CBI energy conference 2011 - Jon Bentley

© 2011 IBM Corporation

How can we encourage smarter energy demand?

Jon Bentley – Smart Energy Lead, IBM United Kingdom Limited14th June 2011


IBM | Smarter Planet

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Smarter Energy Demand:

What do we mean by it?

Why do we need it?

How do we get it?



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Savvy:More sensible use of a scarce and expensive resourceCut usage, waste, cost … and the need to build more capacity

Intelligent: Usage choices better matched to supply challengesEmissions, peak, variability … reduced need for excess capacity

What do we mean by “Smarter Energy Demand”?

Smart: Dynamic responses to supply availability and mix Time of use shift, foregone demand … resilience and balance

All of the above



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of UK electricity to come from renewable sources in 2020 to meet climate change targets(1) up from 7% in 2010.(2)

32%UK electricity demand will exceed the capacity of present power stations, delayed only until 2020 by plants under construction.(3)

2016of new generating capacity required by 2020 to meet demand and renewable targets with only 9 GW under construction.(4)

47 GW

Increase in electricity required for 1/3 of Britain’s passenger cars to be EVs, requiring equivalent of 8 new nuclear reactors.(6)

18%required by 2025 to upgrade Britain’s power infrastructure equating to £8,977 for every household in the UK(7).

£233.5bn

Sources: (1) DECC renewable energy consultation; (2) Renewables International: UK energy statistics for 2010-2011 (3)(4) BERR Energy Markets Outlook; (5) IBM UK Consumer Survey 2010; 473 respondents; (6) IBM analysis; (7) Ernst & Young Study / IBM Analysis

of people are correctly aware of plans to introduce smart meters, 14% incorrectly state there are no plans, and 77% don’t know. (5)

9%

A period of extraordinary change …



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… bringing complex and inter-related challenges

Integrating more variable supply

Maintaining security of supply

Limiting increases in cost of supply

Curbing demand peaksand growth

Meeting emissions commitments

Increasing customerengagement



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Why do we need Smarter Energy Demand?

Increasing supply – building more plants and burning more fuel –to meet unconstrained demand is no longer sustainable

Marginal changes in demand – waste avoidance, voluntary efficiency measures and consumption cuts – to reduce the need for new supply will not be enough

Smart solutions to managing demand – dynamic and time-of-day pricing and active demand management - will be needed

These will require market reform, smart technology, customer engagement and collaboration



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We must use all the levers we have to meet a challenge of this scale

Demand growth: ~345 TWh ~400 TWh ~555 TWh2010 2020 2050

Security of electricity supplyParliamentary Group for Energy Studies – February 2011

Typical information driven change: 6-10% reduction – before tail-off after 6(?) months

Olympic Peninsular Automating Home Power Usage Trial (2006, IBM / PNNL) – 10% reduction in bills, 15% reduction in average peak and 50% reduction in critical peaks

+16% +61%Average increase over 2010 Demand:



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How do we get Smarter Energy Demand?



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Senior UK energy company executives clearly believe they should be doing more to influence customer behaviour

55%32%

11%2%

Yes, a lot more

Yes, a little more

No, doing enough now

Don't know

Source: April 2011 Utility Week Survey commissioned by IBM. Web interviews with 47 managers, senior managers and directors of energy companies, 65% with > 10 years in the industry

Qu 8A: Should energy companies be doing more to shape consumer behaviours?



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Energy company executives favour price / tariff mechanisms and education programmes

76

66

63

54

46

44

20

10

Price incentives for energy reduction

Widescale education programmes

Encouraging switching to green tariff

School and community programmes

Subsidies and incentives for insulation

Encouraging micro generation

Fine over use of energy

Limit energy available to individuals

Qu 8B: If yes, then what should they be doing?

Source: April 2011 Utility Week Survey commissioned by IBM. Web interviews with 47 managers, senior managers and directors of energy companies, 65% with > 10 years in the industry



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Globally, energy customers respond to cost outcomes more than cost drivers and significantly more than environmental issues

Percent of respondents that would be likely to change their energy usage patterns based on specific influences

Source: IBM 2011 Global Utility Consumer Survey. 17 countries 8118 individuals; Sample Size = 6045 (Group I and Group II only).

18%

32%

36%

43%

43%

51%

51%

55%

62%

0% 10% 20% 30% 40% 50% 60% 70%

Influence of friends

Influence of family

To forestall future powerplant construction

To reduce environmentalimpact

To reduce new oil and gasexploration

To reduce the consumptionof natural resources

To strengthen the country'seconomic future

To decrease dependence onimported energy

To save money

!

NB: Impact of US, China and Japan



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-28%

-3%

2%

0%

9%

-2%

11%

18%

-31%

-6%

7%

3%

20%

19%

28%

38%

-31%

-5%

-2%

4%

21%

27%

36%

45%

-40% -30% -20% -10% 0% 10% 20% 30% 40% 50%

Reducing environmental impact

Friends doing it

Family is doing it

Avoid new power plant construction

Reducing consumption of natural resources

Improving economic future for nation

Saving money

Achieving national energy independence

Percent deviation from responses of 18-24 year olds

25 - 44 45-64 65 or older

Differences in likelihood of changing energy usage patterns based on specific influences, compared to that for the 18-24 year old age group

Influence of environmental concern is much higher among younger consumers, and friends play a

slightly bigger role in what matters

Economic, financial, and resource concerns become rapidly more

important with age

The young care more about the environment and what friends are doing whilst the economic and financial concerns increase with age

Source: IBM 2011 Global Utility Consumer Survey



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More understanding and awareness of energy topics is strongly correlated with willingness to adopt new behaviours …

43% 42%

52%48%

52%58%

67% 69%75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Willing to shareinformation on energy

usage

Likely to change energyusage patterns to

achieve goals

Likely to activelyleverage new

information aboutconsumption

No or MinimalKnowledge

ModerateKnowledge

Strong Knowledge

Percent of respondents expressing their likelihood of taking on specific behaviours or behavioural changes

Sample Size = 6045 (Group I and Group II only); population-weighted.Source: IBM 2011 Global Utility Consumer Surveyc

Knowledge of energy topics



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… but customer knowledge is poor across all behavioural profiles, with little variation across age groups

Percent of respondents that did not know the answer to the specified question or statement


41%44%

55%

77%

27%

31%

48%

72%

29%

34%

45%

64%

21%18%

37%

58%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Meaning of $/€ per kWh(or equivalent)

What "renewableenergy" is

What a "time of usepricing" is

What a "smart meter" is

Passive Ratepayers

Energy Epicures

Frugal Goal-seekers

Energy Stalwarts

Sample Size = 6045 (Group I and Group II only).Source: IBM 2011 Global Utility Consumer Survey

Disposable Income Available for Energy Choices High

Dec

isio

n-M

akin

g In

itiat

ive

Take

n Hig

h

PassiveRatepayer (PR)

Frugal Goal-Seeker (FG)

Energy Stalwart (ES)

Energy Epicure (EE)

22%

33%

20%

24%

Disposable Income Available for Energy Choices High

Dec

isio

n-M

akin

g In

itiat

ive

Take

n Hig

h

PassiveRatepayer (PR)

Frugal Goal-Seeker (FG)

Energy Stalwart (ES)

Energy Epicure (EE)

22%

33%

20%

24%

What hope for time-of-use pricing?



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Customer views of energy companies are not an ideal platform for the collaboration and innovation required …

7%

9%

13%

14%

16%

16%

26%

UtilityProviders

Pay TVProviders

OnlineRetailers

InsuranceProviders

TelecomProviders

GroceryRetailers

Banks

Understands me and offers products / services that are aligned

with my needs

Approaches me with innovative products or services

Treats me like an individual and delivers a personalized

experience

6%

9%

10%

16%

17%

20%

21%

UtilityProviders

PayTVProviders

InsuranceProviders

TelecomProviders

OnlineRetailers

GroceryRetailers

Banks

6%

9%

12%

14%

16%

21%

23%

UtilityProviders

InsuranceProviders

Pay TVProviders

GroceryRetailers

Banks

OnlineRetailers

TelecomProviders

…levels of trust and service satisfaction must be increased



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Individual provide information to inform choice

Society create mass pressure for behaviour change

Market use price signals and incentives

How do we get Smarter Energy Demand?

System automate via smart grid and appliances

Collaboration change the relationship between utility and customer

Building trust is key to all of these actions



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www.ibm.com/think/uk

Thank you

CBI energy conference 2011 - Jon Bentley

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