Consumer Archetypes for Ofgem’s Vulnerability Strategy
Revealing a nuanced pictures of 13 groups of GB energy consumers
Project duration: July 2019 to March 2020
Ofgem's new Impact Assessment Guidance, Consumer Vulnerability Strategy and refreshed Consumer Archetypes can be downloaded here.
‘Decarbonisation, decentralisation, digitisation and decreasing consumption’. However you characterise it, the energy market is in transition.
As we shift towards renewable technologies, electric vehicles, smart meters and other data-driven technologies, new business models and types of energy services are becoming possible.
But these changes create completely new ways to generate unfairness (in terms of the distribution of system benefits and system costs) and to leave people behind (in terms of the complexity and cost of participation in the full range of benefits of the future energy system) - as our Chief Executive, Simon Roberts OBE, stressed in this article for Citizens Advice.
Regulating for ‘no one left behind’
This issue is one of Ofgem’s key priorities. As the national regulatory body for the gas and electricity markets, it wants to see an inclusive energy market, where consumers in vulnerable situations aren’t left behind and are able to take advantage of the opportunities provided by the evolving market.
It is also now designing the next price controls for RIIO-2, through which it wants to improve the service provided by energy companies to vulnerable customers.
Against this backdrop, at the end of 2019, Ofgem published its Consumer Vulnerability Strategy 2025, setting out its priorities for vulnerable consumers over the next five years while the energy system transitions.
CSE was brought in to help with a key pillar of the strategy – developing the underlying understanding of who vulnerable customers are and the impacts that changes in the energy system may have on them.
A nuanced picture of energy customers
Back in 2012, CSE developed an analytical model – DIMPSA (‘Distributional Impacts Model for Policy Scenario Analysis’) – to help Ofgem take a more sophisticated approach to its impact assessments.
DIMPSA used a data set in which the population of Great Britain was segmented into a set of distinct groups of energy consumers, or archetypes, which together represent all households across the country. DIMPSA was then used to model different policies and assess the impacts of these on different types of households.
To deliver the insights needed for Ofgem’s Vulnerable Customer Strategy 2025, we generated a new energy consumer data set, using the most recently available data and revising our segmentation approach and analytical techniques to produce a more representative set of archetypes to reflect today’s society and expectations of future changes in the energy market.
Updating the energy consumer dataset involved pulling together detailed socio-demographic information from the ONS Living Costs and Food (LCF) Survey. Information was added on energy consumption, energy market attitudes and behaviour (Ofgem Consumer Segmentation Survey), housing characteristics (English Housing Survey).
In this way, the LCF data was augmented with external analysis such as whether households have engaged in the energy market in the last 12 months (either by comparing tariffs, switching tariffs or switching energy supplier), their historical supplier switching behaviours and attitudes to new market products as well as dwelling characteristics (e.g. energy efficiency).
Different households in the data set were then segmented into different energy consumer archetypes. This process included input from Ofgem with an initial workshop, held with a range of key Ofgem staff, to identify key factors to be considered when deriving the archetypes.
13 groups of households
A set of 13 groups of households, or archetypes, was derived from this analysis, the headline statistics are set out in the table below.
These groups reveal a more nuanced picture of different types of energy consumers – beyond ‘the average consumer’ or ‘vulnerable vs. everyone else’.
Feeding into Ofgem's Vulnerability Strategy, the archetypes serve as a tool to enhance understanding of the diverse characteristics, capabilities and likely market experiences across the population of energy consumers – the different drivers that exist for households to engage in energy related policies, and enable a more considered and nuanced approach to policy design and promotion of energy technologies.
This table shows the headline statistics and summary descriptions of the 13 energy consumer archetypes
These archetypes are intended to be used to understand how different policies may impact on different types of households and energy consumers and to investigate existing or proposed policy designs, or to help rebalance any policies which have been identified as unintentionally overlooking or disadvantaging certain households.
Although it’s important to recognise that the archetypes are not intended to be used as tool to help identify or locate vulnerable households. Vulnerabilities can exist across all groups of households and can vary significantly in both magnitude and severity.
Going forward, these new archetypes can be used to shape further analysis around the ongoing energy market transition, enabling a deeper understanding of:
- Vulnerabilities in the context of the capabilities demanded of consumers in the emerging markets in smarter energy services.
- The potential distributional impacts that these markets could bring.
- What sorts of intervention might be needed to mitigate negative impacts.
The report shows the proportion of population of each archetype across English region and devolved nation of Great Britain. Below is Archetype C5.
You can read about the original project from 2012 and 2014 here - ‘Beyond Average Consumption – Development of a framework for assessing impacts of policy proposals on different consumer groups’.