The new rules of engagement for the US energy market


Pick any three energy thought leaders at random, and ask them for their insights into the future of the US energy consumer market and you’re bound to hear not only different but also conflicting albeit educated, opinions.

Consumers are committed to climate change – but they’re also focused on the bottom line. Demand for EVs is high and the transition is speeding up – but may take another 10 to 20 years.

This article was originally published in Smart Energy International 5-2019. Read the full digimag here or subscribe to receive a print copy here.

Consumers know who their utility is, and are happy with service, but don’t really care about who delivers it…

These contradictory and conflicting insights illustrate the state of flux affecting not only the US but other matured and developing energy economies alike during the global transition to a sustainable energy-powered future. The playing fields are more level in the midst of this transition than ever before because whilst the rate of transition will vary based on economic ability, the global electricity market is changing, and all utilities seem to be asking the same question: How do we plan for a future so beset with contradicting values, instead of a pure focus on the bottom line?

Global financial and professional services firm EY conducted a study in April 2019 of 1,500 US consumers, and 102 executives in charge of energy management decisions for their organisations. The report Fuels of the future: what is powering the US energy transition? puts to rest a lot of the contradictory statements and speculation into what the future truly holds for an industry where technology has consistently outpaced regulations.

Here’s what you need to know.

Electric vehicles, self-generation and other major changes are expected, but not fully trusted, at least not yet.

92% of American consumers drive conventionally-powered vehicles, but they’re faced with two hurdles, both in perception and potential. Firstly despite the rollouts of EV charging facilities via programmes like Electrify America, and even a growing number of charging stations at retail-giant Walmart’s stores, there are still a large number of Americans who will never want an EV.

Concerns include fears that there will never be enough charging points to satisfy demand, and that EV pricing is so far from parity that most won’t be able to afford an EV before 2030.

Furthermore, 42% of participants believe that EVs will never be able to achieve ranges similar to those of conventionally-powered vehicles, yet Tesla and others have proven that over 1,000 kilometres can be travelled at highway speeds on a single charge, as long ago as 2017.

Despite this overarching negative outlook, participants expect that technology will shift this dynamic, and make EV adoption more practical within the next decade.

Self-generation and prosumers need more awareness, and put the savings first Participants predicted that it will take nine short years before it becomes both affordable, and practical, to generate their own household’s electricity. Surprisingly, almost half (42%) of those surveyed weren’t familiar with self-generation as an option, indicating that awareness needs to be bolstered severely. Encouragingly, 83% of those expressed interest after learning more about the technology’s benefits on their energy bills.

The results bear this “cost-sensitive” sentiment out in the survey’s results, with 72% of respondents stating their interest is primarily in saving money, 53% seeking to avoid power price increases, and a half (49%) see the investments as a means to add value to their property or lifestyle.

They’re leaving it to you to make the first move…

Although participants prize price highest, there is growing concern about the environment and increasing desire to see more renewables in the energy mix.

Whilst the vast majority (82%) of participants put price first when considering switching utilities, most aren’t ignoring the issues of climate change, carbon footprint and the transition to renewables.

In fact, on average, consumers are willing to pay more should their utility bring more renewables into the mix, saying they’d pay up to 21% more per month if the power they were consuming generated 50% less carbon.

There’s a common misconception that their utility already uses renewables, even though only 17% of utilities in the country are doing so, according to the study. That holds water when considering awareness and adoption of self-generation, and other behind-the-meter technologies. The market may not quite be ready yet – they’re looking to their utility to make them more carbon-friendly.

It all comes down to this – the tipping points

Malcolm Gladwell, the author who brought the concept of a “tipping point” to the fore in business thinking in the early 2000’s noted that cumulative events, even if seemingly unrelated, can converge to create major change – change, that with the right awareness, insights and influence, can be anticipated if not predicted. EY’s study points out three coming tipping points that may well mark the end of the traditional utility.

  • The cost of off-grid, independently generated power reaches parity in terms of both price and reliability with grid-fed power.
  • The cost of generating and storing one’s own electricity becomes more cost-effective than utility-delivered power
  • EVs reach price and performance parity with conventionally-fuelled vehicles Awareness of, and preparation for, these coming changes will mark the distinction between those that thrive, and those that battle to survive, and whilst forecast to occur later in some regions of the world, we can typically expect them within the next decade at most, and they may arrive almost simultaneously.

Corporates want competition too.

The survey found corporate customers were even more in favour of competition than their consumer counterparts. Among the 57% of energy decision-makers (EDMs) without a choice of providers, 90% said having a choice in their utility would make a difference to their company.

Meanwhile, 45% said the ability to reduce their company’s carbon footprint would be a benefit of competition. EDMs also believe increased choice would enhance their access to the most sophisticated energy technology, with 60% citing that factor as a benefit.

Not surprisingly, corporates are less emotive about the opportunity to move into renewables; EDMs make decisions based on economics. Price is critical since they use a lot of energy; and so is reliability, since downtime means lost productivity and profits.

EDMs with a choice in their utility said they choose based on price (86%), reliability (60%) and then the use of renewable energy (16%). When asked what would cause them to switch from their current provider, 92% of EDMs point to the opportunity for a lower price and 37% say they would switch to use more renewable fuels in their operations.

It’s not that corporations aren’t interested in renewables. In fact, EDMs are willing to pay for more environmentally friendly fuel.

Respondents, on average, said they would pay 2.22% for electricity generated with 10% less carbon and 7.61% more for electricity generated with 50% less carbon.

However, businesses have alternative pathways to greener energy, such as power purchase agreements (PPAs) with renewable providers, green tags from exchanges or even independent power generation (IPG). In fact, the US is leading the way for corporate PPAs and several large technology sector players are pursuing 100% renewable energy targets.

When asked about IPG, 78% of EDMs agreed their company is interested in IPG for all of its facilities, and 85% said they are interested in IPG for some.

Building on customer satisfaction

These findings show both consumers and corporate customers recognize the value of electricity competition and that price and reliability continue to be the key drivers when provider decisions are made. However, the survey also illuminates increasing environmental concerns — and the desire to use more renewable energy.

Although energy customers want choice (and most do not have it), the good news is consumers are very satisfied with their current providers.

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?


Utilities need to innovate and transform their businesses to handle the unprecedented disruption across the sector. Emerging technologies will play a crucial role, and utilities must harness their capabilities to seize the opportunities presented by the new energy world.

Cost is a significant hurdle as 61% of consumers report the expense to undertake more efficiency projects is too much, and 27% believe it will take too long for savings to pay for the initial expense. Yet, among homeowners, these upgrades are desirable – 64% plan on or want to install solar panels, and 80% of respondents could be incentivized to make energy-efficient home upgrades through tax credits or a discount on homeowners insurance.

On the corporate side, companies have been most likely to maintain or replace equipment in a bid to be more energy efficient. Asked why they’ve not taken more steps to be more energy-efficient, EDMs cite the upfront expense and the time required to recoup the cost. Another factor for power and utilities and real estate companies to consider: nearly half (46%) of EDMs haven’t taken more steps because they do not own the buildings they operate from, suggesting that commercial landlords are the most promising target for energy efficiency upgrades.

What’s next in energy?

The survey results suggest that when it comes to making changes in their energy usage, both consumers and EDMs tend to be reactive rather than forward-thinking. For energy companies, this is an opportunity to create a deeper relationship with customers by getting behind the meter or the gas pump and leading energy customers to change.

This is a significant, but necessary, change for a sector historically disconnected from its customers. By serving as energy consultants rather than suppliers, energy companies can help customers lower costs and reduce their carbon footprint — while strengthening their own market position. SEI