A vision for a smart energy grid has been around for at least 10 years, yet adoption remains painfully low, with only 5 million smart meters and 140,000 programmable communication thermostats installed across the United States.

Many barriers are holding up deployment of an “energy internet,” including technology, public policy and business model issues. But perhaps the biggest hurdle is the fundamental misalignment with the way consumers actually behave. In other words, how can we get consumers to care about smarter energy management?

To answer this question, some energy entrepreneurs are embracing what Innosight has long advocated as the game-changer in mass adoption of a new technology: a true understanding of the “jobs” for which a customer hires a company’s products. Those jobs aren’t just functional, but social and emotional. After all, the acceptance of smart meters and other new energy technologies will require the formation of entirely new habits such as shutting off TVs and computers when not in use and doing laundry at off-peak times.

At Innosight, we define habit conversion as the process of moving a new behavior from the conscious mind to the habitual unconscious mind. More compelling products, services and pricing can be a part of what drives consumers, but the process also needs to embrace the underlying psychology as well.

The energy industry has a long way to go to understand the total picture of what motivates consumers. In a 2011 study, the Smart Grid Consumer Collaborative, a public-private research group, found that 75% of the households most likely to adopt smart meters are either completely unaware or only remotely informed about the technology. Yet the same study showed that nearly 70% of consumers want to know more and are open for engagement. The player that finds the right consumer engagement model, then, can drive massive change in one of the world’s largest industries.

Learning from Tendril’s Approach to Consumer Motivation

We recently spoke with Tim Enwall, the founder and CIO of Tendril, an energy internet company that’s paving the way for the power industry to harness ubiquitous computing. The company sells software applications for the smart grid and currently has deals with 35 utilities and service providers who have 70 million customers around the world.

There’s no doubt that the enabling technology will be available, says Enwall. He sees a near future in which every light switch, outlet, washer and dryer, thermostat, water heater, refrigerator and electric car contains a $2 chip that transmits energy usage information.

But today’s average energy consumer is “asleep about energy,” he says. The Boulder, Colorado startup’s goal is to engage consumers along their “path of enlightenment” and bring them into a world where they are much more conscious about energy. Tendril aims to get consumers along this path by prioritizing three important, unsatisfied, widely-held jobs to be done:

1. Saving money – by cutting monthly energy bills.
2. Saving the planet – by reducing consumption of carbon-producing fuels.
3. Gaining control – via increased access to usage information, a need that has intensified with the increasing connectivity of everything.

The problem is that energy consumers are entrenched in a system that makes being passive about their consumption much easier than making small changes that could lead to big results.

Lessons from smoking and weight loss

That’s where basic behavioral science comes in. He compares habit conversion in energy to weight loss or smoking cessation. Tendril went so far as to acquire a startup called Grounded Power that based its approach on what it had learned in building a successful smoking cessation website.

One main lesson is that “externally motivating tactics” don’t work. Just as beating overweight people and smokers over the head with the message “you are going to die” fails to motivate people, exhorting people with some moral or environmental obligation to save energy is a proven loser. In addition, cutting checks to consumers in exchange for control over their thermostat or AC unit has also met with extremely low adoption rates.

Instead, the objective is to drive “intrinsic, internal motivation.” As with smoking and weight loss, the idea is to get consumers to set achievable goals, such as how much money or energy they want to save. Software such as a smart phone app can then constantly show them how they are doing. Finally, the other driver that works is community support and competition.

*Creating new habits: Tendril Energize is a suite of apps that enable energy users to set goals of how much they’d like to cut costs and consumption—and then continually monitor progress.

Tendril starts by sending a consumer a paper statement with information on how their consumption compares to their neighbors, along with tips on how to improve. This typically arrives with their utility bills. As consumers increase awareness, Tendril encourages them to go online, see information in real time, set goals and commit to actions to achieve those goals.

Online, community users share stories and suggestions such as adding more clothes to loads of laundry, or purchasing intelligent power strips. As they learn more, consumers become more comfortable with more complex solutions, along the lines of Apple opening the app store a year after the iPhone was released. In the home energy management space such offerings include automated savings programs or smart appliances to ‘set and forget’.

Using this behavior-driven approach has allowed Tendril to connect consumers to the smart grid and achieve positive results, with immediate 5% to 10% savings in energy consumption and costs being typical.

But companies like Tendril are really eyeing the bigger cost savings and longer-term efficiency benefits. Once enough consumers demonstrate they are willing to change their habits, utilities should get more and more interested in stepping up the marketing of new services, including more smart meters and a larger mix of renewable resources.

Over time, that could lead to new growth for the industry, especially as automobiles shift from being fueled by oil to being powered by electricity. With the proliferation of tablets and smart phone, there’s a real chance it will be seen as habitual for consumers to manage it all.

Kristen Johannessen is an associate at Innosight. Summer associate Jessica Aldridge is a graduate student at Yale University.

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