How UK energy suppliers can steer consumers towards a brighter 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. 

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%.

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.

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.

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.