Some big numerical goal often drives energy policy. How much power do we need to ensure a reliable grid? How much transmission do we need to build to move the power? How many megawatts of renewable energy must we activate to achieve climate goals?
Creating a decentralized grid, however, necessitates different thinking. Distributed energy growth requires not so much setting a big goal as changing the way we deliver energy and creating the policy and market mechanisms to make it happen. It’s more about how than how much.
That means reforming a legacy utility system with deep pockets and a vested interest to resist change.
Almost anyone working in distributed energy resources (DERs) will attest that it’s a struggle. Head-to-head battles before state regulatory agencies to change the system are often lost. Witness California.
So, I was struck by a Boston Consulting Group (BCG) report that offers a different strategy for pressuring change: galvanizing consumers.
Why a demand-centric energy strategy
Turbocharging the Energy Transition by Boosting Customer Demand says that clean energy now relies heavily on a supply-led approach, focusing on government regulation and incentives. A demand-centric energy strategy — which activates consumers — would transform markets two to five times faster than supply-side drivers, according to the global management consulting firm.
The report says a demand-centric strategy could yield major results in solar, electric vehicles (EVs), and heat pumps. It also finds that three sectors respond best: residential and commercial buildings, transportation, and manufacturing.
A consumer-centric strategy may seem weird
Focusing heavily on customers is foreign to many energy companies. They are used to relying on government policy to form markets, and they tend to view their products as commodities rather than solutions to problems, the report says. The power industry also has a history of operating at a distance from customers. (Let’s face it, many in the industry still use the terms ‘end user’ and ‘ratepayer’ to describe customers.)
Creating markets in a more consumer-centric way is harder than it sounds. The report cites a disconnect between what consumers say they want and what they choose to do. While 80% of consumers studied express concern about sustainability, very few translate their concerns into purchase decisions.
In truth, most people still don’t think about energy and too many are misinformed. Consider the UK survey where drivers answered only two out of 10 questions correctly about EVs. Energy and Climate Intelligence Unit (ECIU), a non-profit that commissioned the EV research, warned that a “constant stream of EV misinformation” is misleading consumers about EV costs, safety and environmental effects.
Consumers as advocates for distributed energy
While demand-centric strategies might be hard, they are not impossible. BCG says it uncovered 65 energy-related offerings from companies and governments that made it work.
The report offers several suggestions on how to create a demand-led industry, including:
- Focus on a positive narrative
- Zero in on enablers of progress
- Smooth the customer journey
- Foster industries and ecosystems
- Keep public perception in mind
BCG doesn’t suggest doing away with supply-driven approaches. After all, in a highly regulated industry like electric power, government policy plays a big role in determining markets. But the two approaches — demand and supply — could bolster each other. If it works, imagine a large new constituency accompanying DER policy advocates through the door when they urge change before government decision-makers.
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