Smartphones and Utility Consumer Engagement Strategies

This week, the Smart Grid Library features a guest writer, Bill Maikranz, Consulting Director of SGL Partners, the consulting group of the Smart Grid Library.

Today the principle model of interactions between consumers and utilities is one of ordering service connection or disconnection, payment questions or arrangements (current and past due), and outage reporting. This is accomplished almost entirely by phone either with agents or automated through Interactive Voice Response (IVR) systems. Everyone has to pay their bills, so these channels are good for bill payments, which sometimes require interactive and realtime negotiations. The IVR is also a good tool for utilities to find out where outages are occurring through the location identification of callers reporting power losses and calls to obtain status information.

Current Smart Grid technologies enable consumers to participate in demand response (DR) programs to modulate electricity usage. For instance, some Smart technologies can automatically control heating and cooling in buildings based on real-time remote or previously programmed controls. These products are gaining acceptance in residential and commercial markets across the USA.  DR programs will trigger increased opportunities for consumer interactions for ad-hoc and planned participation requests.

Beyond that, some utilities are exploring or deploying smartphone applications for residential consumers to check and pay balances. There are several good reasons to offer ease of access solutions: younger bill payers want mobile convenience to suit their lifestyles; not every is in front of a PC every day but everyone uses their mobile phone each day; and any communication that keeps a record of activity on mobile devices means it is easy to track activity.

The common thread of today’s interaction technologies and business processes is based on historical planning and customers reducing costs or assuring that utilities get paid. What will be the business driver or drivers that motivate utilities to encourage more channels of communication with consumers? Will the motivations remain cost reduction and timely payment of bills, or will competition offer new solutions to entice consumers to change providers? What are the drivers or interests of the consumers in these technologies: Convenience? Ease of use? Ubiquity? Or something that engages them in their time and cost of usage?

There is always the financial driver – to either save or receive more money on the part of both utilities and consumers. The other is the more intangible force of doing something because it’s the right thing to do (reduce CO2 emissions, for example) or in general because it’s needed. To make or save money most consumers will do whatever they can to reduce their utility bills. But consumer engagement to do the right thing has to be easy for the consumer. If it’s too hard to engage it can have the opposite effects and result in lower customer satisfaction scores.

With over one billion smartphones deployed in the world today the technology platform answer to all of the above questions is a mobile phone app or channels for communication with utilities other than phone calls. These apps must send information and requests to utilities and receive information back with full consideration of data security and privacy. It’s a key underpinning for utilities to transform their existing customer operations from reactive to proactive consumer engagement strategies.

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No More Tinkering – How Reinventing the Oven is Like Reinventing the Grid

How do you build a better oven? That’s a question Nathan Myhrvold, former CTO for Microsoft and foodie recently discussed.  He pointed out that today’s electric or natural gas-powered oven is designed on the principle first put forward five thousand years ago to dry clay bricks.  Kitchen technologists since then have been tinkering with that basic design – even though the objective of food preparation is often at adds with the objective of baking a clay brick, with the possible exception of holiday fruit cakes.

His exploration of how to build a better oven is a useful analogy about how we think about building a better electrical grid.   We can continue to tinker around the edges, making small, incremental improvements to existing technologies, or we can start over and work with entirely new technologies.  For example, we can continue to try to commercialize carbon sequestration technologies to make fossil fuels less polluting, or we can put our money in clean from the get-go renewables.

Myhrvold offers a fascinating description of the problems with existing ovens right from the moment you turn them on.  Today’s ovens are inefficient.  They consume too much energy for the output we get. The same is true of today’s electrical grid.  We lose 6 -10% of the energy along the supply routes from those remote, centralized sources of generation to the flicks of a million switches that make lamps glow.  The technologies to reduce those losses in the traditional electricity supply chain tinker with the problem.  A Smart Grid reconfiguration of the grid from centralized to distributed energy resources (DER) co-located at the point of consumption is a fresh approach that simply eliminates the line loss problem.

The problems with ovens aren’t simply about wasted energy.  The energy is often in the wrong areas.  The oven and the food contained within are not very responsive to each other’s status.  A cake may be baking too hot on one side of the oven and too cool on the other.  This misapplication of energy exacerbates another shortcoming – ovens provide insufficient and often inaccurate feedback about what’s going on inside them.   The only way cooks can really know what’s going on is to open the door and conduct a visual inspection.  As the IEEE Spectrum article explains, that simply compounds all the energy waste issues in the modern kitchen oven.

The problems of balance and lack (or inaccuracy) of feedback apply to today’s grid too.  Sure, grid operators do a good job of balancing the grid, but it requires a significant effort with an expensive outlay of capital and energy waste.  Here’s where another Smart Grid technology group comes into play.  Sensors deliver situational awareness of grid operations, and improve the abilities to deliver the right amounts of energy at the right places at the right time without wasting as much energy.  In fact, in many scenarios, reducing demand for electricity – also known as demand response (DR) – is a better answer than increasing generation capacity.  Sensors, and their companion actuator technologies are already successfully automating electricity reductions (or responses) on a facility-wide scale – such as dimming lights or bumping an air conditioner temperature up a degree.

And guess what?  Sensors address the situational awareness problem in ovens, and can include communications capabilities to alert us when food has completed its cooking cycle or needs skilled human intervention.  Just like the grid, sensors plus communications technologies in ovens makes them smart too.  Both ovens and the electrical grid benefit from innovative thinking that put less emphasis on technology evolution and more emphasis on technology revolution.  Consumers of both will be better off for it.

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Intelligent Water Consumption – the Next Frontier for the Smart Grid?

The Rim Fire, a conflagration centered in California’s Tuolumne County, is larger than the city boundaries of Chicago (with its own interesting history about fire.)  This fire threatens critical power and water infrastructure as well as Yosemite National Park and property for thousands of people and businesses.  The Hetch Hetchy Regional Water System delivers water for 2.6 million residents and businesses in the San Francisco Bay Area, including my town in Silicon Valley.  This system also supplies hydropower for the City of San Francisco, and two of three powerhouses in that area are shut down and awaiting inspection along with high voltage transmission lines, serving important city agencies like police and fire stations, City Hall, SF General Hospital, streetlights, and the city’s electrified transit system.  There will be damage to some of the electric grid’s assets.  The water infrastructure appears to be unaffected.

The City has backup plans in place for both power and water.  San Francisco’s Public Utilities Commission spent $4.6B over ten years to upgrade critical infrastructure and build more reliability into their infrastructure and sources of supplies (water and electricity) as well as the transport of them to the city and its water customers stretching down into the northern border of Silicon Valley.

This event raised a couple of questions for me and a compare and contrast exercise.  What if the water system had been damaged to the point that these backup plans go into effect?  Would it limit the amount of water that would be available to my community?  Could residential customers such as myself curtail water usage in the same ways (and as conveniently) as we are asked to curtail electricity usage?  What tools and programs would be available for me to do this?

There is a modicum of awareness about electricity use via plug load technologies that can measure how much electricity is drawn by specific devices, plus years of education about electricity consumption habits.  There’s also work on disaggregation technologies that deliver whole-house metrics by tweezing out various devices’ electricity use.  Utilities have programs that operate with homeowners’ permissions to automatically control selected devices and modulate energy usage.  Appliance manufacturers are planning new models that can receive electricity price signals and modify their operations to suspend certain functions like defrost cycles or ice-making during high price periods.

We’re way behind that curve on technologies and services that can deliver similar capabilities for residential water consumption. In fact, the situation is downright primitive.  Most technologies are still in conceptual stages and seeking funding.  Existing metering solutions have to be clamped to pipelines, which can mean an intrusive and expensive gauge of near realtime consumption.  How many water agencies are discussing creation of Time of Use (TOU) or dynamic pricing for residential water use based on peak and low demand time periods.  Appliance manufacturers may have water-conservative dishwashers and washing machines, but these aren’t built to flexibly respond to signals coming from a water grid.

Few investors see the need to allocate money to water consumption solutions, because as is often lamented with electricity, the prices for water are just too low.   Consumers don’t see the need for metering water or awareness of how much of a household’s water goes to washing dishes versus running showers versus irrigating flowerbeds and gardens.  But many states already experience significant droughts that trigger restrictions on water use for specific purposes, and as climate change impacts regional precipitation patterns, expect to see more need for intelligent water consumption.

While demand response (DR) activities are being discussed as routine programs for consumers with regards to electricity, it’s hard to find similar levels of discussion ongoing about residential water use in the USA.  While we’re planning a future with smart appliances, water-consuming devices are still really dumb when it comes to grid responsiveness.  We’re all really stupid when it comes to water, and that’s a real problem.  We can live uncomfortably without electricity.  We cannot survive without potable water.

The challenges to create a smart water grid are daunting, and as illustrated here, we’re significantly farther back in terms of achieving objectives compared to electricity.  Some of the technology and policy answers may come from agricultural and industrial consumption. Just like electricity, these categories are heavy users of water, and it would be smart to avoid reinventing wheels whenever possible.  Intelligent water consumption has been overlooked so far, but that’s about to change.

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What Does Japan’s Top ICT Company Think (and do) About Smart Energy?

Japan’s national energy strategy experienced a 9.0 quake of its own in 2011 as a result of the twin incidents of the March 11 tsunami and subsequent Fukishima nuclear accident.  It rattled many assumptions about energy sources and electrical grid configurations for its major corporations too.  A recent Silicon Valley Technology Forum hosted by Fujitsu served as an excellent opportunity to hear how these large-scale events have shaped thinking and R&D in the leading information and communications (ICT) company in Japan, which also happens to be the third largest ICT company in the world.   Their thoughts and R&D can help contribute to North American ideas and directions to improve our energy surety as well as grid reliability and resiliency that the Smart Grid’s modernization activities must deliver.

Fujitsu’s Smart Energy vision focuses on three trends:

  1. local generation and consumption
  2. increased sensing and remote control in transmission and distribution grids
  3. increased demand response (DR) technologies and distribution grid-sited storage.

Local generation and consumption has a fair number of terms associated with it such as decentralized generation of renewable energy, in wide use in Germany as part of their Energiewende vision.  The phrase distributed energy resources (DER) enjoys more use here in North America, and covers more technologies like energy storage and DR programs rather than have a focus solely on generation sources.  While there are subtle differences in these terms, the end goals are the same, to use technology disrupters like solar panels (disrupted by virtue of technology, policy, and finance innovations) to redefine existing models of how electricity is distributed and managed.

Increased sensing and remote controls rely on technology innovations that are delivering a supply of cheap, low-powered, long-lasting wired and wireless sensors for a growing range of machine to machine (M2M) applications.  Smart meters and phasor measurement units (PMUs) are two of the first applications within the energy sector, but there are emerging applications in smart cities, transportation, and personal health too.  There will certainly be disruptive services as a result of M2M technologies.  Smart meters enable proactive outage reporting – obviating the need for customers to call in to notify utilities of service interruptions.  But other sensors attached to other equipment used in generation, transmission, distribution, and consumption of electricity will help us move from unrestricted consumption to sustainable consumption.

This transformation of consumption models is where DR and energy storage come into play.  Consumption changes from a passive state to an active state and enables market participation in generation of negawatts or kilowatts.  While negawatt generation is typically focused on DR programs, energy efficiency (EE) activities arguably could also be included in consumption.  Manufacturers like Fujitsu are developing new circuits that reduce energy consumption by reusing energy stored in specific transistors.  These circuits could show up in the power supply units of servers by 2014.  Fujitsu demonstrated their OpenADR 2.0 server software which could send messages on a wide scale to devices enabled to receive signals and reduce energy usage in reaction to those signals.  Ability to communicate at a scale of thousands to millions of devices, as opposed to today’s hundreds, will be crucial for residential or commercial DR programs to be fully effective in the future.

Fujitsu researchers described a very interesting variation of the typical DR program.  In this scenario, specialized plug loads that have their own battery resources (ie laptops) are controlled in an office building to “disconnect” from the grid and run on battery power.  When aggregated over a sufficient number of devices, building loads decrease.  It’s a creative alternative to the usual reductions in lighting or HVAC loads for organizations that want to participate in DR programs that reduce energy use at peak times and save money for building occupants (reduced energy bills or increased DR payments) and ratepayers (avoidance of investment in new generation assets).

The Smart Energy trends discussed by Fujitsu during their Forum illustrate significant synergies.  If we have intelligence in the grid and the associated communications networks to build situational awareness of devices, regardless of their status as generating, storing, transmitting, or consuming electricity, we can create completely different grid that co-locates generation (or storage) with consumption.  Reducing reliance on geographically remote generation reliant on vulnerable transmission and distribution wires does deliver energy surety as well as grid reliability and resiliency.

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Is An Electricity Négociant in our Future?

Ahh, California.  The land of milk and honey.   And wine – lots of it.  Silicon Valley denizens like me can find vineyards and wineries within a 30 minute drive in any direction.  So it stands to reason that we’re more focused on the wine business than other parts of the country.  There’s a term that is quite common in the wine business – négociant.  A négociant is an entity that buys grapes and controls the wine-making process.   Négociants are intermediaries between vineyard owners and wine consumers.  Négociants add value to grape juice by blending and processing fermented juice into delicious wines. 

So what does the wine business have to do with the Smart Grid?  It’s an interesting analog for how our electricity business models could evolve.  Our future could include electricity négociants that offer a range of services, and they could disrupt traditional investor-owned utility (IOU) business models as well as intermediate typical utility/consumer relationships.      

We already have the first few intermediaries between utilities and consumers in the form of Demand Response (DR) service providers.  DR service providers organize and aggregate large consumers of electricity, typically Commercial and Industrial (C&I) businesses that have operational flexibility to shift electricity usage to off-peak times.  They are found in both the wholesale and retail electricity markets.  One example is Constellation Energy, which offers services that help businesses function in DR as well as other energy markets.   EnerNOC is an example of a company that has expanded beyond traditional DR programs with energy efficiency and carbon emissions management services.  The electricity business model evolution has already begun on the consumption side.

A revolution will occur on the production side, with the introduction and adoption of cost-effective distributed energy resources (DER), which include electricity generation and storage.  These Smart Grid technologies are disrupters to our existing electricity supply chain, which is based on a flow of electricity from centralized generation controlled by utilities or regionally organized markets called ISOs (Independent System Operators) or RTOs (Regional Transmission Organizations).  Literally giving “power to the people”, DER products can transform this supply chain.  Power produced onsite can serve multiple purposes.  It can be used from a self-reliance perspective, which is what net-zero energy buildings aim to achieve by producing all the electricity necessary for their operations.  Or, DER-produced electricity could be sold back to the utility as is already done with net metering tariffs and deliver economic benefits to the asset owner.  

Electricity négociants could play interesting roles in this supply chain transformation.  An electricity négociant might contract to manage the electricity produced by a campus microgrid, and deal directly with the local utility to sell specific amounts of power to the utility at peak times while simultaneously organizing consumption reduction actions within the microgrid environment.  It might also deliver monitoring and maintenance services on all that microgrid generation capacity, offloading the responsibility from the onsite facilities management group.  For instance, some solar companies offer a range of services from insolation analysis and financing options to maintenance of a site’s solar generation equipment.  A segue into similar services for energy storage assets would be a logical next step.  A combination of consumption and production services offered by an electricity négociant would also be the next evolution in the electricity business model.  

These business models can intermediate the direct relationship that utilities have traditionally had with consumers.  And that should trigger some soul-searching in utilities – particularly the IOUs and the regulatory agencies that interact with them.    For IOUs, would it be strategically sound for electricity négociants to intermediate their consumer relationships?  Could IOUs become electricity négociants too?  What are the impacts of DER to their aggregated lifetime consumer valuations?  For regulators, how would they work with négociants to ensure that consumers continue to get safe, reliable and cost-effective electricity services?  Do DER deployments require a rethink of how utility rates are calculated? What policy shifts would encourage evolutions in electricity supply chains?

In the wine business, négociants provide consumers with a wide offering of wines varying in quality and price.   Could a similar range of blended electricity production and consumption service choices from electricity négociants be available to consumers in the future Smart Grid?

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