the consumer perspective - accenture · 2015-05-23 · australia 501 brazil 501 canada 500 china...

The New Energy WorldThe Consumer Perspective

Introduction

New customer drivers, new game-changing technologies and new government policies are driving energy (i.e., electricity, gas and oil) companies toward new challenges and opportunities. This “new energy world” has brought with it an increasing debate about threats to the free-trade world, as consumers increasingly voice their concerns over security of supply, energy cost and climate change.

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To help energy companies navigate the challenges and opportunities of this new energy landscape, Accenture has developed The New Energy World: The Consumer Perspective, an extensive global survey aimed at gaining a deeper understanding of the business implications and impacts of end-consumer concerns over energy-related issues. In addition, we gauged consumer expectations toward governments and industry leaders to address current and future energy challenges.

The findings provide fascinating insights into the public’s changing opinions, perceptions and priorities within the new energy world. Overall, the research yields four key findings, each of which brings significant implications for the future strategies of all participants in the energy value chain, including governments. These key findings are:

• Concerns over energy-related issues are high.

• Consumers are unwilling to undertake more significant changes on the demand side.

• Consumers favor supply-side efforts.

• Consumers demand greater government intervention in the energy market.

This paper examines each of the four findings in detail.

What is a high-performance business?Accenture defines high-performance businesses as those that:

• Effectively balance current needs and future opportunities.

• Consistently outperform peers in revenue growth, profitability and total return to shareholders.

• Sustain their superiority across time, business cycles, industry disruptions and changes in leadership.

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Methodology and sample

Countries/regions included in the survey, with numbers of participantsAustralia 501Brazil 501Canada 500China 501France 501Germany 500India 500Italy 500Japan 500

Mexico 500Middle East (three countries)

500

Netherlands 500Nordic region (four countries)

500

South Korea 500Spain 500United Kingdom 501United States 1,000

This quantitative research is based on a 20-minute survey conducted online in native languages with 9,005 consumers in 22 countries during November 2009. The consumer sample was spread across the gender, age and income range in each country, and was representative of the general population in all countries or regions except in Brazil, China, India, Mexico and the Middle East—where the sample was representative of the urban populations. Data collection was completed for Accenture by Gfk NOP.

Key finding No. 1Concerns over energy-related issues are high

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Consumers’ continuing concern over energy-related issues comes across prominently in our study. As Figure 1 illustrates, 90 percent are “extremely” or “somewhat” concerned about rising energy costs, closely followed by 83 percent worried about climate change, and 80 percent concerned about local air pollution. Two-thirds of consumers are worried about job losses in the energy sector, reflecting the impact of the global economic downturn.

Figure 1. Level of concern with energy-related issues (Extremely + somewhat concerned)

Figure 2. “Do you consider that the global economic downturn has increased your level of concerns with the following issues?”

Increase of energy costs 90%

Climate change

Local air pollution

Destruction of jobs in the energy sector

83%

80%

67%

Source: Accenture – The New Energy World: The Consumer PerspectiveBase: All respondents

Climate change 63%

Local air pollution 59%

Increase of energy costs 80%

Destruction of jobs in the energy sector

72%


The effects of the tough economic environment are further highlighted when we ask consumers whether their level of concern over energy issues has been increased by the downturn. Some 80 percent say the downturn has made them become more worried about rising energy costs (see Figure 2), while 72 percent say it has increased their concern over destruction of jobs in the energy sector. Almost two-thirds—63 percent—say it has made them more worried about climate change.

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However, as Figure 3 illustrates, despite voicing concern about rising energy prices, most consumers also are resigned to the fact that more expensive energy will be a fact of life in the next few years. Asked whether they expect to see energy prices rise by up to 20 percent in their own country to meet renewable energy deployment targets, 42 percent say they expect this to happen within less than five years, and another 32 percent expect it within 10 years. Only 15 percent think it will take more than 10 years for energy prices to rise by 20 percent.

Our global findings on consumers’ levels of concern over energy-related issues mask interesting variations at a national and regional level (see Figure 4). The people least worried about the risk of an energy shortage are in the Nordic region, where only 50 percent of consumers say they are “extremely” or “somewhat” concerned about an insufficient supply of energy—probably reflecting the region’s abundant hydro-electricity, gas and oil.

In contrast, the consumer population most worried about energy shortage is in France and South Korea, where 89 percent of consumers voice concern. In France, this concern might be attributed to media headlines over energy security due to the closure of several nuclear power stations for maintenance. Another interesting finding is Italy, which faces potentially severe problems with energy security in the coming years, and where only 77 percent of consumers are worried—roughly in line with the global average. Meanwhile, Brazil, which has a well-diversified energy mix including significant use of biofuel, has one of the world’s highest levels of concern over energy security, at 88 percent. This is possibly due to energy concerns related to Brazil’s rapid urbanization.

Figure 4. Are you concerned by the following…risk of energy shortage

89%France

89%South Korea

88%Brazil

87%Japan

87%China

86%India

86%Spain

72%United Kingdom

69%United States

65%Canada

59%Germany

59%Netherlands

50%Nordic region

76%Australia

76%Average

Middle East 84%

77%Italy

85%Mexico


(% extremely + somewhat concerned)

Figure 3.“Considering the current and future energy challenges, what do you think is the likelihood and timing of the following to happen in your country?”

Increase of energy price

15%

32%

42%

> 10 years

5 - 10 years

< 5 years


There is an increase of energy price up to 20 percent to meet renewable deployment targets

“Never” responses not shown

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In tandem with this concern over energy security, as Figure 5 illustrates, the overwhelming majority of respondents worldwide remain convinced that their country needs to reduce its reliance on fossil-fueled generation. Some 89 percent of consumers believe it is “important” or “very important” that their country achieves this shift—a finding that is virtually identical to a study we conducted into attitudes to nuclear generation in 2009,1 when the figure was 88 percent. This consistent response suggests that the global economic downturn has not affected consumers’ conviction that the role of fossil fuels in the overall generation mix needs to be reduced.

Again, these global findings mask variations at the regional and national level. As Figure 6 demonstrates, the proportion of consumers who believe that migrating away from fossil fuels is “important” or “very important” ranges from 77 percent in China to a high of 99 percent in South Korea. Many of these findings are consistent with our 2009 study2 of attitudes to nuclear power. However, some countries exhibit swings in the importance they attach to reducing the reliance on fossil fuels. These shifts may reflect the fact that our latest research was conducted shortly before the United Nations Climate Change Conference (COP15) in Copenhagen in December 2009, in the full glare of media attention on this issue. In Japan, where the government has recently committed to tough long-term carbon emission reduction targets, the proportion who thinks it is important to reduce fossil-fueled generation has surged from 74 percent to 95 percent. Similarly, Spain has gone from 86 percent to 94 percent. However, public opinion in several countries has moved the other way—including the United States, which has gone from 92 percent to 84 percent and Australia, which has gone from 92 percent to 85 percent—perhaps reflecting skeptical attitudes to COP15 in these countries ahead of the event itself.

Figure 5.“How important is it to you that your country reduces its reliance on fossil-fueled power generation?”

Very important

Not very important

Important

Not important at all

45%

44%

9%2%

43%

45%

10%

2%

89% 88%

11% 12%


Source: Accenture Multinational Nuclear Power Pulse Survey 2009

Figure 6. “How important is it to you that your country reduces its reliance on fossil-fueled power generation (i.e., coal-, oil- or gas-generated power)?”

South Korea 99%

95%Brazil

France 95%

Japan 95%

95%India

94%Spain

85%United Kingdom

United States 84%

85%Netherlands

China 77%

85%Nordic region

Germany 88%

85%Australia

Canada 87%

89%Average

90%Middle East

Italy 93%

96%Mexico


(% very important + important)

1. Accenture Multinational Nuclear Power Pulse Survey 2009.

2. Ibid.

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That said, the fact remains that most consumers worldwide believe it is important to rebalance the generation mix away from fossil fuels. Our findings show that the main reason for this view is the need to reduce emissions and address climate change—a requirement that 49 percent of consumers cite as the main rationale for reducing fossil fuel usage. However, it is interesting to note that 19 percent of consumers think the number one reason for moving away from fossil fuels is generating “green” jobs in their national economy (see Figure 7). The primary reason differs from country to country. In the United States, reducing reliance on foreign energy is the number-one reason, while in India, the production of green jobs is the first-choice reason.

Reduce emissions/address climate change 49%

Reduce reliance on foreign energy 32%

Produce green jobs 19%

Source: Accenture – The New Energy World: The Consumer PerspectiveBase: All respondents who consider that their country should reduce its reliance on fossil-fueled power generation

% first choice

Figure 7.“What are the three main reasons why you think it is important that your country reduces its reliance on fossil-fueled power generation (i.e., coal-, oil- or gas-generated power)?”

Japan 77%

Spain 60%

88%Netherlands

India 33%

United Kingdom 69%

71%Nordic region

77%Germany

China 67%

76%Australia

79%Canada

South Korea 74%

72%Average

France 75%

53%Middle East

Brazil 75%

United States 81%

72%Mexico

81%Italy


(% not at all + not very comfortable)

Figure 8.“How comfortable are/would you be with your national energy companies (i.e., electricity, gas, oil companies) being owned by foreign companies?”

In concert with the general concern over energy issues, there also appears to be significant apprehension in most countries about foreign ownership of energy companies. All countries except India have more than half of respondents claiming that they are not, or not at all comfortable with foreign ownership of national energy companies (see Figure 8). In reality, there already is significant foreign ownership in most of the countries surveyed, but it provides a significant warning to governments that there is consumer unease about further foreign control of energy companies.

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Key finding No. 2Consumers are unwilling to undertake more significant changes on the demand side

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Given that most consumers want to see their country reduce its reliance on fossil-fueled generation, how do they think this objective should be achieved? The answer is that most consumers want to have this done for them through the development of low-carbon energy sources, rather than doing more significant efforts themselves by changing to less energy-intensive behaviors and lifestyles. This finding resonates pretty well with our 2009 Consumer Observatory on Climate Change,3 where we had found that there was a gap between intentions and actions (see Figure 9).

As Figure 10 illustrates, if consumers are given a straight choice between easier availability of lower-carbon energy sources and making demand-side reductions themselves, 63 percent go for the former option. As we have already seen, they are concerned about energy consumption and climate change, but are relatively unwilling to take more significant personal action to address this. Interestingly, given that the cost of energy is their main concern, they seem to be overlooking the fact that the development of lower-carbon energy sources are likely to be more expensive than power generated from traditional fossil fuels.

Figure 9.“If an energy provider was proposing products/services that help reduce the level of carbon emission, would you be willing to switch to this provider if this was an option?”

Figure 10. “In your opinion, what actions should be considered the top priority in order to reduce your country’s reliance on fossil-fueled power?”

37% 63%

Use less energy: increase energy conservation (i.e., reduce energy waste) and efficiency of use (e.g., more efficient car, more efficient lighting)

Develop low-carbon sources of energy in your country such as biofuels for cars, solar and nuclear for electricity


I am readyto switch

I am not readyto switch

Yes, I have switched

I am currentlyconsidering switching

I have not switched and I am not considering switching

Source: Accenture End-Consumer Observatory on Climate Change, 2009 Base: All respondents

Electricity/naturalgas provider*

* Analysis conducted for the countries where switching of electricity/natural gas provider is an option

Oil provider

9%

15%

76%

12%

15%

73%

89%

11%

3. Accenture End-Consumer Observatory on Climate Change, 2009.

“Have you switched over the past 12 months or are you considering switching to a new energy provider?”

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Such contradictions clearly highlight the need for further consumer education around energy conservation and carbon emissions. Experience shows that consumers ultimately end up paying for energy-saving measures, but that demand-side solutions are a faster and more efficient way of achieving the same objective than changes on the supply side. They also can end up saving consumers money on their overall energy spend. So consumers are willing to “do their part,” but need to be educated and informed about what their role will be, and about how they can personally optimize the benefits for the environment and themselves.

This analysis is supported by our findings on the actions that consumers already are taking to reduce their energy consumption (see Figure 11). Some 89 percent say they already have turned down their heating or air conditioning at home, are using more energy-efficient light bulbs and are shutting down electric devices instead of leaving them on stand-by.

However, of those consumers claiming to have taken these relatively easy steps, more than a quarter admit they “could do more.” And significantly fewer have taken more difficult and inconvenient actions such as reducing long-haul flights (73 percent), cycling instead of driving (64 percent), improving their home insulation (59 percent) or buying a more energy-efficient car (46 percent).

So, given this cautious attitude, what factors are inhibiting and motivating consumers to take personal action? On both counts, the answer is financial considerations. In the light of our previous findings, it hardly is surprising that the main inhibitor is the relatively high cost of buying new products and installing systems, cited by 77 percent of consumers worldwide as one of the top-three barriers to action. This is followed at 56 percent by the difficulty of finding convenient alternative energy sources (see Figure 12).

Replace at least one of your appliances for a more efficient one

Reduce the number of long-haul journeys

Regularly use bike/public transportation/carpool instead of your car

Improve the level of your home insulation

Buy more energy-efficient car

Yes I have taken this action but could do better/more

Shut down electric devices instead of leaving them on stand-by

Use higher-efficiency light bulbs

Reduce heating temperature or the use of air conditioning at home

% YES

24% 65% 89%

25% 64% 89%

29% 60% 89%

28% 51% 79%

28% 45% 73%

24% 40% 64%

28% 31% 59%

23% 23% 46%

Yes I have already taken this action


Figure 11. “Please indicate whether you have already taken the following actions?”

Figure 12. “What may prevent you from taking more actions at your individual level in order to address the current and future energy challenges of your country?”

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Similarly, finance is the main motivator to action—as it proved to be in our previous survey in 2007.4 As Figure 13 shows, our findings are remarkably consistent in ranking lower bills, financial incentives and tax breaks as the main motivators, with very little change in the percentages for each. However, there is a significant rise in the influence of social pressure and broad national effort as a stimulus for action, up from 62 percent to 71 percent. And 61 percent agree that a factor new to our research—information and tools from employers—is an important motivator.

Social pressure/broad national effort

Information and tools provided by your employer

Taxes

Incentives

Savings on your bill 28% 66%

34% 56%

40% 39%

40% 31%

38% 23%

94%

90%

79%

71%

61%

60% 35%

52% 38%

38% 43%

24% 38%

% Somewhat + Very important


95%

90%

81%

62%

na

Somewhat important Very important


Source: Accenture End-Consumer Observatory on Climate Change

2010 2007

Figure 13. “How important would the following elements be to motivate you to take concrete actions to conserve energy and acquire more energy-efficient products and services?”

In line with the importance attached to financial motivators, most consumers also expect financial incentives to be offered within the coming decade to encourage them to use domestic electrical equipment at off-peak hours. Two-thirds (67 percent) expect such incentives to be proposed within the next 10 years, including 36 percent who anticipate them within the next five years. So a sizeable majority of consumers do believe that demand-side incentives will emerge over time (see Figure 14).

Financial incentives proposed

16%

31%

36%

> 10 years

5 - 10 years

< 5 years


Financial incentives are proposed to use domestic electrical equipment at off-peak hours

“Never” responses not shown

Figure 14. “Considering the current and future energy challenges, what do you think is the likelihood and timing of the following to happen in your country?”

4. Accenture End-Consumer Survey on Climate Change, 2007.

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Key Finding No. 3Consumers favor supply-side efforts

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While consumers ultimately expect to be offered demand-side incentives, their current preference is for supply-side changes that will provide them with easier-to-access, lower-carbon energy sources.

In line with our 2009 research study into attitudes to nuclear power,5 we find that nuclear is gaining growing acceptance as part of the mix. As Figure 15 illustrates, the past year has seen consumer opinion shift from “pure” renewable such as wind and solar power toward a mix of renewables and nuclear—with the result that 50 percent of consumers now believe nuclear should be part of the generating mix, either stand-alone or in combination with renewables. This figure is up from 43 percent in our previous survey (see Figure 15).

34%

9%

57%

40%

10%

50%

Both

Increase the importance of nuclear power for electricity generation

Increase the importance of renewable power for electricity generation

2010

50%

2009

43%


Source: Accenture Multinational Nuclear Power Pulse Survey 2009Base: All respondents

Figure 15. “In your opinion, what actions in the development of low-carbon sources of energy should be considered to reduce your country’s reliance on fossil-fueled power generation?”

5. Accenture Multinational Nuclear Power Pulse Survey, 2009

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Again, as demonstrated in Figure 16, there are significant variations by country. Consumers in India are the most positive worldwide toward including nuclear in the mix, with an acceptance rate of 68 percent (up from 67 percent in 2009), closely followed by China on 67 percent (up from 62 percent) and the Middle East. The least positive are those in Germany (35 percent), Spain (36 percent) and Brazil (39 percent), although these three countries all show increases in acceptance of nuclear generation as part of the mix over the past year.

Amid the general move toward favoring nuclear as part of the mix, the countries voicing the most positive attitudes toward nuclear tend to be those with significant nuclear new-build programs under way or planned, such as India and China. The United States and United Kingdom (62 percent and 54 percent respectively) have seen acceptance of nuclear rise by 5 percent during the year.

68%

67%

67%

62%

58%

56%

54%

45%

45%

44%

41%

45%

41%

41%

39%

36%

35%

India

Middle East

China

United States

South Korea

Canada

United Kingdom

France

Italy

Japan

Australia

Netherlands

Nordic region

Mexico

Brazil

Spain

Germany

50%

(62%)

(38%)

(37%)

(29%)

(28%)

(67%)

(57%)

(49%)

(37%)

(41%)

(41%)

(44%)

(31%)

Accenture Multinational Nuclear Power Pulse Survey 2009 ( )

(43%)

Average

(% increase of nuclear power, either standalone or combined with renewable power)


Figure 16. “In your opinion, what actions in the development of low-carbon sources of energy should be considered to reduce your country’s reliance on fossil-fueled power generation?”

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However, other findings on renewables underline consumers’ poor understanding of broader energy issues. Asked to estimate both the current proportion of renewables in their country’s energy mix, and also the proportion needed to address its energy challenges, consumers in several countries overestimate how much power is already coming from renewables. They also believe that the proportion needed to tackle energy challenges is around 30 percent—a figure that does not fit with their view that the main solution lies mainly in easily-available, supply-side solutions using lower-carbon energy sources. It is clear that many simply do not understand the scale of the change needed, and that governments and the industry still face a significant education challenge (see Figure 17).

21%

18%

16%

14%

14%

13%

13%

13%

12%

12%

11%

10%

10%

10%

9%

9%

9%

32%

25%

31%

31%

30%

31%

30%

31%

28%

29%

28%

30%

27%

30%

29%

29%

31%

Brazil

India

Nordic region

Spain

Mexico

Germany

Canada

Netherlands

South Korea

United States

Middle East

Australia

China

France

United Kingdom

Japan

Italy

29%12%

Average Today In future

(% of renewable energies in the electricity generation mix)


Figure 17. “Please give an estimate of how much you believe renewable energies account for in the electricity generation mix of your country today? What should it account for in the electricity generation mix of your country in order to address the current and future energy challenges?”

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Nevertheless, what consumers have grasped is that the current state of development and implementation of renewable energy solutions is insufficient. As Figure 18 shows, almost four in five consumers worldwide believe that significant further improvement is required in areas such as solar, wind and hydro generation. Perhaps the most remarkable finding is that 11 percent think these are already at the necessary level—although these consumers may be primarily in territories with well-developed renewables industries, such as the Nordic region and Brazil.

At the right level – no or little improvement required

Insufficient – significant improvement required

Do not know 10%

79%

11%


Figure 18. “What do you think of the current state of development and implementation of renewable energy solutions (e.g., solar panels, wind turbines, hydro) in your country?”

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Key Finding No. 4Consumers demand greater government intervention in the energy market

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Our study clearly shows that consumers have an ambivalent attitude toward the role of energy companies. On one hand, most think it is important that companies take action in areas such as developing new cleaner-energy technologies, low-carbon products and services, and low-carbon energy sources (see Figure 19).

But on the other hand, they do not trust energy companies to make the right decisions on their own—with 46 percent saying the energy industry will only take the right steps under political direction, and 32 percent refusing to trust them to do so at all (see Figure 20).


Development of new cleaner-energy technologies (e.g., carbon capture and storage, next generation of biofuels)

24% 70% 94%

Development of low-carbon products and services (e.g., more energy-efficient products and services)

29% 64% 93%

Development of low-carbon sources of energy (e.g., renewable, nuclear)

25% 68% 93%

Development of consumer information in order to increase their knowledge on how to reduce carbon emissions at their personal level (labeling, education)

36% 55% 91%

Somewhat important

Very important

Source: Accenture -The New Energy World: The Consumer Perspective Base: All respondents

Yes, definitely

Yes, but only with directions from governments/political leaders

No 32%

46%

22%


Figure 19. “How important is it that energy companies take action in the following areas in order to address the current and future energy challenges?”

Figure 20. “Do you trust energy companies (i.e., electricity, gas, oil companies) to take actions in order to efficiently face the current and future energy challenges of your country?”

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It is interesting to note that consumers in deregulated energy markets tend to have lower levels of trust in energy companies, suggesting that they think the financial profit motive will prevent these businesses from taking longer-term decisions that reduce overall energy consumption (see Figure 21). Companies are least trusted in mixed markets (both regulated and deregulated) such as the United States, Australia and Canada. In these territories, almost half of consumers—47 percent—do not trust energy companies at all to take the right steps. The highest level of trust in energy companies is in Japan, where 60 percent think companies will take action unaided, while the lowest is in the United Kingdom, at just 6 percent.

Yes, definitely

Yes, but only with directions from governments/political leaders

No32%

46%

22%

All

34%

49%

17%

Deregulated

47%

39%

14%

Mix(Both regulated and deregulated)

20%

49%

31%

Regulated


Given the general lack of trust in energy companies, it follows that consumers are looking to governments and political leaders to seize the initiative in tackling current and future energy challenges—and this is borne out by our research. As Figure 22 shows, some 45 percent of consumers worldwide think governments/political leaders should take the lead in deciding and implementing actions to tackle energy challenges, while 24 percent think consumers should lead these efforts. Only 21 percent are looking to energy companies to take this leadership role.

6%

21%

45%

4%

24%

Governments/political leaders

Consumers (e.g., through their changes in behavior and choice of products and retailers)

Energy companies(i.e., electricity, gas, oil companies)

Non-profit organizations

Manufacturers(e.g., automotive, transportation)


Figure 21. “Do you trust energy companies (i.e., electricity, gas, oil companies) to take actions in order to efficiently face the current and future energy challenges of your country?”

Figure 22. “In your opinion, who should take the lead to decide and implement the actions to take in order to address the current and future energy challenges?“

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Once again, there are significant differences by country, driven by differing factors in each case. Unsurprisingly, given that the Chinese state controls the energy industry as well as policy, the largest majority seeing the government’s leadership role as important is in China, at 73 percent. There is also strong support for a lead from government in Japan (62 percent) and the United Kingdom (58 percent). Those seeing the smallest role for government are Mexico and the United States. In those two countries, more respondents think consumers should lead change than either government or industry (see Figure 23).

Energy companies Consumers Governments/political leaders

China 17% 4% 73%

Japan 12% 20% 62%

United Kingdom 21% 10% 58%

Australia 17% 21% 54%

Middle East 20% 17% 54%

Nordic region 16% 25% 53%

Spain 17% 21% 53%

Netherlands 25% 16% 49%

Italy 13% 29% 47%

Canada 20% 25% 47%

Brazil 15% 30% 44%

South Korea 29% 19% 43%

India 36% 14% 40%

Germany 16% 37% 37%

France 17% 32% 35%

United States 29% 36% 26%

Mexico 20% 43% 21%

Average 21% 24% 45%


“Manufacturers” and “Non-profit organization” responses not shown

Figure 23. “In your opinion, who should take the lead to decide and implement the actions to take in order to address the current and future energy challenges?”

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All these findings points to a demand from most consumers worldwide for more government control and intervention (see Figure 24). An overwhelming 85 percent of consumers think more government involvement is “certainly” or “probably” required to combat their country’s energy challenges in an efficient way.

The country results (see Figure 25) echo the pattern seen in the findings on the importance of government’s leadership role, with United States and Mexico the least positive on more government control, at 62 percent and 74 percent respectively.

4%

45%Yes, certainly

40%Yes, probably

11%No, probably not

No, certainly not15%

85%


Brazil

South Korea

Middle East

Nordic region

France

Germany

United States

Mexico

Canada

Netherlands

China 96%

93%

92%

92%90%

90%

90%

90%

88%

86%

86%

85%

84%

83%

83%

79%

74%

62%

Italy

Japan

Spain

India

Australia

Average

United Kingdom


(% certainly + probably)

Figure 24. “Do you think that more government control and intervention is required in order to efficiently combat current and future energy challenges?”

Figure 25. “Do you think that more government control and intervention is required in order to efficiently combat current and future energy challenges?”

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In terms of the type of intervention that governments should make, consumers would like to see them act to control energy prices, and to develop new cleaner-energy technologies and low-carbon energy sources. Interestingly, more than half of consumers worldwide think governments should intervene to control energy prices (54 percent) and incentivize development of cleaner technologies (51 percent). A significant proportion—41 percent—would like to see government make decisions about investment in developing new low-carbon sources (see Figure 26).

The role of the government in controlling energy prices shows strong variation across countries and regions (see Figure 27). The two regions with the highest level of support for government intervention in prices are India and the Middle East. In both these regions, there already is strong control of energy prices and cross subsidies for certain consumer sectors. Interestingly, the next highest are European countries with liberalized markets—France, Germany and Spain. This could indicate that consumers are wary of the power of the dominant incumbents and are looking to governments to play a major role in protecting consumers.

Control energy prices

Support and provide incentives for the development of new cleaner-energy technologies (e.g., carbon capture and storage, next generation of biofuels)

Make investment decision regarding the development of sources of low-carbon energy (e.g., renewable, nuclear)

Support and provide incentives for the development of low-carbon products and services by energy companies (i.e., electricity, gas, oil companies) and manufacturers (e.g., automotive, transportation)

Reduce your country’s reliance on other countries providing oil and gas

Protect national energy companies (i.e., electricity, gas, oil companies) from the acquisition by foreign companies

Reduce the energy demand of your country (i.e., reduce energy waste/usage and increase efficiency of products)

Protect jobs in the energy sector 19%

30%

34%

34%

38%

41%

51%

54%

Top three priorities



Control energy prices (top three priorities % only)

69%India64%Middle East

61%France61%Germany

60%Spain58%Mexico

55%Italy

51%Canada

49%United States

46%Australia

46%South Korea

40%Nordic region

36%Japan

54%Average

54%China

53%Netherlands

54%United Kingdom

55%Brazil

Figure 26. “How important is it that governments and political leaders take actions in the following areas in order to address the current and future energy challenges in your country?”

Figure 27. “How important is it that governments and political leaders take actions in the following areas in order to address the current and future energy challenges in your country?”

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Implications

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Implications for policymakers

In the future, consumers will need to understand the trade-offs and competing objectives in energy policy to provide suitable support to political officials and regulators. Governments need to find ways to educate and include the public in choices for the longer-term changes. It is critical that consumers be aware that there are no simple solutions and that any choice will have direct implications. This awareness will allow policymakers to begin a more informed debate about future energy policy. For example, three areas in which consumer opinions are generally lacking are:

• To what degree does the public value short-term security of supply; how much will they pay for it? Consumers tend to get very upset when the electricity supply fails and will commonly blame the utility for underinvestment. In few geographies is there an informed debate with consumers about the cost to improve service quality.

• How much do consumers value convenience versus higher energy

prices? Many consumers are used to total flexibility about when they use energy. The true costs of this convenience are generally not passed through and the potential financial benefits of demand-side action, such as load shifting, are not accessible to consumers.

• What approach is preferred for building long-term primary energy security? Energy security can be developed via a reliance on indigenous energy sources and through development of a diversified source of energy imports. The public will tend to prefer complete nationally sourced energy security, but this is very rarely possible given current technology and is very expensive to deliver. Developing an appropriate balance will be key, and the public should be aware of the options and choices, including options that may be more distasteful to some, such as nuclear power or demand-side management.

Governments should not look to accomplish this work of informing consumers alone. A combination of

consumer groups, non-governmental organizations (NGOs), academics and industry players should contribute. The result of the process should be a more informed energy policy that is more robust against politically motivated changes, with strong public approval for the proposed measures.

Provide a step-change in energy policy effectivenessOur survey demonstrates that consumers are generally unhappy with the pace at which energy issues are being tackled, and are looking to governments to take the lead. In reality, most businesses are looking to government as well because the energy landscape has become so complex, with competing objectives and high risks for many types of investment, particularly in liberalized markets. What is lacking is an effective energy policy allied to appropriate policy tools.

Utilize the consumer mandate for action This Accenture survey clearly demonstrates that consumers are concerned about energy issues—an interest that has been exacerbated by energy price increases, the coverage of the negotiations at the COP15 summit in Copenhagen and calls for “energy independence” in many countries. However, while our survey demonstrates good consumer awareness in some areas, there are significant gaps in their knowledge. These gaps are understandable given the complexity of the issues. Energy policy has ceased being a matter of low relevance to the average consumer. The energy choices made by policymakers will have an increasing impact on consumers’ lives in terms of cost, their behaviors and their product choices, and as a key tool to combat climate change.

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Accenture believes governments should consider responding to these concerns without delay. Many countries have no integrated energy policy of any substance; the reason for this is a reflection of historic needs, as little was required of an energy policy in days of excess capacity and low primary energy costs. Things have changed and we commonly have an energy policy vacuum. Even fewer countries have a policy that incorporates the considerations of climate change. Climate policy cannot be separately considered from energy policy, as approximately 60 percent of greenhouse gas emissions are related to fossil fuels.6

Even where an energy policy exists it may struggle to be delivered. Regulatory and market tools supporting policy delivery are often insufficient for the new challenges. For example, market mechanisms are often designed for a different set of challenges rather than to deliver the correct investment for the current needs. Also, an increasingly ad-hoc collection of policy tools may have been put in place that support specific aims, such as renewable energy deployment, without sufficient understanding of how they interact with the existing markets or how much they cost the consumer. These policy additions can result in “policy gaps” that increase risks or costs. For example, strong support for renewables is common through feed-in tariffs or portfolio obligations, but there may be insufficient support for the peaking plant or smart grids that are required to enable effective integration of variable-output renewables into the electricity system.

Government policymakers should contemplate developing an integrated energy and climate policy that is actionable. This policy would move beyond aspirations and hopes, toward clear timetables for delivery and legally binding commitments. A key input is the consumer opinion as detailed above. Energy policy choices should be founded on consumer “willingness to pay.”

Effective tools should be put in place so that energy policy is effectively translated into action for any industry structure (such as fully liberalized, state monopolies or hybrid solutions). This may be politically painful—as it could require the removal of existing mechanisms—but the reality is that the energy landscape is facing different tests than a mere 10 years ago. Nevertheless, governments should be wary of throwing out all existing structures. For example, markets can still be highly effective at reducing inefficiencies. The failure of some markets to bring through the necessary investment is not a failure of markets in general. What it can signal is that the market design does not appropriately value current requirements such as capacity, flexibility or low emissions. In addition, the distribution of risk may no longer be suitable for current challenges. For example, the long-term carbon price is essentially a political decision and not something over which utilities have control, yet the carbon price risk is largely shouldered by utilities in markets such as the European Union.

Gaining traction on the demand sideAccenture believes that unlocking the demand side is critical to deliver shorter-term goals. Conservation and efficiency improvements can be particularly important to meeting security of supply and climate change targets without excessively impacting energy costs. Accenture’s survey demonstrates that consumers are inclined to supply-side, as opposed to the demand-side, solutions, and that they are generally less willing to make significant changes to their buying behaviors or energy use. However, it also is clear that consumers are not well-informed about how much this approach costs them. Historic failure in many countries to tap into the demand-side opportunity should not deter policymakers to act, as some key factors have changed.

The individual consumer’s business case for action is vastly improved compared to 10 years ago. Higher primary energy costs, combined with increasing penetration of electronics goods into homes, has made energy a key expense for most households. Consumers are more aware of energy-related issues. Along with an improvement in the individual consumer’s business case, there is an increased concern about issues such as climate change and local air pollution. Technology can now support the demand side more effectively; for example, through smart meters and in-home devices. One example is a lower requirement for consumer input through solutions, such as automated response, that modify demand on specific appliances without the need for consumer action.

In addition to educating the consumer, policymakers should consider developing the appropriate policy tools to tackle the demand side; for example, increased energy-efficiency standards and specifications for buildings, lighting, heating, etc. Also, policymakers should act to remove barriers to further action; for example, ensuring that load-shifting efforts can be valued and consumers can be recompensed—which may require changes to the settlements process, or addressing landlord-tenant issues (the principal-agent problem) to provide alignment in incentives. Utilities can be a key facilitator of the demand side, and there needs to be an increased focus on supporting utilities in moving to an energy services-based business model.

6. Rogner, H., Zhou, D., et al, “Introduction. In Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment report of the Intergovernmental Panel on Climate Change,” Cambridge University Press, 2007, http://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter1.pdf.

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Implications for utilities

As previously discussed, consumers (and most governments) likely do not have all the necessary information to develop policies that balance security of supply, cost and climate change concerns. We believe utilities should play a clear part in supporting the education for policymakers to develop more effective policies, such as a clear articulation of the benefits versus costs. Unsurprisingly, there are few consumers who would understand the impact of policy uncertainty on utility investment decision making and financing costs.

Utilities should aim to work with governments wherever possible to build the next generation of energy policy. This is simplified to an extent in markets in which there is a monopoly supplier and competitive concerns are lower. However, the need is often greater in liberalized markets where there is less opportunity for ongoing modification of markets or consideration of individual investments on the basis of broader “social business cases.”

Gain traction on the demand sideAccenture believes that the demand side provides major opportunities for society. For utilities, it also provides a crucial opportunity to position themselves in a broader business, yielding significant revenue growth opportunities. Two end-consumer areas have significant potential. The first is the “traditional” demand-side area of the home. The second area is the new opportunities that could develop from the electrification of personal transportation. Utilities need to find new ways to engage consumers on the demand side. There are a number of approaches that should be investigated:

• Improve segmentation to identify groups that could deliver sustained reductions. A key challenge is maintaining load shifting or consumption reductions. Opportunities may be greatest in households where improved consumption data would prompt changes in appliances, such

as energy-efficient lighting, or simple behavior changes. These households would be more likely to yield greater long-term improvements than those that require significant ongoing changes in behavior.

• Work with social groups (universities/schools or associations) and city administrations to build more focused demand-side products. The role of social pressure in yielding behavior changes is very important. This should occur at a local level, as government pressure has the potential to be perceived as bullying rather than an inclusive effort. Utilities can be well-placed to support such efforts; however, they will have to overcome potential consumer concerns such as data and personal privacy and mistrust of business. Inclusion of a “trusted third party” to these efforts is likely to be an effective way of developing increased trust between consumers and utilities. Utilities should look for potential trusted groups such as NGOs, academic institutions or social groups in their supply areas that could help this process.

Improve communications with consumers and policymakers The survey results clearly show consumers do not trust energy companies to deliver the required changes alone, and are calling on governments to take a more active role in guiding energy matters such as guiding investments. Consumers are unhappy with the speed of action on energy matters and utilities (and oil companies) are uncomfortably placed between consumer discontent and policy uncertainty from governments.

It is likely we will see significant changes to energy policies from government—a process already in progress in many countries. Utilities need to work effectively with governments and consumers to develop policy approaches fit for the new challenges.

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• Delivering results in the built environment will require changes to the regulation of utilities to support an energy services model. Utilities will need to engage regulators to help secure appropriate funding for demand-side programs and to implement any changes required to market mechanisms.

• Electrification of personal vehicles has a great potential, although there are still significant technical challenges, such as battery capacity, charging time and costs. However, this provides a huge medium- to long-term potential for utilities to position themselves in the core of the future transportation value chain. Mass deployment of electric and plug-in hybrid vehicles will increase electricity demand but will also have major implications for the demand side. These implications take the form of new charging infrastructures as well as new products. Large-scale electric vehicle charging would place significant strain on the network unless the demands were managed through appropriate tariffs and constraints to prevent destabilization of the networks.

Pursue opportunities in low-carbon generation Consumers have expressed preference for supply-side solutions to energy issues where possible. Although there is considerable opportunity for the demand side, it is clear that the longer-term solution for issues such as climate change and local air pollution includes low-carbon power.

The latest United Nations climate change negotiation (at COP15 in Copenhagen) was seen as a relative failure by some parties. However, the negotiation did yield significant steps forward, particularly the active involvement of all major emitters and commitments to maximum warming levels as the appropriate basis for overall target setting. The fundamental basis for action on greenhouse gases was accepted by all nations, and we can expect further action on climate

change policies at the national level irrespective of international agreements.

In this context, electricity generation provides one of the best opportunities to reduce greenhouse gas emissions in both the shorter and longer term. Power generation accounts for about 25 percent of the world’s greenhouse gases and its proportion is forecast to grow over the next 40 years.7 In addition, there are potential low-carbon solutions to power generation that are technically feasible and economic if carbon cost is appropriately included in the decision making. Also, electricity provides major opportunities to supplant other fuels in both the building heating and transportation sectors.

Utilities with low-carbon generation aspirations should build on the increasing consumer support for decarbonization and increased security of supply. A key component of this is providing a sound case be made to regulators and utility commissions for low-carbon investment, supported by strong consumer backing. This is particularly important for new nuclear power, for which the support of the local population is often critical for approval.

A significant concern for many utilities is that most low-carbon solutions have high-build capital requirements and commonly long build durations; for example, nuclear power, offshore wind turbines, hydro or tidal barrages. This makes funding such projects difficult, particularly for a merchant plant competing within competitive electricity markets. In addition, financing is even more difficult in the current economic climate. Governments should consider taking a role in overcoming the shortcomings of the markets which will tend to favor low-capital, rapid-build projects. Consistent, long-term carbon prices that can be valued by utilities and financiers are also necessary. In the absence of binding international agreements, it is necessary for individual governments to provide these signals; for example, by entering

long-term carbon price hedging contracts with investors in a new generating plant.

7. Ibid.

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Implications for oil and gas companies

Oil and gas companies need to understand how failure to gain traction on the demand side will translate into increased targets for low-carbon and alternative fuels (e.g., gas shales, tar sands and oil shales). In addition, this will filter through into changes to the product mix, such as increased biofuels targets or moves toward increased diesel use in some countries.

A key uncertainty will be the rate of electrification of personal and light-duty vehicles. Pressure to increase the rate of substitution of gasoline and diesel by electricity is a potential solution for policymakers if there is a failure to significantly increase the efficiency levels of automobiles. Oil and gas companies should stay well-informed about key technologies required for successful, mass electrification of vehicles. The status of the key battery technologies clearly is a critical factor, but other components (such as the charging infrastructure and electricity network capability) also are very important, and

could be a major constraint on mass deployment in many countries.

Develop low-carbon transportation opportunitiesTransportation provides one of the largest challenges in terms of climate change and, for most countries, in terms of energy independence. As previously discussed, there are a number of directions in which future personal transportation could evolve, in terms of energy source (e.g., gasoline, diesel, biofuels, electricity and natural gas).

Some of the new energy sources, such as electricity, are significantly different from the current products and would require oil and gas companies to significantly evolve their product offering to provide them with a possible role in the new value chain. For example, the retail model could be completely different, with distributed charging infrastructure or

rapid battery switching at dedicated facilities. Other fuel solutions such as biofuels would entail completely different production approaches, although the retail model could remain largely unchanged. Similarly, if natural gas supplies are greatly increased through gas shale production, we could see an increase in the deployment of multifuel vehicles that can use gasoline or natural gas.

We are going to see significant changes in personal transport over the next 50 years, and oil and gas companies need to effectively position themselves for each potential solution. The future personal transportation system is not likely to move to a single technology solution. We will see variations across countries that reflect local preferences and resources. Also, we may see greater variation across usage sectors with, for example, growth of electric vehicle use in urban locations and plug-in hybrids, biofuels and conventional automobiles in suburban and rural locations.

Understand the fuel mix and product portfolio implications of consumer preferences In our survey, consumers expressed preference for supply-side solutions compared to the demand-side actions, such as conservation and energy efficiency. If policymakers fail to extract significant improvements from the demand side, they will need to place greater emphasis on low-carbon supply—in order to meet consumers’ aspirations regarding mitigation of climate change and security of supply.

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Oil and gas companies should work to position themselves now for the longer-term changes to the transportation value chain. This includes taking positions in new technology R&D and developing potential new business models. A key to success will be working with other members of the new supply chains. Working with path-finding cities, automobile manufacturers and utilities in the prototyping of new transportation solutions is necessary to understand the opportunities and threats to the core business.

Regain consumer trustThis survey demonstrates the general lack of trust that consumers have in the ability of energy companies to meet their future expectations. This lack of trust could impact a company’s ability to position itself for new business and weaken its voice when contributing to discussions on the future energy landscape.

The energy industry can learn from other industries in which consumer confidence was low. For example, the public image of mining companies has remarkably improved over the last 20 years. This has been largely due to the active work of companies to engage with the public and governments. A key component has been the level of engagement with NGOs. Regaining trust requires an open dialogue with what could currently appear to be hostile groups. Responsible NGOs can provide important input and be a respected voice for changes required.

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About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 176,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.

About Accenture Research Accenture Research is Accenture's global organization devoted to economic and strategic studies. The staff consists of 150 experts in economics, sociology and survey research from Accenture's principal offices in North America, Europe and Asia/Pacific. This study about the “New Energy World” involved our European experts in survey research.

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