Friday, May 2, 2014

Energy: Empowering the Consumer? A talk by MP Laura Sandys

On May 1st the OUCE hosted a talk by MP Laura Sandys (Conservative, South Thanet) with an elaborately long title: "From the other end of the telescope: mixed energy generation, plug & play grid - empowered consumers".

Laura Sandys with me

In her talk, the MP argued that there is not enough innovation in the UK energy sector. The sector is privatized but behaves like a 1970s public enterprise, she said. There are three main problems with the sector according to her: the system design may not be appropriate for the circumstances, there is lots of systemic waste (with 25-35% average heat loss in UK electricity production), and people do not understand their energy bills, making it difficult for them to make smart decisions.

She then focused on the third point for the majority of her talk. Many consumers in the UK, she said, do not understand the basic units of energy measurement. Their bills come to them with kilowatts and they do not know what that means in terms of their consumption. How many dishwasher cycles does this represent? How many pizzas? How many hours on TV? In addition, she said, consumers often do not know that turning on their heating during January / February peak hours can cost them six times more per kilowatt than outside of the peak. This lack of information, she said, makes it difficult for consumers to make smart energy-saving decisions.

In turn, energy companies have a problem ensuring that lights do not go off during peak hours. To do so, they keep large amounts of expensive excess capacity that they only use during the peak. This is in part why peak electricity prices are so so much higher than off-peak prices. At the same time, low-income consumers who spend too much on their electricity bill cannot afford to go out and spend their money in the local economy.

Sandys offered a solution to this problem: add more marketing experts to energy companies who understand consumers and can communicate with them effectively. They could create solutions such as vouchers that allow them to take 50 pounds off of their energy bill if they go to Pizza Hut during peak hours. This would save money to energy companies money who would not need to run excess capacity and to consumers who would not pay for heating during peak hours. It would also boost the local economy. What is there not to like?

The reactions from the audience were mixed. Some asked why this has not yet happened it if is such a great idea? Others noted that similar strategies have unsuccessfully been tried in the past. Sandys replied saying that the problem is in the people who are in charge of marketing at big energy companies. New marketing experts should be hired, she said.

Perhaps Sandys is right and her idea should be tried. But, instead of attempting to change the practices of large energy behemoths, approaching some of the myriad of smaller energy companies, such as LoCO2 Energy, might be a better strategy. If these companies find it profitable to engage in such activities, the large ones will no doubt follow suit.

However, the issue of unschooled consumers that Sandys described seems to have deeper roots. That is, does the UK have an education problem if people do not understand kilowatts? I leave that up for discussion.


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