If the energy sector wants to unlock the power in distributed energy resources it will need to gain the support of PV and battery owners, write Dani Alexander, Scott Dwyer, Chris Briggs and Chris Riedy. Here’s how it can be done.
Australia is, or will soon be, leading the world in distributed energy. Today, one in five households has solar installed and there are plenty of neighbourhoods where more than half the rooftops host PV arrays. BloombergNEF forecasts that about one-third of Australia’s electricity capacity will sit behind-the-meter by 2035. Distributed energy resources (DER) – whether they are solar, batteries or demand management – are systematically different to coal-fired power stations and will require systematic change to energy management in Australia.
At the heart of this is a need to focus more on people. Because DER are commonly located in homes to provide the occupants power, they rely on customers to purchase and operate them. People are taking control of their own energy future through DER. By doing so, they are becoming key actors in the energy transition.
However, people do not currently trust our energy system – Energy Consumers Australia has found that only 32% of households believe the market is working in their interests. Without this trust it will be a challenge to encourage the people investing in DER to allow their assets to support the energy system as a whole. That is, by flexing their load to match variable renewable supply and/or at times of peak demand, curtailing their solar generation in times of negative demand, or providing active or reactive power (Volt-VAR) from inverter-based DER to support grid voltage or frequency.
To understand how to make Australia’s high-DER future work for all customers, we need to understand what individual DER customers want and care about.
For this reason, the Australian Renewable Energy Agency (ARENA) commissioned our team at the UTS Institute for Sustainable Futures to undertake the initial DER Customer Insights Series. The goal was to provide ARENA and the energy industry with insights on how to better consider customers in future DER projects. We undertook a portfolio-level analysis to investigate the experiences of customers involved in 19 ARENA-funded DER projects.
Two reports were published: The DER Customer Journey, to characterise and critically assess the journey that DER customers go through to facilitate better understanding and continual improvement in the sector, and; DER Customer Values & Motivations, to examine the types and motivations of DER customers to improve engagement in future projects.
Keys to a happy DER customer
Our analysis of the customer journey encompassed the phases from when a customer may become first aware of a DER product or service offering, through the transactional purchase and beyond as part of an ongoing service relationship. This was simplified into four steps: engagement and acquisition; installation; operation and maintenance; and retention.
The research identified six key ingredients that contribute to a happy DER customer:
- Know who your customers are and the values that drive them.
- Clearly articulate the customer value proposition and benefits.
- Provide a smooth customer experience throughout the entire customer journey.
- Ensure the DER products are of sufficient commercial maturity.
- Enlist well-trained, knowledgeable installers who know their customers.
- Trust must be earned along the entire customer journey.
Customer values and motivations
The overarching finding of the research is that future DER projects can benefit from better understanding their target customer base before developing and communicating the product offering.
Fewer than six of the 19 projects had formally segmented their customer base before developing the product and engaging the target market, which may have contributed to the recruitment challenge. Energy retailers, distribution network businesses and communities took different approaches to customer engagement. The two energy retailers used a formal and proprietary segmentation tool – Experian’s Mosaic tool. Several projects led by communities or property developers involved customers in the design process and often investigated more innovative business models, improving customer satisfaction.
However, electricity distributors were focused on solving network constraints and needed to approach the “mass market” – often requiring high levels of uptake (sometimes more than 20%) with blanket marketing strategies.
The gold standard in understanding customers is segmentation, however it is costly and time-consuming.
How to build customer trust
The finding that underpinned both reports was that social licence of DER depends on customer trust. Trust is critical for public acceptance and advocacy of DER projects. Building trust, including ensuring fairness (or social equity), through design and implementation will help protect future projects from customer backlash and move the sector closer to a customer-centred energy future.
Customer trust in our energy market is already low, which can be both a challenge and opportunity for DER providers to overcome. This may lead some customers to seek out DER options to “take control” of their energy or even disconnect from the grid. However, there are already negative perceptions for DER projects to overcome, for example the belief that one needs to look out for cowboy or rogue installers.
Trust will need to be earned along the entire customer journey, including identifying local trusted “champions”, partnering with trusted brands and platforms, keeping communication channels open and planning for long-term legacy.
A key question for future DER projects is: “How does this project help build customer trust?” If this can be answered positively, in good faith, we will be moving closer to a customer-centred energy future.
Spotlight on customer engagement and acquisition
Customer acquisition was particularly challenging for the majority of DER projects studied. This typically resulted in the process taking longer than expected or recruiting fewer customers than targeted.
Many projects involved investing in battery storage systems, requiring customers to spend generally more than $1,000 and accommodate a new battery unit. It was often hard to recruit the target number of customers and, in some cases, keep them fully engaged and responsive over the life of the trial. DER products needed to be communicated more broadly and deeply than originally anticipated, for example by holding community events and one-on-one (and sometimes face-to-face) conversations with prospective customers. This was time consuming and budget intensive, which is unlikely to succeed in a commercial context.
Those who had more success with this part of the customer journey undertook detailed customer research in advance to better understand the needs of their target customers. They also targeted communities that were already familiar with and/or had high-levels of engagement on energy issues, such as the ANU-led Bruny Island trial or the UTS-led Yackandandah trial). Lastly, they had more conservative customer acquisition targets.
- Carefully planned communications and engagement
- Publicity around launch events, community forums and word of mouth were important ways to acquire customers
- Working with local “champions” who are trusted within the community
- Minimising steps and following up leads quickly
What didn’t work
- Complex messaging and jargon
- Providing too many options
- Slow and/or cumbersome acquisition processes, such as delays due to network connection approvals
- Irregular or impersonal point of contact, which led to lower levels of trust, the spread of misunderstandings or misinformation and lower rates of customer acquisition.