Electricity retailers are faced with the dilemma that customers are neither interested nor excited by their product. To blame – at least in part – is the “static price per kWh”. Smart metering systems won’t be able to solve this problem. They will, however, support the design of new products and services without customers having to break out of their comfort zones.
Customers aren’t interested in electricity
Variable electricity rates are one of the great cure-all promises of metering and measurement systems. Electricity customers should consume energy when it’s most affordable. If, however, we take a good look at the “customers”, we see that they are not used to having to think about and consume energy in a flexible yet dynamic manner. Instead, their measurement tool for energy is the “static price per kWh”. Customers are used to being able to plug into an outlet and always have electricity available to them at a constant price all the time. Whether they are willing to think and act flexibly and dynamically at all remains to be seen. One thing is for sure: the old power system and all parties involved have taught customers to consume electricity without asking any questions. Smart meters are not attractive for consumers, with hardly any of them ever even looking at the devices or the corresponding apps.
No incentives for flexible electricity rates?
The question of costs at least should be critically examined when we look at the incentives that customers find when they want to use flexible rates. Today, only one quarter of consumer electricity costs are generated by the market. The remaining costs are generated either directly by taxes and other levies or are regulated like network costs – in other words, they are induced by the state.
Further costs, such as for supply and margin, weigh on the last quarter “market” in the electricity price, which leads us to ask the question: Are we really creating a cost incentive for electricity customers to abandon their learned behavior? Even with the greatest optimism it’s hard to answer this question in the affirmative. Yet, flexible electricity rates are essential to the success of the energy transition. Being able to flexibly manage power consumption and therefore partially influence the load on the electricity grid is fundamentally important for the electricity system of the future and ultimately sector coupling.
The role of customers is changing, but will their behavior too?
The increasing decentralization of self-produced electricity is transforming electricity consumers into active participants on the electricity market. In the long term, up to five million roofs in Germany could be equipped with solar systems, which will all require control functions. The Internet of Things and electromobility are also increasingly gaining a foothold in the domestic realm, thereby creating new opportunities for the distribution of energy. If we recall, customers are not engaged and show a lack of interest. Retailers can capitalize on this attitude if they create offers that enable customers to use decentralization and IoT technologies without ever having to actually deal with them themselves.
Retailers are becoming service providers
Customer demand will shift towards services that combine mobility, energy efficiency, and telecommunications into a useful system. Smart meters allow just that. Using gateway functions, they make it possible to leverage the added value of IoT technologies and decentralized systems and to bundle them into offers.
Flexible rates can then by all means be carried out in the background. Flexible loads of residential customers and production facilities can also be used flexibly and opened up to the grids to contribute to Germany’s energy transition. Retailers are becoming service providers “front of the meter”, i.e. with respect to customers, and flexibilty marketers (e.g. aggregators) with respect to the energy market “behind the meter”. Smart metering systems serve as a control and communication interface between the two segments.
Adapting to consumer behavior
Customers must not, cannot and should not ever be involved. In terms of technology, this situation is most like information and communication technology: the majority of users do not know how computers or smartphones work. They simply want to use them without having to deal with operating systems or installation procedures. If something’s not working they simply contact a professional.
In terms of distribution, much can be learnt from mobile service providers. They couple end-user devices with services and rates. They take over the complex tasks from their customers. Energy retailers can do this too. IoT end-user devices, services and finally the commodity price are simply provided, and the service provider takes care of the complex job of connecting, managing and flexibly adapting everything.