5 minute read 15 Jul 2019
Wind and solar energy farm

When Americans expect the energy landscape to change

By Deborah Byers

EY Americas Industry Leader

Energy sector veteran. Corporate finance and JV professional. Investment advisor. Mother, wife and amateur astronomer.

5 minute read 15 Jul 2019

Americans believe widespread electric vehicles and independent power generation are coming in the next decade.

By 2030, Americans expect revolutionary changes in the way they use energy. That’s according to the EY US Fuels of the Future survey, which in April 2019 polled 1,500 US consumers and 102 executives who handle energy management for their corporations.

Most Americans get from one place to another with a vehicle that runs on gasoline. When they get to their home, a utility provides the needed electricity to power it. Many of these consumers don’t have a choice about which utility they’ll use, and they may or may not be aware of the actual source of energy that is powering their electricity.

However, both American consumers and businesses expect the next decade of energy to be transformative.

On the road and in the home

When it comes to mobility, vehicles powered by fossil fuels continue to dominate the market with 92% of American consumers primarily driving a purely gasoline-powered vehicle. In the future, those numbers will likely shift, but gasoline promises to be a resilient fuel source.

Survey participants who aspire to an electric vehicle point to two main hurdles: first, the vehicle expense, and second, the lack of charging stations. Despite significant investment, consumers who never want an electric vehicle are concerned both about the current and future state of charging stations. Half of respondents expressed fear that there will never be enough places to charge electric vehicles, and 42% reported that the range of electric vehicles will never equal those using traditional fuels.

In the face of this somewhat negative view, Americans seem convinced technology will change the dynamic for electric vehicles within the next decade.

In actuality, it could happen even sooner than that depending on technology disruption.

On average, the survey respondents believe electric vehicles will be widely available in the fall of 2025, although they believe it will be nearly five more years before they personally could buy one. (For higher-income respondents, the lag is less than two years.)

Similarly, consumers predict it will take just nine years until it is technologically and financially feasible for them personally to have their home generate its own electricity. Though 42% of consumers were not familiar with independent power generation (IPG) prior to the survey, 83% expressed interest in it after hearing more about it.

Interest in independent power generation is driven predominantly by a desire to save money (72%), avoid electricity price increases (53%) and add value to their home (49%). Slightly less than half of respondents (48%) are interested in it as a means of reducing their carbon footprint, while just 37% ascribe their interest to avoiding fossil fuels.

Corporations expect a similar timeline

Although corporations are relying on alternative energy more commonly than consumers are, gasoline and diesel are still primarily responsible for powering commercial fleets.

Respondents expect this reliance on fossil fuels to continue. A majority of corporate energy decision-makers (EDMs) said transitioning to electric fleets would compromise profitability and operations. Further, two out of five EDMs expressed concern about the safety of electric vehicle batteries in the conditions their vehicles operate. By contrast, the majority believe natural gas vehicles are a viable option without these concerns.

Natural gas fleets

52%

of EDMs agree they could transition their entire fleet to natural-gas-powered vehicles while maintaining current profitability.

Despite these findings, EDMs reported they could feasibly transition their construction, manufacturing and mobile equipment vehicles to leverage renewable fuels in around 8.6 years on average, compared to 10 years for their entire fleet of passenger, freight and delivery vehicles.

For IPG, corporate interest is high: 78% of EDMs report their company is interested in it for all facilities, and 85% are interested in it for some of them. EDMs are aware of the benefits, with 52% believing complete IPG would reduce carbon footprints and 29% stating it would secure more financial certainty. 

However, they predict a lengthy timeline for recouping the investment: just 29% believe it would take fewer than 10 years, and 49% believe it would take longer. They predict that, on average, it will take 5.7 years until it is technologically and financially feasible for them personally to use IPG to power at least one of their facilities (regardless of whether they are currently interested), then 6 more years for all their facilities.

IPG

92%

of EDMs single out solar as the most interesting IPG energy source option.

Tipping points for transformation

The expectation of impending change from energy customers mirrors research EY conducted in 2018, alongside a leading global analyst group, to identify and model three critical tipping points that may converge to mark the end of the traditional utility business.

#1. Off-grid energy reaches cost and performance parity with grid-delivered energy.

#2. Electric vehicles reach price and performance parity with combustion engine vehicles.

#3. The cost of transporting electricity exceeds the cost of generating and storing it locally.

In the US, these three tipping points were forecast to occur later than some other regions — ranging from 2025 to 2050 — but, notably, were forecast to arrive nearly simultaneously.

These tipping points, partnered with continuous technological innovation, climate change concerns as well as the expectations of consumers and EDMs, suggest a move toward massive transformation for the energy industry. While our survey respondents expect this change in the next decade, energy companies can’t procrastinate. A technological game-changer could be just around the corner.

Energy company of the future

To remain relevant, energy companies need to rethink their relationship with customers and embrace a new a path forward.

By understanding what drives their customers, energy companies can develop business models that match, and embed the flexibility and agility needed to consistently deliver on evolving expectations. They can incorporate products, services and platforms that provide choices based on customers desires, and tailor their interactions with customers to generate loyalty. 

If energy companies themselves don’t adapt to customers expectations, disruptors are waiting in the wings to push sector boundaries and innovate beyond what customers even think they want. Energy transformation is coming; how will your company leverage customer understanding to capitalize on that change.

Summary

Americans recognize energy transformation is coming. They expect to be able to use electric vehicles and independent power generation within the next 10 years. How can energy companies prepare, and can they leverage customers’ expectations for energy to position their business for future success?

About this article

By Deborah Byers

EY Americas Industry Leader

Energy sector veteran. Corporate finance and JV professional. Investment advisor. Mother, wife and amateur astronomer.