The Smart Grid business sector is facing the same skepticism about many initiatives ranging from large-scale renewable energy grid integration projects to smart meter rollouts.  The nay-sayers point to costs of new renewable energy sources versus existing fossil fuel-based sources.  Critics of smart meters focus on the incorrectly installed or inaccurate meters as reason enough to stop deployments.  Yes, utilities must ensure that every customer has an accurate meter, but should car manufacturers who routinely recall percentages of their fleets every year be barred from continuing to produce cars? 

Changes are coming that will (r)evolutionize our relationship with electricity, and some of them are happening with less fanfare.  Perhaps the lack of a spotlight aids in their progress.  For instance, feed-in tariffs (FiTs) are adopted in some states and under consideration in others.  FiTs require utilities to purchase electricity from individual producers of different renewable energy sources at set prices.  There are a couple of variations of  FiTs, but their benefits are generally the same.  First, FiTs ensure that renewable and locally-sourced energy will be added to the grid.  Second, FiTs eliminate costly one-off contracts between utilities and customers – simplifying the producer/retailer relationship for the benefit to both parties.  The term for this is TLC – transparency, longevity, and certainty in this generator/purchaser relationship.  What does this mean for Joe and Jane Ratepayer?  It means consumers purchase locally-generated power, setting the stage for a vastly different grid that has many points of distributed generation instead of reliance on far-flung centralized power sources.  That means improved grid reliability, reduced greenhouse gas (GHG) emissions, and avoided investments in transmission facilities, which often cost $1million/mile to construct.  And that all means more bang for your buck. 

Another change that is frequently in the news is the continued momentum of electric vehicles (EVs).  From the recent initial public offering (IPO) of Tesla stock to the announcements of planned electrification of more existing car models, there is growing interest in EVs and their role in the Smart Grid.   There’s even an acronym for one of these roles – V2G or vehicle to grid, the practice of using stored energy in EVs as dynamic sources of energy capable of discharging electricity back to the grid.  The coming changes apply to new business models and policies too.  For instance, a recent study from Zpryme cites activity from the state of Delaware that mandated something similar to FiTs for EVs.  Their V2G policy requires utilities to buy back energy from EV owners at the same price that those owners would pay to charge their EV batteries.  This means that an EV can make money for its owner.

It’s hard to oppose a change that makes you money, but it illustrates the challenges for utilities, industry associations, policy makers, and vendors face in educating taxpayers, ratepayers, and consumers about Smart Grid changes that have immediate impacts, but may not have immediate benefits.  The education can occur, and should occur, but it will require concerted efforts by all Smart Grid players to ensure that the changes on the horizon are enthusiastically supported by taxpayers, ratepayers and consumers.

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.

Could the new personal energy consumption data that will be available through new Smart Grid technologies and services have the potential for malicious as well as beneficial use?  The answer is yes.  Leaving aside all discussion of security, here are my answers to the questions posed last week to help you understand the need for strong privacy protections of our personal energy consumption data:    

1. Who “owns” my personal energy consumption data?  Me.  I own it, and I give permission to service providers to have access to it.  Of course, the entity that delivers electricity must have certain data to bill customers for the total amount of energy consumed, just as electric utilities have that stewardship of that information today.
2. What rules govern its availability, storage, and disposal?  This is a murky area.  There are few policies in place today about managing access, storage, and disposal of personal energy consumption data.  There are state and federal laws about personal information, but these are typically focused on data that does not include energy use.  Therefore, we need to ensure that laws address personal energy consumption data and clearly identify ownership and authorization rights. 
3. Who makes these rules and how are they enforced?  It would be nice to have a comprehensive federal law that governs personal energy consumption data, so that state regulators, municipalities and co-ops could develop regulations that align to it.
4. What are potential commercial uses of my personal energy consumption data?  Here are a few hypothetical situations, with two caveats.  First, these examples deliberately exclude Home Energy Management Systems, which can take this data and save us money and reduce our carbon footprints.  Second, these are purely hypothetical musings.  Much like information is collected to form your credit score, in the future third party entities might collect personal energy consumption information to form a carbon footprint score or an energy score.  This information might be purchased by potential employers or landlords to determine if you will be an energy guzzler in their operations or properties.  Market research firms might analyze personal energy consumption data and extrapolate lifestyle information so they can target ads and promotions to you.  Insurance companies might develop new calculations that tie energy consumption to health or longevity. 

This may all be possible, but it should only occur with our explicit consent for our data to be used by these third parties.  If they can make a compelling case of the benefits that accrue to us for this commercial use of our data, I’ll listen.  

To learn more about information that smart meters can deliver, join me at the Metering, Billing/MDM America conference in San Diego on March 7-10.  This annual event draws innovating utilities, meter manufacturers, and thought leaders to discuss not only theory but reality in Smart Grid deployments.

For my Silicon Valley readers, don’t miss the Sustainable Silicon Valley/Santa Clara University Smart Microgrid event on February 23 to hear about this local university’s plans to take their microgrid and make it a smart microgrid.

Shout Out

If you are interested in a green career, there’s a new book, Green Careers for Dummies, by Carol McClelland, PhD that delivers an excellent education for readers into a wide range of job possibilities and how to position their education, skills, and interests into fulfilling careers – including Smart Grid careers.  I particularly liked how careers are divided into categories such as Careers in Rebuilding the Infrastructure and Providing Green Products and Services.  These categories help readers target their interests and clearly describe dynamic new career areas like the Smart Grid as well as identify example job positions and important industry and market trends.  I highly recommend it. 

Smart Grid technologies give us the detailed information to modify home operations for the benefits of reduced energy bills, reduced carbon emissions, and improved energy security.  Existing meters retrofitted with readers or smart meters deliver the granularity we currently lack about our use of anything that draws electricity.  Home Energy Management Systems (HEMS) offer portals to conveniently monitor and manage energy consumption using this detailed information.   Saving money on my utility bill, saving the environment, and building energy security – what’s not to like about these compelling benefits?

There’s only one downside – there’s an amazing amount of lifestyle information that can be extrapolated with granular energy consumption data from any residence.  In the traditional electricity grid, we have always been data producers and utilities have always been the data consumers – gathering kilowatthour (KWh) data so it can charge us for our electricity use.  The Smart Grid delivers a richer data set and the potential for new commercial uses of personal energy consumption data.   The pool of data consumers of our personal energy information may grow well beyond the traditional utilities, and we as the data producers need to consider these questions:

1. Who “owns” my personal energy consumption data? 
2. What rules govern its availability, storage, and disposal? 
3. Who makes these rules and how are they enforced? 
4. What are potential commercial uses of my personal energy consumption data? 

The rules about privacy of this new data need to be developed so that we as the data producers ensure smart management of its consumption.  Fortunately, there is work underway to create data privacy recommendations as part of the National Institute of Standards (NIST) Smart Grid Cyber Security Strategy and Requirements initiative.  Next week’s blog will discuss some possible answers to the questions listed here.

Shout Out

Congratulations to the state of California’s Building Standards Commission, which adopted CALGreen, a mandatory green building standards code which takes effect on January 1, 2011.  CALGreen requires inspections of energy systems in non-residential buildings over 10K sq ft, 20% reductions in water consumption, 50% diversion of construction waste from landfills, and use of materials that reduce indoor pollution.   The CALGreen program is a first for the USA, and let’s see if other states adopt similar measures, and go one better by mandating the same measures for residential buildings.  Go here for more information. 

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.

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.