Chapter 1
The impact of the energy transition on consumer confidence
Today’s energy experience negatively influences consumers’ view of the future.
Modeled on established consumer confidence indicators, the ECCI draws upon a survey of 36,000 residential energy consumers across 18 markets to understand consumer confidence today, and three years from now, across five factors: the stability of energy providers’ business; value created by providers for consumers and their community; ability to access clean energy options; access to affordable energy; and regulator or government support for a fair and equitable energy transition.
Consumer confidence levels vary by different geographies
The ECCI reveals the two ends of the consumer confidence spectrum. In Japan, for example, confidence is very low, with consumers facing rising energy prices, market deregulation and the lasting impact of the Fukushima nuclear disaster. Meanwhile, consumers in mainland China are extremely confident in their energy future, perhaps driven by the significant focus on, and investments in, energy infrastructure and renewables.
Energy consumer confidence is also partly driven by energy market regulation. Most markets that rank higher in the ECCI have little energy competition. In many cases, competition has brought a confusing array of consumer options and price volatility that seem to erode confidence.
We also see a link between income levels and confidence. Regardless of a market’s position in the ECCI, consumers on lower incomes have lower confidence, perhaps reflecting a feeling of being left behind and unable to afford or access new energy solutions, such as rooftop solar panels, home battery storage and electric vehicles (EVs). To date, a focus on higher-income consumers as the early adopters of these solutions has meant fewer options for people on lower incomes to participate in the energy transition and see its benefits.
To better understand the impact of the energy transition on consumer confidence, we mapped the ECCI against the World Economic Forum’s Energy Transition Index, which benchmarks markets across 38 indicators of energy transition progress. Findings revealed an interesting correlation between markets' progress in the energy transition and energy consumer confidence. As a market progresses through the energy transition, consumer confidence first rises, reflecting positive sentiment around the possibilities of the future, before falling sharply. It seems that as the scale, complexity and disruption of the journey move from theory to reality, the impacts hit home. With time, however, the realities of the new energy world take hold, consumers see value in the changes around them and confidence again begins to rise. Building and maintaining consumer confidence throughout the energy transition journey will be an important determinant of a market’s ability to achieve, or accelerate, decarbonization goals.
Change is never easy, and the energy transition requires changes to consumers’ lifestyles, homes and vehicles. Currently, many markets are on a downward confidence trend, as consumers are still in the early stages of understanding the impact of the transition on their routines, actions and investments. Their pessimism can also be attributed to a disappointing energy experience and rising energy prices in many markets.
Consumers are paying more for an energy experience that doesn’t meet their expectations today, let alone tomorrow, and they can’t see how the energy transition will create value for them personally.
Our research shows consumers’ expectations are not being met today across all aspects of the energy experience. When consumers engage with their energy providers or others in the energy ecosystem, it is often a confusing, fragmented experience where they aren’t able to see the full range of support and opportunities that may be available. Energy confidence is built by getting the basics of safety and reliability right, and is further strengthened by meeting other needs, such as the ability to add value to the community.
Chapter 2
Learning lessons from the ECCI
Which markets are avoiding the “valley of disillusionment?”
Perhaps most intriguing are markets that appear to have avoided the link between energy transition progress and poor confidence. For example, although France and the Netherlands are well advanced on their energy transition journey, consumers there are more optimistic. In France, a combination of market design, government interventions and nuclear power generation has helped create a predictable and stable market structure that has shielded consumers from retail volatility and dramatic price increases.
In the Netherlands, proactive community engagement and broad collaboration across society may be the secret to maintaining consumer confidence. For example, the Amsterdam Smart City project brought together business, government, academia and community organizations to create a holistic program that considered energy efficiency alongside urban planning, eMobility and technology innovation. It has delivered tangible benefits to people’s lives — and could be why Dutch consumers have more confidence in their ability to easily access safe, affordable energy in the future.
Sweden stands out as leading the way with high consumer confidence. Here, new energy projects are developed with deep community engagement and focus on the wider potential benefits, including lower energy costs, new jobs and increased tax revenue for local communities that will fund new cultural centers, sports complexes and local infrastructure.
What lessons can we learn from these examples? In Sweden, France and the Netherlands, consumers have been encouraged and supported to engage in the energy transition at an early stage. The value of the transition, to communities and to consumers, has been highlighted. And, importantly, government and regulators have created a predictable, stable foundation for the energy experience. Compare this with the UK, where consumers have borne the brunt of retail volatility, significant price increases and failing energy suppliers — and where confidence is low.
Meanwhile, in the US, the energy transition is still at an early stage, and consumer confidence is relatively high. As investment and policy grows, a focus on maintaining consumer confidence must be a priority or clean energy ambitions may be at risk.
Consumers are still committed to clean energy
Despite their crisis of confidence in energy, we found that consumers are still inspired and committed to doing their part in building a cleaner future. Forty percent are considering purchasing energy-efficient appliances, and about half are considering an EV. But there’s a gap between intention and action. Consumers say that making such changes is too difficult, too expensive or just confusing.
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Success will require leaders from across the energy ecosystem to step forward, break down barriers and simplify our collective energy transition journey.
So how do we make it easier and more affordable for consumers to act on those intentions that will support a more sustainable future? It starts with recognition that the energy transition is everyone’s responsibility. According to Serge Colle, EY Global Energy & Resources Industry Market Leader, “Many organizations are approaching the energy transition in isolation, with little thought for the holistic customer experience. Success will require leaders from across the energy ecosystem to step forward, break down barriers and simplify our collective energy transition journey.”
Chapter 3
Collaboration around four key actions
A concerted effort is needed to improve the energy experience and boost consumer confidence.
All players in the energy ecosystem need to come together to give consumers the energy experience they want. To get started, there are four key actions business leaders need to take:
1. Collaborate to create consumer-centric ecosystems
Building an energy system that inspires confidence requires an ecosystem working toward a common goal. We need a similar approach to accelerate the adoption of clean energy solutions.
EY research shows that when consumers consider purchasing new energy products or services, they turn to a wide variety of providers. Energy companies, solar installers, renewable charities, home improvement retailers and large technology companies make up the top five. But consumers have to engage with many more stakeholders as they navigate new solutions.
Consider the current process to install rooftop solar panels. In most markets, this involves a complicated, disjointed and expensive journey of exploring options, purchasing the right system, obtaining permits, finding an installation company, and making sure your energy provider will enable you to sell excess generation back to them. Imagine if these different companies and government bodies could come together and reinvent the experience into one that’s effortless and more affordable. More consumers are likely to engage, take action and be inspired in the potential of clean energy solutions.
Key questions for:
- Energy providers: How can we create a one-stop shop for consumers adopting new energy solutions such as solar panels?
- Financial services: What new financing approaches and partnerships can increase the accessibility and scope of clean energy options for consumers?
- Technology companies: How can connected home products (e.g., smart thermostats), platforms and data be shared to make sustainable choices effortless for consumers?
- Government: How can funding programs incentivize cross-sector collaboration around consumer education and engagement?
2. Target lifestyles and individual actions
The EY Future Consumer Index shows that consumers are committed to making sustainable lifestyle changes that go beyond energy. Over three-quarters regularly recycle packaging from products, carry reusable shopping bags and try to conserve water. Kristina Rogers, EY Global Consumer Leader, says “Consumers are increasingly driven by social and environmental values, and 64% are prepared to behave differently if it benefits society.”3
How can campaigns tap into these lifestyle choices to encourage and support energy-efficient behavior and investment? Leveraging insights about consumer behavior across industries can help, especially as consumers’ energy experiences increasingly span multiple products, providers and channels.
Consumers are increasingly driven by social and environmental values, and 64% are prepared to behave differently if it benefits society.
A deeper understanding of different energy consumer mindsets can also help design clean energy solutions that add more value across people’s lives. Our research identified five personas with varying approaches to sustainability.
Winning over consumers will require education, sales and marketing that is targeted, personalized, and that drives home energy transition benefits. And the reward for businesses that invest in this differentiation is significant.
Key questions for:
- Energy providers: How can we tailor experiences and move away from a one-size-fits-all approach to consumers?
- Real estate and property managers: How can we make it easier for people in diverse circumstances, including those living in community housing, renters and those running small businesses, to access clean energy solutions that fit their needs?
- Retail and consumer products companies: How can we partner with other organizations to help consumers understand different clean energy solutions and make better choices that fit their lifestyle?
- Government: What funding options, incentives or education programs can help address the barriers that low-income consumers face when trying to be more sustainable?
3. Value the energy intangibles
The Netherlands’ ability to inspire consumer confidence while still accelerating clean energy highlights the importance of emphasizing the broader benefits of the energy transition, beyond the basics of reliability and safety. Showing how renewables and greener solutions can deliver other important consumer intangibles, including community and social impact, choice, convenience and comfort, could be a game changer in winning consumer confidence in the energy transition. But it won’t be easy in an industry where much of the investment is in infrastructure that is largely invisible to consumers. We’ll need to see a united effort from businesses, government and community organizations to reframe messaging and inspire consumer confidence. Organizations that master this can also create differentiated value propositions and new revenue opportunities.
Key questions for:
- Energy providers: How can we build more sophisticated marketing and sales campaigns that highlight the energy intangibles that matter to consumers?
- Infrastructure developers: What opportunities exist to expand consumer and community engagement early in large infrastructure projects to ensure clean energy investments deliver personal value?
- Technology companies: How can new business models (e.g., virtual peer-to-peer energy trading communities) engage consumers and create new types of value?
- Government: How can communications and awareness campaigns put the spotlight on the economic and social benefits of the energy transition?
4. Master behavioral science
People can be paradoxes. According to EY research, about half of us think it’s okay to offset our positive energy actions with negative ones. For example, consumers who purchase smart thermostats to save energy may end up using more because it’s easier to adjust heating or cooling to make their homes more comfortable.4 It’s called the rebound effect, and it highlights a key flaw in current communications and engagement. Focusing purely on sustainability messaging or price, without considering behavioral science, isn’t enough to drive positive consumer changes and build confidence in the energy transition.
Behavioral science is a growing focus for academic research and it is integral to many industries, helping tap into values to influence consumers’ actions. It’s also key to many public health messages, including during the COVID-19 pandemic. The most successful campaigns to encourage people to stay home, social distance, wear masks and get vaccinated appealed at an emotional level, created personal accountability, communicated desired behavior change and linked it to good citizenship.
Adopting these approaches can help providers, government and other stakeholders create more compelling experiences, supported by agile feedback loops that evaluate results and drive improvements.
Key questions for:
- Energy providers: What consumer insights, skills and collaborations can help build behavioral science capabilities into solution design, marketing, sales and customer service?
- Academia: How can our research insights be directly applied to drive long-lasting sustainable consumer behaviors?
- Technology companies: How can our wealth of consumer data and behavioral insights help shape sustainable behaviors?
- Government: What policy approaches can enable an energy ecosystem to share consumer data to help deliver sustainability outcomes while addressing security and privacy concerns?
Counteracting a crisis of consumer confidence
The ECCI should sound alarm bells around our ability to meet climate targets. Even soaring investment in clean energy infrastructure won’t pave the way to a new energy future if consumers aren’t convinced that the journey will yield benefits. The success of the energy transition will require a concerted cross-sector, cross-government effort — and it depends on rebuilding consumer confidence now.
When energy hits home, will providers be left out in the cold?
The energy transition will drive change into every aspect of consumers’ lives, and there are significant opportunities for energy providers that act now.
Summary
A new Energy Consumer Confidence Index warns that energy transition progress may stall due to consumers’ lack of confidence in its benefits. Now is the time for energy providers and the broader energy ecosystem to improve the energy experience and boost consumer confidence. Collaboration around four key actions will accelerate our journey to a better energy future.
