6 minute read 3 Nov 2021
Mother and son walking down the street

How UK energy suppliers can steer consumers towards a brighter future

Authors
Rob Doepel

UK&I Energy Market Leader, Ernst & Young LLP

Dedicated to driving a sustainable future and enabling collaboration across the new energy value chain.

Yunus Ozler

EY UK&I Energy & Resources Consulting Leader; Partner, Ernst & Young LLP

Experienced industry and consulting leader. Passionate about helping energy clients be bold leaders and realise their long-term value. Enjoys cycling, skiing, history and geopolitics.

Sam Worley

EY EMEIA Customer Experience Lead, Energy

Passionate about helping clients to navigate the energy transition. Focused on developing mutually beneficial relationships between clients and their customers. Avid traveler.

6 minute read 3 Nov 2021

Energy suppliers must still play a lead in helping UK consumers adopt sustainable, zero carbon and affordable energy solutions at pace.

In brief
  • EY survey of 30,000+ global energy consumers (2000+ from the UK) reveals they have a lower understanding of ‘sustainability’ than equivalent groups globally.
  • UK consumers have energy affordability as a key expectation. Suppliers can help consumers change their consumption behaviour to offset rising energy prices.
  • The rise of the omnisumer and customers prepared to pay more for green solutions offers paths to growth for suppliers that act now to reshape for the future.

The UK’s energy market is in dire straits. At the time of writing, 21 energy suppliers had exited the market in 2021 alone, forcing two million customers onto Ofgem’s “suppliers of last resort” and prompting warnings that UK consumers face a winter of “desperate choices”. We expect Ofgem to enable suppliers to play their role more effectively with further regulation of the market, including a price cap reform and increased scrutiny of suppliers business models. Drivers behind the current crisis include the impact of Brexit and a worldwide spike in gas demand and prices. Gas is the main fuel for heating British homes, and in 2020, 43% of the UK’s electricity came from gas-fired power plants. The UK Government is progressing plans to decarbonise the country’s energy supply by 2035, but there are fears that some measures, including moving the burden of the green energy surcharge to gas bills and a ban on new gas boilers may disproportionally impact low-income households.

Mind the gap between expectations and satisfaction levels 

This recent experience provides stark evidence of the need to transform the UK energy market and drive its transition from fossil fuels to renewables. Energy suppliers must also reshape their own organisations to better understand exactly what customers want, and then make changes to meet these evolving expectations. 

With the aim of finding the answers to these questions, EY surveyed 2,000 UK energy consumers (part of a survey of 34,000 consumers across 17 countries), discovering an alarming gap between expectations and satisfaction levels. For functional factors such as reliability, affordability, convenience and bill transparency, the gap was 8%. But across more emotional factors, including treating customers fairly, rewarding loyalty, supporting sustainability, and caring about customers and the community, the performance gap is more than double that (17%).

This is a major challenge to energy suppliers – and an opportunity. Those companies that build a better customer experience can find paths to growth even in tough conditions and help drive the fundamental industry-wide change that will create a more sustainable energy future. 

  • About the survey

    This consumer survey across the globe was conducted across 17 countries with a diverse demographic sampling of 34,000 residential energy consumers aged 18 or older. The UK survey included 2,000 consumers. To bring a broad consumer perspective, the survey sample included a mix of bill payers and non-bill payers across ages and income levels.

Educating consumers around sustainability is the first step

Not surprisingly, cost is the priority for energy consumers we surveyed, with 73% expecting suppliers to offer affordable rates. Unfortunately, these expectations are unlikely to be met in the short term. International Renewable Energy Agency (IRENA) forecasts a cumulative investment of US$27t will be needed by 2050 if the world is to meet Paris Agreement targets, with this cost likely to be borne partly by energy users. But while suppliers may be unable to meet immediate price expectations, they can – and must – educate and encourage people around how energy efficient behaviour can lower bills now, and enable cheaper, sustainable energy in the future.

Education is a logical starting point. Less than a quarter of the UK customers surveyed say they have a high understanding of “net zero” (less than the global average of 31%) and just 33% have a high understanding of what “carbon neutral” means (the global average is 36%). Even “sustainability” itself is understood well by just 41% of UK consumers, compared with the global average of 53%.

Level of energy knowledge

24%

of UK consumers surveyed say they have a high degree of understanding of “net zero.”

Until people can clearly understand and articulate energy efficiency goals, it will be difficult to motivate the behavioural change required to achieve them. Energy suppliers are best positioned to close these information gaps and, in doing so, improve engagement, differentiate against competitors and achieve their own sustainability objectives. Tactics can include “nudges” to change consumption behaviour, including rewarding customers with lower prices for non-peak energy use. Suppliers can gamify energy data use – i.e., showing customers their carbon footprint and comparing it with their neighbours – and galvanise consumers around events such as Earth Day.

Until the normal ‘person on the street’ can easily understand and articulate the link between household energy efficiency goals and climate change, it will be challenging to motivate behavioural change.
Rob Doepel
UK&I Energy Market Leader, Ernst & Young LLP

There’s also value in collaborating with government to roll out better public information campaigns around energy efficiency and digital education. Taking a human-led approach – including removing industry jargon – can help connect better with consumers through concepts they understand and value.

Vulnerable customers will need extra support

Of course, suppliers will need to make sure commitments stack up. The UK Government have begun investigating business’s claims of “eco-friendly” products in the wake of “greenwashing” and have introduced a new green reporting regime.

And companies will need to ensure education around improving energy efficiency is delivered in an equitable way, and tailor support to different customers, including vulnerable groups. For example, even as the costs of some clean energy solutions, such as smart thermostats and air source heat pumps, continue to come down, they remain out of reach for many people. But giving customers access to digital tools, such as smart meters, that give them greater visibility and control over energy consumption can still make a big impact on usage and bills. Almost one-third (31%) of UK consumers check energy consumption every week, and the figure is much higher for younger generations (43% of those aged 18-24 years and 38% of 25-34 year olds.)

Interest in monitoring energy usage by age

Monitoring energy consumption

31%

of UK energy consumers check consumption every week.

Even with these initiatives, the question of how to equitably protect vulnerable customers remains an open one. Industry and government must work together to develop solutions that protect and support customers on lower incomes. Options may include more government-funded financial relief or establishing a government-backed supplier to support financially vulnerable customers and guide their energy transition journey.

Meeting green expectations can deliver revenue growth

How can suppliers deliver on expectations in the face of escalating wholesale energy prices and the rising cost of doing business – and still grow revenue? Opportunities exist in targeting consumers willing and able to pay more for energy products and solutions that align to their values. About one-third of UK consumers say they would pay extra for sustainable products and services — and Millennials are a “motivated middle” where over one-third are willing to pay a premium. Encouragingly, 49% of consumers would turn to energy suppliers first for new energy solutions.

Willingness to pay a premium

30%

of UK consumers surveyed say they would pay more for sustainable products and services.

How important is sustainability to you when selecting a service supplier? 

How important is sustainability to you when selecting a service supplier?

Suppliers can also reshape products and services to meet changing consumer preferences. More than half (57%) of UK consumers want pay-as-you-go options and 51% would like more personalised energy products.

EY research revealed the rise of the omnisumer – a person or business who simultaneously participates in a dynamic energy ecosystem across a multitude of solutions and commercial relationships. Energy suppliers will need to redesign offerings to suit the omnisumer, while still considering the needs of the broader population and educating customers about sustainable energy behaviour.

The rise of the omnisumer also creates a more complex web of energy experiences that mixes both long-term supplier relationships and short-term, on-demand transactions such as charging an EV at a private charging station. UK suppliers will need to build the partnerships, technology and skills to operate successfully within these ecosystems.

Preference for more flexibility

57%

of UK consumers surveyed prefer a pay-as-you-go option

Preference for more flexibility

51%

of UK consumers surveyed would prefer more personalised energy products

Five “no regrets” actions to take now

At this critical time for the UK energy market, suppliers have an important role – helping to accelerate decarbonisation targets while meeting customers’ most fundamental energy needs around affordability and reliability.

There is clearly much to do at a policy and regulatory level, and suppliers can add their experience and expertise to reforms. They can also lead their own customer-led transformation, supporting customers through a human-centred, technology-enabled approach that will improve their experience. We suggest that five “no regrets” actions implemented immediately can help suppliers support consumers in today’s tough conditions and lay the foundation for long-term value creation.

  1. Communicate with transparency about the implications of the energy transition – including a period of higher prices – for consumers in the short term and long term
  2. Educate consumers to become omnisumers, using digital engagement to reinforce and nudge sustainable behaviour
  3. Build partnerships and ecosystems that deliver the seamless experiences omnisumers demand
  4. Innovate and test new market offerings and services; the value pools for the future energy system are still emerging – so the ability to quickly scale those that succeed will be key
  5. Plan for a future zero-margin energy world and focus on growth through new energy solutions

Summary

EY survey of UK energy consumers reveals big gaps between expectations of energy suppliers and satisfaction levels, and an overwhelming desire for affordable energy above everything else. For energy suppliers, educating customers around the energy transition can help manage expectations around prices in the short term, while steering behavioural change that will enable a more sustainable energy future. Reshaping the customer experience through a human-centred, technology-enabled approach that meets the needs of the new energy omnisumer can also help suppliers find new paths to growth.

About this article

Authors
Rob Doepel

UK&I Energy Market Leader, Ernst & Young LLP

Dedicated to driving a sustainable future and enabling collaboration across the new energy value chain.

Yunus Ozler

EY UK&I Energy & Resources Consulting Leader; Partner, Ernst & Young LLP

Experienced industry and consulting leader. Passionate about helping energy clients be bold leaders and realise their long-term value. Enjoys cycling, skiing, history and geopolitics.

Sam Worley

EY EMEIA Customer Experience Lead, Energy

Passionate about helping clients to navigate the energy transition. Focused on developing mutually beneficial relationships between clients and their customers. Avid traveler.