Way back in time, we had a decentralized and distributed electricity grid.  Power plants were co-located with users, and transmission was limited to relatively small geographic areas.  Over time and for a number of reasons, as the number of electricity users grew, the grid became more centralized. 

And now?  There’s a trend to distributed generation, evidenced in homeowners installing alternative energy solutions like solar and wind to offset at least some of their electricity needs.  Those numbers will certainly grow when Feed-In Tariffs (FITs) are in place in more states.  FITs require electric utilities to buy back excess electricity from individuals or businesses that have their own means of generating electricity from alternative energy sources.  The onset of smart meters helps the growth of distributed generation since these meters ostensibly can handle the ebb and flow of electricity.  However, a big obstacle to widespread adoption of distributed generation lies in the software that tracks and monetizes the electricity flow. 

The electric meter on your home or business is the cash register for a utility.  The billing software that calculates charges and sends out your monthly bill is usually a hairy and gnarly application that is modified only with great care and caution.  It may have to work with many different price models.  It may interface or integrate to other utility software applications for customer service, trouble tickets, and outage management.  Therefore, consider the time and effort involved for utilities to revise their existing systems (or take the risk of scrapping them for a new suite of integrated applications) to accommodate additional calculations to not only charge you for your use of their electricity, but pay you for their use of your electricity. 

Its quite a task, and possibly one without comparison.  My wireless carrier, landline provider, and cable TV provider are not set up to “buy back” unused time or channels (although I would love to stop paying for bundled cable channels I never watch), and the best deal I can find is that I get 5 cents off my grocery purchase for each bag I bring to use when shopping at my local stores.

Think about what billing software looks like to support distributed generation and FITs.  It has to interface with all other existing systems, and it has to have an interface to each participating homeowner or business.  That interface has to be real-time and hold historical data for look-backs that could range from yesterday to this day last year.  The complexity and amount of information is best managed by a web-based solution, so that homeowners can log in at any time from any computer to view their account.  Information has to include the pricing plan(s) for customers who sell back electricity, and visual displays of current flows – is the electricity flowing from utility to home or vice-versa?

Then think about what this means for the customer support operations in utilities.  People call now with questions about their bills.  There will be a huge increase in calls to utility customer service centers once distributed generation and FITs are more widely adopted.  Some of that volume is a learning curve issue and a percentage of calls will of course decrease over time, but invariably, homeowners will call in to question why their solar panels are not generating as much electricity as they think they should to trim their utility bills.  These calls really should go to the solar manufacturer, but if consumer behavior is true to form, the first call is to question the accuracy of the billing statement. 

Savvy Home Energy Management System providers (HEMS) have an opportunity to become the utilities’ best friends by reporting not only the energy consumption within a home, but also the energy generation in that home.  The ability to integrate to any manufacturer’s PV, wind, or other alternative energy system and report on performance (plus diagnostics for routine issues) can significantly impact the operational costs for utilities’ customer service centers. 

Distributed generation is going to be a big part of the Smart Grid evolution, and there will be lots of opportunities for strategic partnerships between energy producers and energy management solution providers.  Utilities could and should be encouraging these partnerships because it will make their jobs easier, and keep their customer service costs down.