Perceived value includes services rendered for the price and how proactive the provider is in addressing their needs and in developing a relationship.

And half say that they would go around their current utility and buy directly from a solar energy provider if that option was available.

Check out SEPA report on how solar is changing utilities’ internal organization here.

The commercial energy services market is growing quickly, as is the smart home space. Energy services are a $1.5 billion industry today, with forecasts pegging the market at $4 billion in a couple years – numbers that present utilities with a threat and an opportunity.

The threat comes from the new providers who are after the wallets, hearts and minds of the customer. If those players are able to get homeowners to save energy, a $100-per-month utility customer could become a $95-per-month customer — and the utility won’t ever see it coming. What the utility will see, after the fact, is that it’s earning less money on some customers. The only way to see it coming — and prevent it — is if you are the one selling those services to the customer.

The good news for utilities is that the customer is interested in obtaining energy services from them. A recent Accenture survey showed that utilities were ranked by customers as the No. 2 preferred provider of energy services.

Shelton Figure 3a
Source: The Shelton Group

The opportunity for utilities to get in this space is there now. Not only can utilities become the providers of energy services to commercial and residential customers, they can become the ones leading the charge on solar offerings as well. The benefit to utilities is long-term engagement with their customers, as well as long-term control of the energy business.

What consumers want? Solar from their utilities

The consumers’ perspective is pretty straightforward. The sun comes up every day; it’s really hot, temperature-wise, so we should be making energy out of it, and utilities should be offering us that option.

One of the questions on Shelton Group’s annual surveys is: “If you were the President of the United States, and you could support only one source of energy, what source would that be?” The answer is always, overwhelmingly solar, and the percentage of respondents naming solar gets bigger every year.

As consumers, we think utilities should figure out how to use more solar and make it easy for us. Since they aren’t, either we’re doing it for ourselves or we are getting it from other providers, such as SolarCity, which are making it easy for customers.

Third-party solar companies — SolarCity and others — are going after the Achilles’ heel of the utilities, commercial customers. Of the Fortune 500 companies, 89 percent publish an annual corporate sustainability report. Typically, the No. 1 goal in those reports is to increase energy efficiency and the use of renewable energy, and these companies are making good on those goals, with or without their utilities.

Utilities should no longer think of themselves as simply being in the electron business. Yes, they still sell electrons, but as expectations change about energy, utilities’ unique advantage is reassurance and insurance. It is a position of strength that sets utilities apart from the solar industry and all the smart home and energy service providers.

Utilities have kept the lights on for more than 100 years and now manage the platform that supports all the new products and services. The value proposition for customers should be “you want to stay connected.”

If the utility provides the solar system, the customer can still feel energy independent, while enjoying the assurance of having the grid as backup. When a customer goes solar, the utility may lose revenue from the sale of electrons, but if it provides solar and other energy services, it will receive new revenue.

The hottest utility solar trend? Community solar. Read SEPA’s report here.

I definitely think that over the next five to ten years, as technologies such as energy storage mature, a utility may risk losing all of the revenue from a customer if it doesn’t figure out how to make that offer.

One last point here, as a measure of success, utilities typically focus on customer satisfaction ratings, which are a misleading metric. For utilities, the best J.D. Power customer satisfaction rating in the country translates to no better than a C or C+ grade. More to the point, utilities should not measure themselves against other utilities, but companies such as SolarCity, Nest, Google, Apple and Cox Cable.

Utilities need to look past satisfaction to loyalty. Loyalty is a measure of a customer’s repeat, intended buying behavior. Customers have had forced loyalty to the utility up to this point, but they won’t be forced to be loyal in the future.

A utility must be a company with which customers want to do business, and that relationship cannot be built on a once-a-month basis. Utilities must give customers technology. They must make it easier for customers to acquire energy, pay their bills and manage outages.

And they need to give their customers solar. We’re testing this with some of our utility customers, and it pops. People want solar, and they’d prefer to get it from their utility. The opportunity is there.