The Smart Grid in Europe: The Impact of Consumer Engagement on the Value of the European Smart Grid

Abstract: Smart grid technology is promising significant increases in efficiency for the electricity industry, savings for end-consumers and associated reductions in CO2 emissions for society. Yet smart grids in Europe are developing slower than expected. This work describes the drivers and barriers for the development of the smart grid in Europe and investigates how to increase the value creation for utilities, consumers and society through the maximization of consumer engagement with smart grid technology. Consumer engagement has a profound impact on the value of the smart grid for utilities and for society through estimated potential savings in construction of peak capacity of up to €9 billion per year from peak load shifting through demand response and up to an estimated €18.2 billion in annual savings from reduction in absolute power consumption. This study demonstrates that the business case for smart grids in Europe is much more obvious for society than for utilities; therefore, forward-looking regulators should drive the development of the smart grid in Europe by putting incentives and policies in place. Using the theories of Regulatory Engagement, Affordances, Transaction Cost, Social Comparison and Diffusion of Innovation and reviewing results from numerous demand response pilot tests around the world, this thesis discusses best practices and develops recommendations for utilities and for regulators. It concludes that utilities, regulators and intermediaries should not just focus on technology or financial incentives, but more importantly should improve the classical marketing function in utilities, i.e. understanding the behavior and fulfilling the functional and emotional needs of different consumer segments. According to the author, lowering or eliminating transaction costs for consumers and strengthening social interaction, norms and values around energy use are key levers for increasing consumer engagement, which are largely overlooked by utilities and regulators.