Death by a thousand cuts. Or not.

Death by a thousand cuts. Or not.

Much has been written about the utility industry’s “death spiral.” I’ve got some data points to add to that scenario … and a possible solution.

On the commercial customer front: the largest utility customers – companies, facilities and manufacturing plants that use a lot of energy – are increasingly going renewable, and doing it either without their utility or with their utility as an afterthought.

In short: the business community is taking some of the money it used to spend with utilities and either saving it or spending it elsewhere. Why is this happening? It’s not that they dislike their utilities: 72% of business decision-makers polled in our B2B Pulse study ranked themselves as “satisfied” with their utility. It’s because they’re committed to sustainability. And they’re committed to sustainability because:

  1. They don’t see a business case for a 2-degree Celsius increase in global temperatures.
  2. They know their consumers expect them to be good environmental stewards.
  3. In many cases, they save money on their energy costs by buying renewables directly.

We see a similar story on the residential side: 66% of Americans say they’re satisfied with their utility … but 33% are interested in “leaving” their utility for another non-utility option (such as Google, Comcast or SolarCity). And once they buy a smart thermostat, it opens a Pandora’s Box of possibilities for them – and the percentage who would be interested in procuring energy from someone other than their current utility jumps to 47%. After all, this wonderful, sexy new device is doing all kind of things – automatically – that their utility has never done for them … what else might be out there, outside of utility land?

In short, utilities are going to continue to see little bits of revenue fade away, from both commercial customers and their larger, more affluent residential customers. In my mind, the closest thing to a silver bullet for replacing that lost revenue is EVs.

I love that approach because it involves pulling revenue away from another industry’s pocket altogether vs. the painful, brand-damaging process utilities go through now to change the rate rules for renewables or grid access. In that process, they essentially demand that they get paid in a way that fits under their old business model instead of finding a new revenue model that feels fair to everyone. It just makes utilities look so old-school, greedy and demanding – not like companies who actually care about their customers and want to serve their best interests.

EVs, on the other hand, allow you to send a signal that you’re forward-thinking, you’re innovative, and you’re trying to create the future for your customers … and they allow you to earn money according to your current business model if you want (although you could come up with some innovative new rate structures that are a win-win for you and your customers).

Based on a discussion about this at an EEI meeting I spoke at last week, there seem to be two schools of thought on this among utilities:

  1. We should move the market forward by installing charging stations everywhere.
  2. We should wait until sales of EVs pick up before putting in charging stations … because who’s going to pay for all that?

Here’s our point of view:

  1. In the categories where brands and retailers have sent a clear market signal that “this is how we do it,” green products have been widely accepted – specifically, lighting, cleaning products and paper products. There are many green options at shelf now, and that’s given consumers the social norming signal that it’s OK to buy them … in fact, it’s what we do around here.
  2. Thus, deploying charging stations all over your service territory sends the same social norming signal. It tells your consumers that this is the new normal … this is how we do it now.
  3. This signal will also calm one of the largest barriers to EVs: range anxiety. Yes, the bulk of charging for those who have EVs now is done at home or at work … but if you haven’t bought an EV yet, you don’t actually know that and the fear of being stranded trumps the facts about how charging is actually done. If people can see that there are charging stations all over, just like gas stations, it tells them they won’t be stranded and overcomes that objection.
  4. You shouldn’t wait for car dealers to push EVs to market. They make money on servicing cars, not selling them … and EVs don’t need oil changes or much else in the way of service. So until they change their business models, they’re disincentivized to push them.

When I advocated for this at the EEI meeting last week, one person said, “Well, it seems like a really expensive way to go at it.” I have two responses to that: First, I’d think of it as a branding campaign and if you have budget for that, pull the costs for the chargers out of that (I realize that may not cover the entire cost … but utilities are terrific at infrastructure development, so you should be able to figure out how to get this done). Lastly, yes it’s expensive. But so is death by a thousand cuts. And that’s a lot more painful.

 

Suzanne Shelton

About Suzanne Shelton

Suzanne Shelton is President and CEO of Shelton Group, the nation's leading marketing agency focused exclusively on energy and the environment. Drawing on her extensive knowledge of the industry, Suzanne provides unparalleled strategic insights in her writing, research, and client work. Suzanne is a guest columnist in multiple publications and websites, such as GreenBiz.com, and she speaks at over 20 conferences a year, including ACEEE, AESP, Greenbiz Forum, and Sustainable Brands.

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1 Comment

  1. Great post, Suzanne. The more I read about EVs, the more convinced I am that we’ll all be driving them within a decade. Yeah, it’s a great opportunity for forward-minded utilities to lead.

    Reply

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