Green tariffs alone not enough to prompt UK energy consumers to switch supplier
Over three-fifths (62%) of UK energy consumers are more likely to purchase a product or service that is sustainable, with over 40% of under 35s willing to pay a premium for sustainable energy, a new EY survey reveals today.
The survey, which canvassed the views of 2,000 UK energy consumers to explore their attitudes towards sustainability, reveals that while these changing attitudes present an opportunity for energy companies, they also bring risks – almost a third of respondents (32%) said they had stopped using a product or service because it was non-sustainable.
In addition, a small but significant proportion of energy consumers (12%) say that their primary reason for switching supplier was for sustainability-related reasons – three times more than for customer services-related issues.
Green tariffs in isolation no longer enough
But offering green tariffs alone is not enough to attract or retain customers, and to demonstrate true green credentials – that differentiate a company from the competition – suppliers must commit to sustainability across all their activities.
The UK Government’s £12bn Ten Point Plan for a Green Industrial Revolution, while continuing the UK’s move to low carbon sustainable power production – supporting nuclear, solar and offshore wind etc – also puts consumers firmly at the heart of the energy debate with announcements such as the banning of gas boilers in new homes from 2023-2025 and ending the sale of new petrol and diesel cars and vans from 2030.
With sustainability now at the top of the Government’s agenda, a mainstream concern in the home and a key driver in purchasing decisions, energy companies need to demonstrate their green credentials clearly. But with many suppliers already providing green tariffs, this is no longer enough to differentiate companies from the competition.
Energy companies need to catch the attention of consumers by clearly demonstrating an intrinsic commitment to sustainability across all their activities, not just specific products in isolation, or risk losing those customers to more sustainable competitors.
Consumers want to reduce energy usage but don’t always know how
Nearly 70% of consumers surveyed said that they wanted to use less energy for heating and appliances in their homes over the next five years but don’t always know how to.
One key reason is a lack of information, with nearly half of respondents (49%) acknowledging this when purchasing appliances and one-third experiencing the same challenge when it comes to choosing a gas or electricity supplier. Over half of those polled (55%) also said that they want a better way to gauge the impact of their behaviours, with the same percentage stating that they would like to understand their individual carbon footprint.
Another barrier for consumers is the perceived complexity of switching supplier. Over half of respondents (51%) said they would switch to a sustainable energy company if suppliers made the process simpler and easier to understand.
Yunus Ozler, EY Energy Consulting Leader, adds: “Consumers want to clearly understand how much energy they are using across their household appliances and even domestic transport, and what their overall carbon footprint is. By providing more information on consumers’ environmental impact, energy companies can build trust and create powerful nudges to change consumers’ behaviours.
“But to really facilitate a significant change in consumer behaviours, energy companies must try and remove the complexity and lack of options around their products and services that act as barriers to acting sustainably, making it easier for consumers to turn awareness into action.”
Younger consumers more willing to pay green premium
Sustainability is now a vital factor influencing younger customers’ purchasing behaviour. Over 40% of under 35s surveyed were willing to pay a premium for a sustainable energy suppliers, falling to 26% for over 35s. Forty-two per cent of all respondents said they would like to buy sustainable products and services from an energy supplier, ahead of providers from other sectors such as tech companies and retailers.
Ozler adds: “These green conscious younger consumers are likely to play an increasingly important role within the home and, to capitalise, energy companies must respond by providing younger customers with carefully targeted products and services that will satisfy demand and generate greater customer lifetime value.”
Supporting local suppliers
While climate change and sustainable energy production is a global concern, energy companies should not overlook the local focus of many households. Nearly two-thirds of consumers polled prefer to purchase products and services from local suppliers and 63% indicated that COVID-19 made them more aware of supporting local communities. This trend translates into purchasing energy – with 76% of respondents indicating that they would rather buy and use sustainable energy generated in their community.
This could be an opportunity for energy companies to offer community energy schemes and demonstrate their local presence. In the future, there may be opportunities for energy companies to help consumers generate and/or distribute power locally through community energy projects which benefit from selling excess energy back to the grid.
Powering a sustainable future – what lies ahead?
Energy companies are in an acute period of transformation as they seek to become leaders in a net zero world, while simultaneously experiencing cost and margin pressures. However, persuading consumers to adopt more sustainable behaviours and pay a green premium for more sustainable products and services may not be such a big task as anticipated.
Investment in more sustainable offerings can, rather than merely adding costs, actually generate returns through higher margins. Being able to differentiate themselves in an increasingly commoditised market offers energy suppliers a powerful opportunity to stand out from their competitors.