Energy Awareness in the U.S. and Europe – How to connect with customers on both sides of the Atlantic? - Interviewing Michaela Ballek part one

"Small (behavior) changes have a higher impact on overall resource consumption, thus business cases are more easily developed around these issues."

Michaela Ballek, based in Berkeley, California, is a management consultant in sustainability, smart grids and energy efficiency, with a focus on raising awareness and behavior change. Currently, she is working on a research project on residential energy efficiency tips and associated cost savings. She is also volunteering for Sustainable Silicon Valley, a non-profit organization bringing important stakeholders of the San Francisco Bay Area together, to work for a sustainable future.
Previously, she worked at B.A.U.M. Consult, one of S3C’s managing consortium partners, and played a key role in conceptualising the project proposal for S3C in 2012. Prior to that, she was research manager for technology, innovation and sustainability consulting at McKinsey & Company. Altogether, she has a unique perspective on customer engagement of utilities and related companies involved in energy efficiency and smart grids in Europe and in the United States.
After the S3C project has reached its midterm and the results of our analysis work packages became available, we took the opportunity to get in touch with Michaela and discuss our results as it relates to her experience in the US in the past two years. We focused on one of the main challenges that we found in our research: To develop a viable business model around end user engagement. Her involvement with different US organizations in this field has equipped her with valuable insights of why and how the models can work.
If you are generally interested in American research on the topic of end user engagement in Smart Grids, you can easily gain access to many studies and project results online.
-    The Smart Grid Consumer Collaborative:
-    Access to all Consumer Behaviour Studies carried out in Smart Grids projects under the ARRA funding scheme:
What do you see as the most pronounced differences between Europe and the US regarding consumer attitudes and behaviour toward energy?
It is a fact that the U.S. have by far the highest energy consumption per capita in the world. This is rooted in a variety of issues, such as a long history of relatively cheap oil and other fossil energy sources, combined with a lower population density that led to wasteful consumption of resources in general. For example, some types of electrical appliances, such as AC systems or clothes dryers, are more prevalent and are used more heavily than in Europe. Also, I noticed that many Americans still leave their car running while parking, sometimes for very long periods of time, or more briefly to write text messages or programming their GPS.
This relative waste of resources is leading to a higher efficiency potential than in most European countries. Small (behavior) changes have a higher impact on overall resource consumption, thus business cases are more easily developed around these issues. Quite a few projects have shown that energy consumption is reduced by a low, but significant percentage, if American consumers get motivated in the first place.
On the other hand, Americans usually invent and adapt technology fairly quickly, including technology helping energy efficiency, also called cleantech. A large number of Silicon Valley entrepreneurs have created clean technology companies, such as Nest that was sold to Google not too long ago, or various software companies offering energy efficiency monitoring systems to larger organizations.
Have policy makers and regulators on state or federal level taken any actions so far to raise awareness? If so, what has been their impact so far?
The American energy market is still regulated in many states. There, the option to switch to another electricity or natural gas utility – as it has become the norm in most European countries – does not exist. However, this results in a situation, in which some state regulators can exercise substantial power over the utilities, for example to force them to increase energy efficiency in their service areas.
Every state is regulated differently, but for example in California, energy efficiency increase programs have been in existence for quite some time. This has led to a flat per capita energy consumption curve over the last decades, whereas it increased by a third in the rest of the U.S.
In addition, smart meters have been rolled out to significant numbers in the U.S., in many states far beyond the 50% mark, and the process is being continued. The Green Button Initiative was launched a few years ago to help people access their energy consumption data. While quite a few utilities and software service providers are offering Green Button data services, but just a small percentage of households is actually looking at their data online.
How does the Opower model work then and how does it connect to our research?
Opower is successfully working on the premise that social comparison has a strong influence on behavior change. Key of Opower’s service to utilities is the creation of a so-called home energy report for each utility customer, that indicates how well they are performing regarding energy consumption in comparison to similar households. In addition, they offer a set of energy efficiency tips – all of this is printed on the monthly utility bill in an appealing way to promote interest and action. Similar information is also offered on websites with individual access for each utility customer. Research has shown that these reports help decrease energy consumption by 1-3 percent.
This business model works well in those US States where energy efficiency has been mandated by the regulator, and where smart meters are installed. Also, American households are used to receive monthly utility bills - which helps to message frequently.
In addition, Opower is offering behavioral-based demand response services. For example, customers receive an email from their utility one day before a particularly hot summer day, asking them to join their neighbors in conserving energy that day. For each kWh saved in comparison to their regular peak consumption, they receive a rebate. In addition, they receive an evaluation at the end of the season that tells them how well they have done.
These services obviously only work with a large data set and a sophisticated evaluation engine – which is what Opower is providing to their utility customers. The more data they have about a household, the more targeted are both the comparisons and the energy efficiency tips.
Similar to your results in S3C, Opower has come to the conclusion that segmentation matters. Advice and specific programmes work best when tailored to individual customer types – both residential and SMEs – and is one of the key success factors not only for customer engagement, but to raise their interest in the first place.
Part two of the interview with Michaela Ballek: "Energy Awarenessin the U.S. and Europe – How to connect with customers on both sides of the Atlantic?"
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