It’s clear that consumers, policy makers, utilities, and Energy Service Providers (ESPs) need to understand the value that energy use data may have in the future.  Today, we have offline data, which includes income, credit rating, home value, past purchases, number of children – all types of data that have been used by direct marketers for years.   Online data, which consists of IP-addressable search history and public information posted on sites such as Facebook and LinkedIn, is relatively new.  The latest trend is the merging of offline and online data for sale to advertisers, researchers, and content aggregators, and here’s where the concerns rise.  Electricity use data is a new form of online data – especially if you have a HEMS solution or IP-addressable appliances and electronics.  HEMS solutions will probably be offered by your local utility and/or ESPs.  Therefore, the policy about collection and use of that data could vary by utility (if these are the data collectors), or by ESPs such as a wireless communications company or a HEMS company.

Will we see HEMS analogs to the Google business model in which the search is free and the money is made selling search history data to advertisers and researchers?  What if the HEMS solution is free and the ESP or utility has the ability to take subscriber energy use data and market it?  What are the responses from policy makers so far?

The German government recently announced a new German foundation to investigate data security and the use of security standards and technology to protect user privacy.  Canada has a Privacy Act that defines how the federal government must handle information about individuals. There is ongoing National Institute of Standards and Technology (NIST) activity to create privacy and security recommendations for energy usage data for both residential as well and Commercial and Industrial (C&I) customers.  The USA does not have a comprehensive national data law, but instead relies on a patchwork of privacy laws and enforcement mechanisms. 

Until the NIST recommendations are completed, utilities and vendors might want to follow the lead of PG&E, which outlined this privacy policy on its website.  This policy reflects the collection of data by smart meters, and goes well beyond the usual privacy statements that are found on most other utility websites.   It clearly states, “We do not sell or provide personal customer information to third parties for their commercial benefit.”

Another source for guidelines is the Network Advertising Initiative‘s self-regulating policy for consumer opt-outs from behavioral advertising which addresses existing online information.  This might be the type of policy that manufacturers and ESPs offer for new online information about energy use collected from IP-addressable devices.   Consumers who understand that value of their data may be more likely to opt-in to enjoy reduced prices, membership discounts, or money back on their utility bills.  Transparency about who gets the value of energy use data will be key to win consumer confidence and support for Smart Grid initiatives.   

Was this evidence of a smart meter backlash or a simple demonstration of that adage that familiarity breeds contempt?    Only detailed surveys will determine that, but it is clear that PG&E needs different advisors in the executive suite and a fresh approach to interacting with customers. 

So, community choice is safe in California, and this is excellent Smart Grid news for two reasons – but there’s a real warning in the poll results too.  (Community choice lets cities, counties, or neighborhood entities purchase and/or generate electricity for residential and business use within their boundaries.  Community choice means local control over energy resources, more renewable sources of energy, plus a lower overall cost of electricity.) 

First the good news.  Community choice should accelerate the integration of sources of renewable energy into the grid.  As the environmental devastation grows from oil spills (even on land – see the Red Butte Creek spill in Utah), it is becoming apparent to even the most oblivious that this is one fossil fuel that we would be well-served to render obsolete.  For instance, communities can band together to create solar gardens and aggressively convert rooftops to solar power to generate local clean and renewable power for their electric vehicles.  

A second benefit is that distributed generation improves our grid security.  Complete reliance on centralized energy generation puts all eggs in one basket.  If you believe the reports about hackers infiltrating the computer networks that control the electrical grid, or even if you only believe a fraction of them, there’s serious reason to be alarmed and deploy solutions that improve the stability and reliability of the electrical grid.  A grid studded with microgrids and CCA-controlled energy sources is a smarter grid, less likely to be completely disabled and able to recover faster from natural disasters or acts of criminality and terrorism.     

However, there is a real worry in the Proposition 16 results.  It is clear that PG&E customers don’t trust PG&E.  This does not bode well for future PG&E efforts to educate their customers about TOU (Time of Use) rates and other measures to reduce electricity needs at peak time periods to save money and reduce carbon emissions.  Enlightening consumers about their energy use and encouraging participation in smart energy programs is a process of complex messaging, and it requires a relationship of trust.  PG&E doesn’t have that now, and the big question is – can they earn consumer trust to be effective in their future Smart Grid solution rollouts?  If they fail in that endeavor, we all lose. 

First they created a public relations disaster with their smart meter rollout, which now has its own term called “the Bakersfield effect”.  PG&E investment in a sensible communications plan and budget could have prevented this problem.  The impacts of the Bakersfield effect are widespread.  Smart meter rollouts in other utilities are delayed or postponed, and each setback hinders realization of their Smart Grid objectives.

Second, PG&E filed a tariff proposal that would reduce their current 5 tier electricity pricing structure to 3 tiers.   Under the current structure, the more energy you use, the higher your rates.   This provides financial incentives for Californians with high bills to seek solutions like solar panels or energy efficiency investments or simple energy conservation behaviors.  The proposed flattening of this program rewards electricity guzzlers at the expense of energy-conscious consumers.  It is akin to asking drivers of gas-sipping cars to subsidize the gas for Hummers.  Solar companies are already on record stating that this tariff change, if approved by the California Public Utilities Commission, would remove financial incentives for many homeowners to add solar generation and thereby defeat two key Smart Grid objectives – increased renewable energy and more active consumer participation. 

And finally, there’s Community Choice Aggregation and Proposition 16.  Community Choice Aggregation (CCA) is available in several states including California and is an interesting market model to accelerate the introduction of renewable energy into the grid and enable more consumer participation to reduce energy use.  The program details vary in each state, but all allow cities or counties to purchase and/or generate electricity for residential and business use within their boundaries. The local investor-owned utility (IOU) delivers electricity through its transmission and distribution network and continues meter reading, billing, and maintenance services.  The customers in the CCA footprint have the ability to opt-out of the CCA program, but why would they?  A CCA arrangement means local community control over energy resources, an increased reliance on renewables, plus a lower overall cost of electricity. 

For example, a local effort in Marin County projects that adoption of a CCA program for the county and its communities would result in:

• Annual average electricity cost savings of $6.8 million spread amongst it customers
• Increased renewable energy utilization to 51% by 2017 or sooner – double the renewable energy resources provided by PG&E in that timeframe
• Improved rate stability for local residents and businesses because a CCA is responsive to its local customers, not to remote shareholders

Prop 16, misleadingly titled the Taxpayer’s Right to Choose Act, is sponsored and funded by PG&E, which is committing up to $35M to the June 8 campaign.   PG&E would like to kill CCA to protect their monopoly powers.   While this effort pleases Goldman Sachs and other Wall Street investors, it has negative impacts for the Smart Grid and us.   First, discouraging community-sourced generation reduces the resiliency of the Smart Grid.  Communities that have their own sources of electricity could contribute electricity or reduce energy consumption during grid disturbances and thus help PG&E continue uninterrupted electricity service to all ratepayers.  Second, it casts a pall on the number of new market models, products, and services that can be introduced, which is one of the seven characteristics of the Smart Grid identified by the Department of Energy (DOE) to accelerate deployment of solutions that improve our energy security and reduce greenhouse gases.  Third, community-based programs that promote energy efficiency and responsive energy reduction programs have unique, localized value propositions to lower community energy costs that could not be matched by a monolithic entity like PG&E.   See this link for more information.

These PG&E actions, if allowed to go forward, are serious obstacles to the deployment of Smart Grid technologies and services, and in turn hinder the ability of this nation to improve our energy security, reduce greenhouse gas emissions, and reduce energy costs for consumers.  Satisfying Wall Street should not (again) be a financial, environmental, and national security cost to American taxpayers, ratepayers, and consumers.

This is the GOOD about California’s Smart Grid plans – it’s a public process that invites an open exchange of views about the roadmap for a successful and cost-effective Smart Grid in this state, which often serves as a template for other states. It included a great deal of discussion about what is in the average residential ratepayer’s best interests – and the aspects of the Smart Grid that benefit consumers.

The BAD is that decisions have to be made quickly, and in advance of cyber security and interoperability standards recommendations coming from the National Institute of Standards and Technology (NIST). It’s becoming a common theme – everyone is waiting for these standards recommendations, everyone wants state and Federal regulators to establish policies, but regulators are reluctant to pick winners and losers.

The UGLY is a sad, cynical and manipulative ploy by one of the three California IOUs to squash competition from municipal utilities. That utility is PG&E. It is sponsoring and investing more than $25 million dollars in a misleadingly-named “Taxpayers Right to Vote Act” also known as Proposition 16. This proposition requires that 2/3s of voters must approve any local government’s provisioning of electricity through a municipal utility. Why is this ugly? First, it contravenes the proposed California Smart Grid roadmap’s goals of accommodating all generation and storage options. Second, it directly counters another roadmap objective to enable electricity markets to flourish. PG&E definitely does not want alternative markets organized around Community Choice in California that could compete with them. Third, it is blatantly unenlightened behavior from a utility that had the courage to divorce the Chamber of Commerce for its “extreme position on climate change”. Does PG&E have an evil twin that is currently running the show?

Shout out to the EPA and DOE
The US Environmental Protection Agency and the Department of Energy are strengthening the ENERGY STAR program as noted in previous blogs. New testing is underway on six of the major electricity consumers in average American homes, and new ongoing verification testing will ensure continued compliance in addition to the third party testing already put into place. The appliances are freezers, refrigerator-freezers, clothes washers, dishwashers, water heaters and room air conditioners.

In addition, the DOE has been aggressively stepping up enforcement of Energy Star standards, requiring manufacturers to actually comply with these standards, and revoking the ENERGY STAR label from non-compliant products. This is all good news for American consumers, because the ENERGY STAR program is well-known and trusted to guide purchasing decisions. Beefed up enforcement will save consumers money – estimated to be $250 – $300 billion in savings over the next 30 years. Now that’s what I call a good use of taxpayer money. For more information, click here.

A few weeks ago I had the opportunity to discuss, well, no, that’s the wrong verb to describe the scenario.  I had the chance to bow on bended knee to humbly suggest to a representative of my local utility that it could improve its messaging about the benefits of smart meters and Smart Grid technologies in general, and target messaging to women in particular.  The response, delivered in the chilliest of tones was that since the utility had a woman at the head of the marketing effort, that demographic was more than amply covered.  No, sorry, it’s not covered.  Not even close.       

It is employee attitudes like this that will kill Smart Grid support, which is needed at both the taxpayer and ratepayer levels.  It is employee attitudes like this that have utility CEOs despairing of successfully effecting change within their own organizations*.   It is attitudes like this that torpedo any possibility of a utility being the trusted advisor to help consumers manage significant changes in their relationships with energy.  And the saddest realization of all is that while consumers overwhelmingly expect utilities to offer advice about energy consumption, utilities like the major IOU (Investor Owned Utility) in my area are serving up plenty of material for future business school courses about how to squander trust in utilities through a lack of interest in ratepayer communications.    

There are smart utilities out there that have successfully enlightened their customers about smart meters and Smart Grid benefits, and it would be fantastic if all utilities actively shared successes and failures to facilitate the development of practical advice.  The smart utilities understand that today’s ratepayer relationship may migrate to a customer relationship in the future, and that customers will have choices about energy suppliers.  These same utilities also understand that sustaining and growing trust relationships will help engage consumers to be enthusiastic participants in residential demand response programs and energy efficiency programs. 

So when you read the definition of the Smart Grid in the Smart Grid Dictionary, the point about bi-directional communications is more than an evolutionary change in a network, for some utilities, it’s a revolutionary change in their behaviors.  You may not always like what you hear from your ratepayers, but start listening now and building rapport to deliver the complex messages about the Smart Grid and the benefits to consumers.  And Smart Grid solution vendors need to remember that the Smart Grid is more than just wealth creation for them.  It won’t happen without value creation for consumers. 

To all the hard-working, dedicated, and insightful PG&E employees who understand the importance of enlightening consumers about Smart Grid initiatives and are working to do that, thank you from the bottom of my heart.  I support your efforts, and I am sorry that you have to deal with colleagues who just don’t get the fact that Smart Grid success is contingent on ratepayer and taxpayer support.  Maybe if you post “It’s the Consumer, Stupid” signs in the office, the message will sink in. 

*IBM global study of utility CEOs:  70% anticipated turbulent change within their organizations about Smart Grid, and from one year to the next reported a 19% drop in their expected success in managing that change.

And why should they?  It’s the responsibility of utilities, and maybe the Department of Energy (DOE) as well to educate consumers better about what Smart Grid technologies can do today and in the future.  The DOE has developed a series of booklets that explain the benefits of the Smart Grid to various groups, including consumers, but clearly there need to be much more aggressive and coordinated campaigns to enlighten consumers.

Does Joe Ratepayer understand that smart meters enrolled in utility programs will reduce or eliminate the need to build more power plants to address peak electricity load requirements?  Does Jane Ratepayer understand that new power plant construction translates into higher electricity bills to recover costs?   Could Joe or Jane intuitively understand how a smart meter saves them money and saves the environment too?    

Those of us in the business understand that smart meters will save consumers money on their utility bills as the grid evolves to residential Time of Use (TOU) electricity rates and Home Energy Management Systems (HEMS) are deployed.  (Note:  The Smart Grid Dictionary defines TOU as “A rate structure with different unit prices for electricity use in a 24-hour timeframe, generally to encourage use during periods of lower demand.  This price applies to a time-of-use price, rate, or tariff and is a dynamic price scheme typically used with non-dispatchable demand response programs.  It is also known as time-of-day pricing.”) 

Analogies can help explain the Smart Grid rollout process and the role that smart meters play.  For instance, let’s say that I am building a new house with the kitchen of my dreams.  I won’t get the benefits of that kitchen’s output until foundations to fixtures are installed. 

The smart meter is like my house’s foundation.  There’s no home without a foundation.  There’s no Smart Grid without smart meters.  In building my new home, I understand that there is a start and a finish to the project.  I have a blueprint to visualize the goal.  I have a project plan to understand the process of achieving that goal.

It is vital for utilities to connect the dots between current smart meter rollout activities and long term Smart Grid objectives.   Ratepayers and consumer advocacy groups need equivalent blueprints and project plans to understand the long-term objectives in terms of what it means to their bills and the environment.   Outreach via a Consumer Enlightenment Model is absolutely necessary to build and sustain public support of Smart Grid initiatives.        

I’ll be attending the ITExpo’s Smart Grid Summit and the Grid ComForum conference to explore these concerns – see you there! 

I reviewed community websites and posts about PG&E’s smart meters and have a few New Year’s resolutions to suggest to PG&E and other utilities planning smart meter rollouts:

- Learn from PG&E’s sad tale – utilities must develop a thorough communication plan as part of a Consumer Enlightenment Model that explains the benefits of smart meters to ratepayers.  There is a tremendous amount of genuine confusion about the beneficial impacts of smart meters for consumers.  Many consumers have the impression that smart meters are great for utilities, but just an additional expense for ratepayers.   Utilities must communicate the “What’s in it for me?” messages tailored for residential consumers.   

- Part of the Consumer Enlightenment Model’s communications plan must include a statement that an old electromechanical meter can slow down over time, possibly resulting in under-billing in the past.  Therefore, when a smart meter is installed, it may be the first accurate reading of electricity consumption in many years.  One irate consumer reported that his electricity bill for a family of four jumped from $20 to $80 per month – therefore the smart meter was inaccurate.  I’d say the old meter was inaccurate since he’s not supplying any of his own electricity from solar, and $5 of electricity usage per person per month is awfully low for PG&E rates. 

- Provide communications training to their field resources and any subcontractors installing meters.  That training must cover the talking points about the benefits of a smart meter from the ratepayer’s perspective.   Telling consumers that smart meters will eliminate meter readers jobs is an accurate but insensitive statement to make during a recession with high unemployment.   

- Examine customer service scripts to deal with customer calls about increased bills.   A review of all call flows in customer care centers is in order to ensure that callers receive a smooth handoff from one department to another and strive to achieve “first call” satisfaction.

That old Ben Franklin saying about “for want of a nail, a shoe was lost” seems appropriate every time this litigation story comes up.  Lacking upfront, convenient, and accurate information about smart meters or any other visible and disruptive technology, ratepayers will seize upon misinformation, substitute opinion for fact, and develop attitudes (about utilities and smart meters) that will be difficult and expensive to change, slow down rollout plans and inflict damage on other Smart Grid initiatives.

Are you interested in learning more about the Smart Grid?  There are two opportunities coming up in early 2010.  The ITExpo will host its first Smart Grid Summit from January 20-22 in Miami, Florida.   The Grid ComForum Conference and Exhibition is scheduled for February 2-3 in Santa Clara, California.   See the events sidebar for more information.

HEMS solutions usually include some sort of In-Home Display (IHD) that communicates information that ranges from current electricity rates, home electricity consumption rates, and what I term “home operations metrics” like temperature and security status. These IHDs can be wall-mounted displays or standalone, battery-operated wireless displays, or even visual devices that simply glow a different color to indicate home consumption or real-time tariff rates.

In the current electrical grid, the utility’s relationship with a residential ratepayer ends at the meter, affixed to the outside of a home. Bills arrive after the fact – at a minimum a month after your electricity use. HEMS and IHDs completely disrupt this consumer engagement model, and offer the opportunity for utilities to extend their relationship inside the home with much richer content and real-time data. True, utilities have websites that consumers can visit, but this information is relatively static.

Smart Grid-enabled HEMS solutions can deliver information that residential users would find compelling – such as real-time billing information mentioned above, tailored suggestions about how to trim their electricity bills, offers for participation in demand response programs to reduce rates, and more. This information empowers consumers to make educated decisions in real-time about how to manage their electricity consumption. That’s the good news.

The bad news is that, operationally and culturally, utilities are not accustomed to selling to residential end users. They don’t inhabit a competitive world where they must fight for mindshare and market share. If you look at the take rate for utilities’ consumers to sign up for electronic billing as an indicator of their selling capabilities, it is abysmal. Only 17% of all residential utility customers have enrolled in electronic billing. In comparison, 40% of telecom customers have electronic billing. Clearly, there’s a problem in utility outreach and education to sell consumers on a program that has solid environmental and convenience benefits.

If utilities have low success rates in getting people to enroll in simple programs like electronic billing, then there are real challenges in communicating complex and layered messages about the benefits of HEMS solutions and associated IHDs. As I noted in last week’s blog about PG&E’s rollout of smart meters, residential end users will have the opportunity to have a very visible and very disruptive technology introduced in their homes. If it’s done well, not only do the utility rate payers benefit, but overall we all benefit from fast adoption of Smart Grid solutions. However, technology rollouts that result in confusion, opposition, and lawsuits have negative impacts on everyone.

Utilities are depending on HEMS solutions to enable widespread participation in demand response and energy reduction programs. The stakes couldn’t be higher to plan and conduct effective rollouts of these HEMS applications, starting with clear messaging about the benefits of HEMS solutions to average residential customers. Not every consumer embraces change – especially when we have all been conditioned to regard electricity as a cheap and plentiful commodity that doesn’t require much attention on our part. However, we can be educated to welcome changes such as smart meters and HEMS solutions, as some utilities have successfully demonstrated.
HEMS rollouts must clearly articulate the benefits to end users – what’s in it for them, what’s required of them, how to get more information, how to get support when things break, and examples of what the solution looks like and options for IHDs. A successful HEMS rollout requires a sophisticated sales and marketing strategy. Next week’s blog will explore some of the key tactics in a successful strategy.

Flat Panel TVs Get Energy Efficiency Standards in California
Break out the Champagne for the bold decision by the California Energy Commission (CEC) in approving new energy efficiency standards for TV sets sold in California!
Recent blogs (see archives: October 12th and 26th, November 2nd and 9th) covered the brouhaha that the CEA and some TV manufacturers created with the usual scare tactics about job loss, economic disaster to businesses, and all the other assorted ills that have been projected with every previous CEC energy efficiency standard. Fortunately, the CEC knows from actual experience that these standards improve economic conditions – for California consumers who will enjoy reduced operating costs (i.e. electricity bills). In energy efficiency matters, other states often adopt the CEC rules, so here’s hoping that this positive trend to reduce energy consumption continues across the nation.

Something is missing from these descriptions, and it is time to recognize that the Smart Grid is an energy ecosystem.  Ecosystems are marvelously complex, inter-related environments.  Remove a food source from the food chain, and watch it change.  The same is true with our energy ecosystem – just substitute a form of energy, like coal, for food, and consider the impacts of its absence.  

We have to plan the reduction, if not outright extinction of the dirtiest fossil fuels, and replace them with renewables.  Since many renewables are intermittent energy sources and not steady-state, it means we also need to introduce layered (generation to distribution) energy storage into the grid to accommodate not only ancillary services but complete continuation of electrons even when the sun isn’t shining or the wind isn’t blowing. 

However, the challenges of introducing new technologies are even more numerous.  For some technologies that make the grid more robust and reliable – like synchrophasors, their deployment won’t cause disruptions – they improve and enhance existing operations.  Most importantly, they are invisible to the average consumer.  But there are other classes of technologies that are much more visible to consumers, like smart meters.

And here is where the challenges really surface for the evolution of the energy ecosystem.  Yes, developing technology is easy.  Deploying technology is hard, especially when it is visible to consumers.  Take the unfortunate example of Pacific Gas and Electric (PG&E).  This utility is the subject of a lawsuit regarding its introduction of smart meters in the Central Valley of California.  Residential consumers in towns like Bakersfield are understandably alarmed at increases in their summer electricity bills, which reflect lots of days with air conditioning to cope with the blast furnace temperatures outside.  I would be too if I were in their shoes – what consumer likes increased bills?  And I should be in their shoes, since my small niche of the PG&E energy ecosystem was altered with a smart meter this past summer.   But I’m not in their shoes.  My bills did not increase.   PG&E did raise electricity rates this summer, but unless you pay close attention to every insert in your bill, these changes in the ecosystem could escape your notice.  However, introduce something new like a smart meter, and an increased electricity bill is the result of that most visible change. 

It’s a planning problem influenced by corporate culture, marketing and communication plans, and consumer awareness.  It is easy for those of us in the Smart Grid and energy sectors to forget that not everyone has the same level of awareness about Smart Grid technologies and benefits.  That’s one reason why I wrote the Smart Grid Dictionary, but this great resource alone won’t be enough to educate consumers about the powerful and compelling reasons to embrace smart meters and other technologies that will be coming to our homes in the next few years.  And face it, most utilities in the USA do not have to compete for consumer mindshare.  That’s one of the tradeoffs of being a regulated business, and the deficits of knowledge resulting from this environment can have expensive ramifications for introductions of visible technologies into the consumer base. 

In hindsight, PG&E should have conducted an advance information campaign to inform, demystify, and reassure consumers about what changes smart meters would bring to their energy ecosystem.  They might have chosen to rollout smart meters first along the cooler coastal areas and go the Central Valley in the wintertime, thereby avoiding a correlation of higher electricity bills as a result to smart meters instead of higher electricity rates.  As a consulting veteran of technology introductions, the best practices include extensive interdisciplinary planning and execution of the plan.  Properly managed evolutions in the energy ecosystem keep the call volumes down in the contact centers, avoid legal entanglements and bad publicity, and maintain harmony with the regulatory agencies.