Adam and Jennifer F. loved the first home they bought together, a historic 100 year old house in a quiet Wichita neighborhood – but they didn’t love the sewer line problems that came with it.
The couple bought the home knowing that the sewer line would need attention, and Adam and a friend rented equipment and spent hours cleaning out the line. The couple believed that would keep the problem from worsening until they were able to implement a more permanent fix.
However, within two years, the couple noticed they once again were experiencing drainage problems.
“I thought, ‘I just fixed that,’” Adam said. “I didn’t think it had been long enough to have another problem.”
But it was – one of the features of the backyard the couple loved was an enormous tree, easily as old as their home, but the sewer line passed beneath it. The tree’s roots sought out the warmth the line emitted, especially during the colder months. In addition, the line was an old clay pipe and offered little resistance to the encroaching roots.
To compound the problem, at some point between the house initially being built and Adam and Jennifer purchasing it, an outbuilding had been erected at the rear of the property, directly over the sewer line. The line would have to be replaced using an auger to dig beneath the outbuilding without damaging the foundation or completely re-routed to avoid the tree and the building.
The cost would be thousands of dollars – an expense the young couple simply couldn’t afford. Fortunately, Adam had assisted a local church, and the pastor put him in contact with Sunflower Services, a HomeServe USA network contractor.
Sunflower recommended replacing the clay pipe with sturdier, more resistant PVC and rerouting it to avoid the tree and outbuilding to prevent continuing root encroachment and make the line more accessible if it should ever need repair in the future. The problem was the $7,000 price tag, representing a significant portion of their annual income.
Sunflower Services employees knew just what to do and contacted HomeServe to see if the couple could have their job covered through HomeServe Cares, the company’s charitable arm. HomeServe, a leading home warranty company providing plumbing and electrical warranties throughout the U.S. and Canada, agreed to cover the cost of the repair.
HomeServe also offers low-cost water and sewer service line warranties through Utility Service Partners’ National League of Cities Service Line Warranty Program in partnership with municipalities and utilities. The program also has been endorsed by several state leagues, including the Kansas League of Cities.
As for Adam and Jennifer, everything is back to normal, thanks to Sunflower Services and HomeServe.
“It’s draining just fine now,” Adam said.
By 2025, Millennials will make up to 75 percent of the work force, as the next largest generation, the Baby Boomers, retire in droves. This means their buying power will only increase in the next decade – multicultural Millennials are spending more than $65 billion each year and influencing up to $1 trillion, the generation has more spending power than Boomers and will spend up to $1.4 trillion by 2020.
Energy providers are sure to get some of those dollars, but what can they do to get a bigger piece of the pie? Millennials spend with companies where they are engaged and they are confident the company is socially responsible.
They also are the first truly “digital generation,” and they want cutting-edge tech, like that employed in smart homes, indicating that they are willing to pay more for a home with smart technology, and real-time data. Both of these demands offer a wealth of opportunities for energy providers, from offering smart thermostats to apps that offer real-time information on energy consumption and ways to save. And that’s only the tip of the iceberg when it comes to smart devices and data.
In addition, energy providers can offer even more engagement with value-added services, building on smart devices and data analysis. Everything from home security systems to emergency home repairs are fields where energy providers can move laterally to increase engagement – and profits. Energy services isn’t a new field, but it is an exciting and growing one.
Providers also could combine those two demands to meet one Millennials are clamoring for: clean energy. Millennials are willing to pay more for clean energy and for a smart grid, if that means integrating clean energy such as solar and wind power. Clean energy and environmentalism isn’t a “trend” with Millennials, it’s a practice that they see crossing into all aspects of their lives, from politics to spending habits.
Energy providers who showcase their social responsibility by providing the clean energy Millennials demand will stand head-and-shoulders above their competition. Millennials already are driving investment in Energy STAR appliances and solar power. They don’t just want to utilize clean energy, they want to reduce their overall usage – yet another reason to move into smart home technology, data analysis and value-added services, especially with energy consumption flattening.
There is a clear gap between what Millennials want and what they are being offered by energy providers. Despite 86 percent of overall customers who would like to have green energy, only 45 percent have been offered it, according to a Deloitte study. It also shows that 48 percent of Millennials are interested in solar power and 32 percent are interested in wind power. The study also confirms Millennials’ interest data analysis, particularly smart meters, apps and time-of-use rates.
Forward-thinking providers will be moving into these spaces as Millennials continue to increase their buying power. Partnerships with service providers such as HomeServe can help them do that.
HomeServe, a leading provider of home repair service plans, partners with utilities across the nation to offer utility customers affordable protection from potentially expensive repairs of electrical lines, water heaters, HVAC systems and water and sewer lines. To learn more about a partnership with HomeServe, contact us.
We know that our energy infrastructure is out-of-date and customers are looking for varied and new services. However moving from the old model of simply supplying electricity to a burgeoning one of supplying energy-adjacent services and transforming the grid into a hacker-resistant infrastructure that also accommodates renewables isn’t inexpensive.
So how will utilities – many of whom are either under PUC regulation or being undercut on prices by new retail providers – afford to keep up in this changing market? By pivoting away from high-cost generation plants and providing a modern grid.
As the grid is modernized, two things will be top of mind for utility providers: fending off hackers and flexibility. In addition to replacing and repairing decades-old gas lines and transmission wires, it will mean updating software – as the Internet of Things expands, so do entry points for hackers. Likewise, the more interconnected infrastructure becomes, the more weak points there are for cyberattacks.
Updating software in a coordinated approach is where the smart money is going. Nearly 40 energy utilities spent $60 billion on grid improvements, while spending on new power plants fell to one-third of total capital improvements spending, according to the Edison Electric Institute. Even as investment in power plants shrinks, so does the demand for power – dropping to the lowest rate in a decade – and many utilities are shuttering obsolete plants instead of replacing them.
Some companies have already begun charging modernization fees, although some PUCs have disallowed them – for now. Several utilities have requested special ratemaking for grid investments, so this isn’t going away any time soon, but utilities will have to wait and see how it plays out in each PUC where they do business.
Although the reality is that rate increases will need to be made to make the grid safer and more resilient, some utilities are reducing increases to ratepayers by having third-party companies pay to offer new services to the grid.
As utilities work to make the grid safer, customers have begun to unplug. Even as the grid becomes safer and better equipped to deal with the surge and ebb of renewables, many utilities must find a balance in net metering between the wholesale rate they want to pay and the retail rate distributed generators want. Again, where PUCs fall on this issue will have an impact on utilities’ bottom lines – and their ability to modernize energy infrastructure.
Changing our country’s energy infrastructure won’t be quick, easy or cheap – nor will it extend to thousands of homes in need of electrical upgrades from weatherheads to service panels to wiring. As smart devices proliferate and renewables become more common, how will these systems fare?
HomeServe USA offers interior electric, hot water heater, HVAC and electric service line warranties that can keep your ratepayers safe from electrical hazards in their homes, protect them from unexpected expenses and give them peace of mind. For information on this turn-key program, contact us.
Most energy customers don’t think about the electricity and natural gas that powers their appliances and heats and lights their home – unless there’s a problem.
And, given the age and condition of our energy infrastructure, the problems compound every year.
Through the 1980s, significant power outages averaged fewer than five per year, but that number has done more than steadily climb – it’s begun to skyrocket. There were 76 significant outages in 2007 and more than 300 in 2011.
Erosion of infrastructure has significant consequences
Some pipelines date back to the 1880s, with most natural gas pipelines being installed prior to 1980. Pipeline breaks and refinery outages cause supply disruptions, which, in turn, lead to higher prices. Reported spills have increased from 573 in 2012 to 715 in 2015.
These soaring numbers have begun to erode customers’ trust and faith in their energy utilities – and they’re looking to find their own solutions.
The problem isn’t enough energy – in fact, with the growth of renewables, more energy is being produced than the grid can often handle, which creates its own set of problems. The issue is the age of the system. More than 50 percent of our energy infrastructure was built prior to the 1970s, and another 20 percent was built in the 1970s and 1980s.
Blackouts have cost the country’s economy billions, but addressing outdated infrastructure will cost billions more – as it stands, the infrastructure, which is a privately owned piecemeal patchwork, may be worth $876 billion. Other estimates put it at between $1.5 and $2 trillion, with a complete replacement costing $5 trillion.
So much of the system has aged beyond reasonable use that the American Society of Civil Engineers has given the infrastructure a D+, estimating that tens of billions of dollars will need to be invested into the infrastructure to improve it. Department of Energy estimates show that more than $12 billion must be spent to maintain natural gas pipelines, stabilize the grid and provide the capacity to handle the influx of renewable energy.
Growth in renewables further stresses grid
The demand for energy has slowed significantly as homeowners seek out energy efficiency, often for its cost savings, but more and more frequently for its environmental benefits. Over the past decade, electrical usage has been flat, and total energy use has declined by 2 percent.
The lion’s share of innovation – and customer growth – will be in renewable energy. However, the aging grid isn’t set up to handle the integration of renewable energy, since energy can’t be stored on the grid, but in the form of coal, natural gas and nuclear materials. One way to improve the integration is to upgrade the transmission network, so energy from places such as Texas, where there has been heavy investment in wind energy, can be transmitted to places without inexpensive and environmentally friendly energy.
Upgrading transmission lines isn’t easy or inexpensive, especially as many utilities face maintenance and upgrade costs while having rate increases capped by regulators. An answer may lie in distributed generation and microgrids.
A microgrid’s ability to operate independently of the main grid can reduce outages, acting essentially as back-up, and being flexible enough to cover anything from a single home or business to jails, hospitals, college campuses and entire neighborhoods. Microgrids also allow connections to distributed energy generators, such as solar panels and wind turbines – and tying into a local energy source will reduce transmission losses. In addition, during a cloudy day, the connection through the microgrid to the main grid allows continued function without a loss of power.
It’s estimated the global distributed energy generation market, driven by lowering costs, will reach more than $570 billion within ten years, and North America is an attractive market. Some utilities have already begun investing billions in renewables as coal plants either age out or the profitability of constructing new ones plummets.
Home wiring systems may need upgrades
This will mean more affordable and reliable energy for rate payers – as long as their service lines and interior electrical systems are in good working order. Like the grid, many home wiring systems have reached the end of their usable lifespans. HomeServe USA can provide affordable home warranty programs to protect rate payers from the expense of unexpected home repairs. For information on a partnership, contact us.
No one is quite sure what the next generation of smart homes will look like, but a great many of your customers want one – and energy utilities are uniquely positioned to lead the way, whether by pioneering new technologies or engaging in affinity partnerships.
Demand Growing Across Demographics
Energy is as ubiquitous and necessary to the smart home as broadband and wifi, and the number of those interested in the technology is only matched by the ways it can be utilized. Among Millennials, one in four own a smart home device and four in ten want one. Older Millennials have embraced the idea wholeheartedly, while younger ones are a bit more reserved, because of concerns about privacy issues.
Millennials are willing to put their money where their interest is – 86 percent are willing to pay up to 20 percent more to purchase or rent a home with smart home technology. They aren’t the only generation willing to do so – 65 percent of Baby Boomers and 57 percent of Generation X also would put down more cash for smart homes, and Generation Z, the oldest of whom are in their early twenties and beginning to establish their own homes, are even more likely than Millennials to want smart homes.
As smart home devices have become less expensive and easier to use, renters have become a larger segment of users and now are just as likely as homeowners to have a smart home device. The largest hurdle is encouraging users to see past Alexa and Google to the vast number of products available to them. The smart home landscape is expected to change over the next five years, with the entertainment share slowing, while smart appliances and home automation see a boost in popularity.
Most Wanted: Convenience and Security
Smart Home devices fall into three major categories: practical and functional, such as smart appliances, thermostats and lighting and personal item trackers; lifestyle and entertainment, such as remote speakers and streaming televisions; and safety and security, such as alarm systems, smoke and carbon monoxide detectors and smart safes and locks. Devices focusing on functionality and security align with products some energy utilities are already exploring.
In a poll of Coldwell Banker sales associates, 65 percent of buyers wanted security devices; 57 percent wanted temperature control; 48 percent wanted safety features such as smart locks; 46 percent wanted lighting features; 42 percent wanted entertainment devices; and 23 percent wanted smart appliances.
An Essence Group report found that Millennials are most interested in devices that provide convenience, while Generation X likes security and energy savings. Accordingly, the most popular devices are smart thermostats, lighting and locks and connected cameras.
VynZ Research predicts that smart home technology hasn’t even begun to peak with an estimated compound annual growth rate of 14.2 percent to become an $89.9 billion industry by 2024. Users will demand safety, convenience and security and look for flexibility and innovation. North America will be the largest revenue holder in smart home solutions and products.
Affinity Partners: Testing the Waters
While energy companies have begun to enter the smart home market, it is a shift from the traditional business model. To bridge this, utilities should consider an affinity partnership.
An affinity partnership can take three separate, but similar forms, according to the Wharton School. A window strategy gives access to new technologies and developments while exploring potential programs or products and reducing uncertainty; an options strategy is a “calculated bet,” building a platform that can be scaled up or down, based on need and viability; and positioning strategy is a low-risk partnership that offers advantage based on scale or scope or gives access to a new customer base.
In seeking an affinity partner, consider companies with shared values and offerings that have practical value, not just “buzz.” Affinity partnerships can help both companies find new eyes for their products or services while connecting their own customers with services or products that cater to their needs. The more complimentary your offerings, the more likely you will boost revenues – without a corresponding increase in marketing costs.
These partnerships are most valuable when they pair noncompetitive brands that share the same values and have a client base that transfers well. The skill is in choosing a partner whose offerings align with your needs.
HomeServe USA, a national home warranty company, partners with utilities across the nation to offer water, sewer and electrical service line and interior plumbing and electric warranties to their customers. HomeServe maintains a 400-seat, award-winning call center 24/7/365 and dispatches fully licensed and insured, local contractors after one call. To learn more about an affinity partnership with HomeServe, contact us.