Presentation by Jon Bentley,

1. Jon Bentley – Smart Energy Lead, IBM United Kingdom Limited
14th June 2011
How can we encourage smarter energy
demand?
© 2011 IBM Corporation

2. IBM | Smarter Planet
Smarter Energy Demand:
What do we mean by it?
Why do we need it?
How do we get it?
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3. IBM | Smarter Planet
What do we mean by “Smarter Energy Demand”?
Savvy:
More sensible use of a scarce and expensive resource
Cut usage, waste, cost … and the need to build more capacity
Intelligent:
Usage choices better matched to supply challenges
Emissions, peak, variability … reduced need for excess capacity
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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A period of extraordinary change …
32% 2016 47 GW
of UK electricity to come from UK electricity demand will exceed of new generating capacity
renewable sources in 2020 to the capacity of present power required by 2020 to meet demand
meet climate change targets(1) up stations, delayed only until 2020 and renewable targets with only
from 7% in 2010.(2) by plants under construction.(3) 9 GW under construction.(4)
9% 18% £233.5bn
of people are correctly aware of Increase in electricity required for required by 2025 to upgrade
plans to introduce smart meters, 1/3 of Britain’s passenger cars to Britain’s power infrastructure
14% incorrectly state there are no be EVs, requiring equivalent of 8 equating to £8,977 for every
plans, and 77% don’t know. (5) new nuclear reactors.(6) household in the UK(7).
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
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… bringing complex and inter-related challenges
Integrating Maintaining Limiting
more variable security of increases in
supply supply cost of supply
Increasing Curbing Meeting
customer demand peaks emissions
engagement and growth commitments
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6. IBM | Smarter Planet
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
Security of electricity supply
Parliamentary Group for Energy Studies – February 2011
2010 2020 2050
Demand growth: ~345 TWh ~400 TWh ~555 TWh
Average increase over 2010 Demand: +16% +61%
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
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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
Qu 8A: Should energy companies be doing more to shape consumer behaviours?
2%
11%
Yes, a lot more
Yes, a little more
55% No, doing enough now
32%
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
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Energy company executives favour price / tariff mechanisms and
education programmes
Qu 8B: If yes, then what should they be doing?
Limit energy available to individuals 10
Fine over use of energy 20
Encouraging micro generation 44
Subsidies and incentives for insulation 46
School and community programmes 54
Encouraging switching to green tariff 63
Widescale education programmes 66
Price incentives for energy reduction 76
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
10 © 2011 IBM Corporation

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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
To save money 62%
To decrease dependence on
55%
imported energy
NB: Impact of
To strengthen the country's US, China
51%
economic future and Japan
To reduce the consumption
51%
of natural resources
To reduce new oil and gas
43%
exploration
To reduce environmental
43%
impact
To forestall future power
36%
plant construction
Influence of family 32%
Influence of friends 18%
!
0% 10% 20% 30% 40% 50% 60% 70%
Source: IBM 2011 Global Utility Consumer Survey. 17 countries 8118 individuals; Sample Size = 6045 (Group I and Group II only).
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The young care more about the environment and what friends are
doing whilst the economic and financial concerns increase with age
Differences in likelihood of changing energy usage patterns based on specific influences,
compared to that for the 18-24 year old age group
45%
Achieving national energy independence 38%
18%
36%
Saving money
Economic, financial, 28%
and resource concerns 11%
become rapidly more 27%
Improving economic future for nation important with age 19%
-2%
21%
Reducing consumption of natural resources 20%
9%
4%
Avoid new power plant construction 3%
0%
-2%
Family is doing it 7%
2%
-5%
Friends doing it -6% Influence of environmental concern
-3% is much higher among younger
-31% consumers, and friends play a
Reducing environmental impact -31%
-28% slightly bigger role in what matters
-40% -30% -20% -10% 0% 10% 20% 30% 40% 50%
Percent deviation from responses of 18-24 year olds
25 - 44 45-64 65 or older
Source: IBM 2011 Global Utility Consumer Survey
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13. IBM | Smarter Planet
More understanding and awareness of energy topics is strongly
correlated with willingness to adopt new behaviours …
Percent of respondents expressing their likelihood of taking on specific
behaviours or behavioural changes
Knowledge of energy topics
80% 75% No or Minimal
67% 69% Knowledge
70%
Moderate
58% Knowledge
60%
52% 52%
48% Strong Knowledge
50%
43% 42%
40%
30%
20%
10%
0%
Willing to share Likely to change energy Likely to actively
information on energy usage patterns to leverage new
usage achieve goals information about
consumption
Source: IBM 2011 Global Utility Consumer Surveyc Source: IBM 2011 Global Utility Consumer Survey
Sample Size = 6045 (Group I and Group II only); population-weighted.
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… but customer knowledge is poor across all behavioural profiles,
with little variation across age groups
High
Decision-Making Initiative Taken
Frugal
Goal-Seeker (FG)
Energy
Stalwart (ES)
Percent of respondents that did not know the
22% 20%
answer to the specified question or statement
80% Passive Energy 77%
Ratepayer (PR) Epicure (EE)
33% 24%
72%
Passive
70%
64%
Ratepayers
Disposable Income Available for Energy Choices High
58%
60%
What hope for 55%
Energy
50% time-of-use pricing? 48%
45% Epicures
44%
41%
40% 37%
34%
29%
31% Frugal Goal-
30% 27% seekers
21%
20% 18%
Energy
10% Stalwarts
0%
Meaning of $/€ per kWh What "renewable What a "time of use What a "smart meter" is
(or equivalent) energy" is pricing" is
Source: IBM 2011 Global Utility Consumer Survey Source: IBM 2011 Global Utility Consumer Survey
Sample Size = 6045 (Group I and Group II only).
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Customer views of energy companies are not an ideal platform
for the collaboration and innovation required …
Understands me and offers Treats me like an individual and Approaches me with innovative
products / services that are aligned delivers a personalized products or services
with my needs experience
Banks 21% Banks 26% Telecom
23%
Providers
Grocery Grocery Online
20% 16% 21%
Retailers Retailers Retailers
Online Telecom
17% 16% Banks 16%
Retailers Providers
Telecom Insurance Grocery
16% 14% 14%
Providers Providers Retailers
Insurance Online Pay TV
10% 13% 12%
Providers Retailers Providers
PayTV Pay TV Insurance
9% 9% 9%
Providers Providers Providers
Utility Utility Utility
6% 7% 6%
Providers Providers Providers
…levels of trust and service satisfaction must be increased
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16. IBM | Smarter Planet
How do we get Smarter Energy Demand?
Individual provide information to inform choice
Society create mass pressure for behaviour change
Collaboration change the relationship between utility and customer
Market use price signals and incentives
System automate via smart grid and appliances
Building trust is key to all of these actions
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Thank you
www.ibm.com/think/uk
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