Smart Grid Innovations Will Reduce the Pain of Consumer Energy Costs

The electricity value chain is undergoing extraordinary changes as it modernizes into the Smart Grid.   At a recent series of Smart Grid workshops hosted by the California Public Utilities Commission, one utility speaker noted that the majority of transformations will occur at the consumption side of the electricity value chain.  I agree.  Consumption is starting to be viewed very differently in the USA.  Whether it is consideration of the carbon footprint of that carrot purchased at the grocery store or the source of the electrons flowing into a socket, more consumers are becoming more mindful of how, when, why and what they consume. 

What are the consumer pains that will motivate them to invest in painkilling innovations?  (As noted in this article, successful new products or services have to be painkillers or vitamins.  As a painkiller, an innovation has to resolve a pain for its target audience.  If it’s a vitamin, an innovative product or service has to improve an existing situation.) 

Pain comes in the form of prices for fuel.  Consumers show remarkable awareness of the price of gasoline.  As gas prices continue to rise, more consumers will discover the many painkilling qualities of electric vehicles (EVs) and plugin hybrid EVs (PHEVs).  The equivalent of a full “tank” of electric charge will be pennies/kW as opposed to dollars/gallon.  And as EVs have a completely different motor than internal combustion engines, they may have less downtime for maintenance and repairs.  The total cost of ownership (TCO) looks very attractive when you factor in annual “fueling” costs and maintenance.  Car manufacturers are rolling out new models with prices that fit a broader range of consumer budgets.  The Plug In America website offers a list of all EVs and PHEVs that are available.  For the gloomy naysayers who insist that these cars are still too expensive or that consumers won’t buy because of range anxiety, I have 3 words:  Solar technology trends.  We’ve seen dramatic increases in solar energy harvesting technologies coupled with equally dramatic decreases in production costs, creating an energetic market expansion at a speed that seemed unthinkable three years ago.  Gamechanging breakthroughs in battery technologies and intense competition among manufacturers will similarly drive down EV costs while increasing driving ranges. 

EVs are also painkillers for two other important stakeholders in the electricity value chain – governments and utilities.  Read about government and utility painkillers for the reasons why.  What’s not to love about EVs? 

For consumers, pain also comes in the form of their electricity bills.  Energy efficiency measures ranging from improving building envelopes with better insulation to Home Energy Management Systems (HEMS) can help consumers reduce their electricity bills.  However, distributed generation or DG will be the ultimate collection of painkilling innovations.  Whether the electricity is produced on consumer rooftops or discharged from their EVs, these distributed sources of generation will earn money for their owners, and offset their electricity bills.  Distributed generation is also a painkiller for utilities because it helps improve reliability, and because it often relies on domestic renewable sources of energy, DG is also a painkiller for governments. 

DG is the painkilling change agent that causes the most profound of transformations in the electricity value chain. Consumers can shift to becoming prosumers.  A term coined by Alvin Toffler, prosumers are consumers as well as producers of electricity.  DG and EVs give us the capacity to become electricity producers as well as consumers, but this transformation relies to a great extent on policy innovations like decoupling and finance innovations that bring these technologies to the masses.  And as prosumers –  aka ratepayers, taxpayers, and voters – we should make sure that utilities and governments are encouraging the rapid deployment of these painkillers.

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Data Analytics at the Grid Edge – Killer Apps or Overkill?

The recent exits of Google’s PowerMeter and Microsoft’s Hohm products targeted at consumers have some industry watchers asking if residential consumers really care about home energy consumption data.  Where we once had a monthly bill that simply indicated the previous month’s kilowatthours of electricity use, smart meters can provide data as often as needed (although 15 minute intervals are a de facto “standard” assumption at this time.)  Who would be interested in this data?  Certain consumer profiles like greens, frugals, and tech gadget aficionados have demonstrated that they appreciate detailed information about energy use, but a larger part of the consumer population hasn’t found a compelling value in this data. 

But there is value in the new amounts of heretofore non-existent data from the grid edge that will be available as more Smart Grid technologies rollout into consumer residences and businesses.  There are killer apps in the analysis of energy use data, and data analytics solution providers with experience in business sectors like wireless and consumer retail have interesting ideas about the real values of consumption data.  The ideas documented here are based on conversations with Bob Becklund of PreClarity, co-founder of a data analytics solution firm working in these areas.  Keep in mind that there are still unsettled areas about energy consumption data and privacy, and it will take time to sort out consumer options to permit use of data by utilities or other entities.   But consumers, utilities, and service providers will find significant value in consumption data – particularly as it relates to behavior and lifestyle.

Utilities get smarter about consumers

Utilities could sift through consumer energy use data and perform correlations with demographic data such as zip code, housing and income data to develop profiles of highest value targets for demand response or energy efficiency programs.  Demand response (DR) programs reduce peak demand (electricity used when it is most expensive).   Analysis and simulations of DR program designs and consumer responses can help utilities save money in avoided costs of additional expensive generation, and participating consumers happily save money in programs that fit their lifestyles. 

Utilities could also take energy use data from residential consumers and correlate it with use of social media and preferred consumer interaction channels, and create new education outreach and marketing campaigns aimed at different populations.   One meter may reflect multiple consumers in a household, and each will have preferences for communication channels.  New campaigns could be launched via Facebook or Google + that are targeted to specific demographics for significantly less cost and time than the “one message fits all” practices found in billing inserts. 

Utilities are gradually moving to new pricing plans based on time of use (TOU) or sources of power (clean versus dirty). This is similar to the evolution of pricing within other markets such as the wireless and airline industries.  As pricing has grown more complex, these industries have demonstrated needs for information, insight, and visibility to “what-if” scenarios to support  business decisions, ensure regulatory compliance, and enhance consumer relationships.   Utilities will have similar needs for tools to help them manage a variety of pricing plans and programs and assist consumers in selecting the plans that make the most sense for them.  

Drivers get smarter about EV roaming

EVs have some strong similarities to mobile phones – consumers tend to take them everywhere.  In the early days of mobile phones, it did not take much distance to move from your zone and incur expensive roaming charges.  Could the same history repeat itself with EV charging plans?   Perhaps not, but roaming and charging at pay stations could create billing complexities for consumers, energy service providers, and utilities.  Data analytics expertise can assist in bringing transparency to all the charging data and the business rules behind roaming EV billing, as well as assist in trip planning or identifying the best charging locations.

Consumers get smarter about energy consumption data

Energy consumption data is all about behavior, and therefore needs privacy protections.  However, that being said, there are situations where consumers may find value in giving permission to utilities, energy service providers, or other third parties to access and analyze their energy consumption data.  For instance, appliance warranties in the future may look very different.   Instead of phoning up a repair shop once the refrigerator has died, a consumer may choose a warranty option that allows the manufacturer to monitor the refrigerator’s use of electricity, and analyze that data to predict and schedule maintenance calls that become proactive rather than reactive. 

Consumers may appreciate services that analyze energy use and break it down by appliance or device – similar to how credit card companies report spending patterns into dining, air travel, and other categories.  Seeing categories helps consumers plan budgets, and similar reports of appliance consumption could help accelerate retirement of inefficient, older appliances for more energy-efficient ones.   

We’re just at the beginning of a brave new world of energy consumption data and no, it’s not overkill.  Data analytics can turn this data into usable information.   Leveraging expertise and experiences of solution providers from related business sectors will expedite the discovery and deployment of these new killer apps for the Smart Grid.

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Utilities Must Improve Their Messages to Communicate the Benefits of Smart Meters

Utilities have a real challenge in succinctly communicating the benefits of smart meters.  Some benefits are not easily distilled into sound-bites.  However, utilities must improve their outreach to consumers to ensure that consumers understand the role of smart meters in helping them save money; helping utilities keep costs and electricity rates down; and reducing carbon emissions. 

I surveyed several US-based utility websites to see how they answered a basic website query for smart meters.  In my role play as a consumer seeking information about smart meters, my most basic question was “what’s in it for me”, also known as WIIFM.  This is a basic lesson taught in Marketing 101 – always tell the consumer what benefits they receive from a new product or service.  Lesson two is to make sure it happens early and often. 

My survey revealed that while smart meter information is presented on each website, it requires some effort to find the WIIFM information and sometimes fails to connect a benefit to a feature.  There are some interesting approaches that include the use of social media as new channels to deliver information, but these lack consistent messaging content.  Communications plans that deliver consistent, multi-layered, multi-channel messaging are necessary to address consumer questions about the value that smart meters have for individuals and communities.   None of the sites in my survey included any gamification elements – although these could have been embedded in pages that require a customer login. 

Here are some survey results.

Utility 1:  The first two search results were useless. The third search result reported on their smart meter deployment and identified two changes consumers would see – remote reading and connect/disconnect capabilities.  The WIIFM benefits were missing, and although they may be obvious to those of us in the business, we can’t assume that consumers will fill in those blanks.    

The fourth result directed me to the FAQ page for Smart Grid topics.   If I wasn’t already in search fatigue, I could find several questions and answers about smart meters, starting with the basic question:  What is a smart meter?  The answer to my WIIFM question was disappointing.  Here’s what I would learn:  “A smart meter – or digital meter – is just one part of a smart grid system. But the device is important in delivering nearly real-time information to our customers. With a digital meter on your home and supporting energy management programs, you can find out – at any time during the month – how much energy you’ve used from the previous day(s).”

This is not a compelling reason for a consumer.  I’ve been told I have a capability to learn how much energy I’ve used the previous day.  But there’s no connection to a consumer benefit here- such as being able to take actions that help me reduce my energy usage, and therefore my energy bills.      

Utility 2: My search results started with a page on how to read smart electric meters.  This page has a box on the right hand side of the page titled Smart Meter, and led to a new page that had a clear feature/benefit statement, “understand energy use to make money-saving and environmentally-friendly changes.”  Clicking on other areas of that page provided information on why smart meters are important in terms of delivering, individual, community, and global benefit perspectives.  The messaging about making choices to save money on energy bills was well-reinforced throughout the text, and ubiquity is important.

The fourth option down in the text box was titled Benefits.  Here I learned that not only would I save energy and money, I’d gain privacy through the elimination of meter reading, find outage sources quickly, and reduce the need for power plants.  The best statement I saw was embedded in a fact sheet linked to that benefits page.  It stated that a smart meter will let you know exactly when you use energy and what it costs.  Had the statement continued on with “and this information helps you make smart decisions to reduce energy use and your bills”, it would have been a fantastic benefits statement. 

These are five takeaways for utility marketing departments:

  1. Consumers expect the Smart Grid to help them save money – connect the dots via multi-layered messaging to show how smart meters achieve that.
  2. Cut the words – consumers are busy people and shouldn’t have to wade through lots of text.
  3. Prominently position the benefits statements up front.
  4. Test your website search results and make sure the pages you want to appear first will appear first.
  5. Think about how social media channels and gamification techniques can deliver benefits messages about smart meters.
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Will Utilities Thrive as Trusted Advisors or Survive as Infrastructure?

The Smart Grid delivers disruptive technologies and services that will impact the entire electricity value chain of generation, transmission, distribution and consumption- meaning utilities and consumers.  Utility operations in generation, transmission, and distribution will be disrupted as work processes, business models, and service expectations change.  Overall, these disruptions are beneficial.  For instance, utilities know that Smart Grid technologies that automate distribution operations will save money, improve grid reliability, and may extend equipment life through improved maintenance.

But when it comes to consumers, this link in the electricity value chain is lacking in knowledge about the benefits that the Smart Grid delivers.  This knowledge gap has profound implications for utilities.  A recent study from EcoAlign shows that consumer awareness has the potential to go a long way in reducing energy consumption and reducing energy bills (with a concomitant reduction in CO2 emissions).  In fact, the EcoAlign study reveals that a stunning 87% of the respondents would like utilities to suggest ways to reduce their bills.  This is the opportunity and the challenge for utilities.

Utilities can play a distinctly new role with their commercial, industrial, and most especially residential consumers.   Utilities can take on the role of “trusted advisors” with consumers to educate and enlighten them on products, services, and simple behavior changes that reduce energy consumption without impact to lifestyles, comfort, or health.  Trusted advisors can build interactions or engagement with consumers and move beyond the traditional delivery of electrons.  Why is this important?  Historically, the lifetime value of a consumer used to mean that utilities supplied electricity, gas, and/or water, and consumers reliably purchased it, at steadily growing rates of consumption year over year.  However, with consumers expecting utilities to suggest ways to reduce their bills, which means reducing their consumption, lifetime value would be a diminishing number.  That’s not exactly a thriving business model or one that excites a lot of investors.

Utilities that become trusted advisors will have a portfolio of different services beyond the safe and reliable delivery of electricity.  These new services go well beyond the rollout of Demand Response (DR) programs to residential consumers.  New services may include Home Energy Management Systems (HEMS), home health or wellness, or water management services.  Services like these offer intriguing possibilities for utilities to increase the lifetime value of consumers.   And even services that utilities are more accustomed to offering, such as energy efficiency and DR, benefit from utilities taking a more active educational role with consumers.

A 2010 report from the Department of Energy’s Lawrence Berkeley National Lab titled “Coordination of Energy Efficiency and Demand Response” studied opportunities for utilities to offer both energy efficiency and demand response programs as a powerful combination to reduce overall and peak demand.  The conclusion was that the payoffs are substantial, but since these are complicated topics, program participation will require consumer education.  Utilities structured to operate as trusted advisors can provide that education, and will be the organizations that thrive in the future Smart Grid.  Otherwise, utilities may simply deliver electricity, gas, or water and watch other businesses sell services to help consumers manage consumption and other home and business-based activities.

Utilities will have to reorient their operations to take on the trusted advisor role.  Part of the transition includes a thorough communications strategy for internal and external constituencies.  This will be one of the discussion topics in an upcoming webinar on June 21 titled How to Deliver Communications and Education about Smart Grid Benefits to Utility Customers.  Join us to learn more about Smart Grid transformations.

 

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The Need for Bi-Directional Education in the Smart Grid

Investor Owned Utilities (IOUs) have a monopoly status in the USA that is regulated by state utility commissions.  Depending on the state, IOUs are responsible for generating, transmitting, and distributing electricity; and interacting with ratepayers for customer services, outage reports, and billing questions.  In a few states, this vertical integration does not exist because of deregulation and divestiture, thus generation and/or transmission assets are owned by other entities.   While this regulatory model has safely delivered electricity to much of the US population with three nines reliability (99.9% uptime) from the traditional grid, today’s Smart Grid technologies and focus on consumer participation prompts reassessment of utility and commission operations.   Residential, commercial, and industrial ratepayers have increasing opportunities to generate electricity and/or participate in microgrid, energy reduction (aka demand response), and energy efficiency programs.  The success of IOU-based programs in these areas will hinge on the accuracy of utility and commission knowledge about ratepayers and the relevance of utility marketing and communications to them.      

Having observed utility/commission interactions and worked with utilities in their customer contact centers, it is quite clear that for many regulated utilities, their focus is on satisfying their local commission, and then their ratepayers.  This means that IOUs spend their time building business cases and justifications to win approval from commissions, not interacting with ratepayers and learning about them.   IOUs have become experts in managing their relationships with commissions.    

Commissions are there to protect the public and ensure reasonable and fair rates are set for regulated services like electricity.   IOUs have not had to concern themselves with really knowing much about their ratepayers, since there has been little need to know more than basic categorization such as residential, commercial business, or industrial operation, and the amount of electricity used each billing cycle.   

These practices worked well in the past, but the advent of disruptive Smart Grid technologies and the importance placed on increasing consumer participation puts new pressures on utilities and commissions to learn more about ratepayers.  We often talk about the need to educate ratepayers about the short and long term benefits of Smart Grid initiatives, but what about the need to educate utilities and commissions about ratepayers?  Any transition to a real consumer-oriented Smart Grid will require utilities to revamp their marketing and communications departments to create more touchpoints with their ratepayer bases and build more knowledge about them.  The questions that IOUs and regulatory commissions should be asking themselves are: How differently would we communicate and market to our ratepayers if they become consumers with choices about how much electricity they buy, sell, store, and use?   What do we need to know about their issues and aspirations around energy use to effectively communicate with them?

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