Four Terms Every Utility Executive Must Know

Jargon is a fact of life in any business sector, and as the author of the Smart Grid Dictionary, I assure you its quite prolific in the Smart Grid sector. Jargon has a beneficial purpose. It is useful referential shorthand that encapsulates complex topics in minimalist terms. Buzzwords are an excellent barometer about business sector trends, and are the emerging jargon in a business vocabulary. Here are a few buzzwords that should become part of every utility C-level executive’s Smart Grid vocabulary in 2015.

Consumer-centric. This term refers to a deliberate strategy to re-engineer processes, reskill employees, and restructure operations that put the consumer at the heart of the business. It’s an oft-misused term in many business sectors. But here’s the rule of thumb to use as a reality check for utilities: When your utility can put numbers to consumer value, and you have built transparency into your customer-facing business processes, you have consumer-centric operations.

Consumer value. Electricity consumers are increasingly electricity producers, and personify the “producing consumer” or “prosumer” term invented by Alvin Toffler back in 1970. Prosumers create kilowatts with distributed energy resources such as solar panels or energy storage that can be discharged back to the grid. Prosumers create negawatts by active participation in demand response programs. Utilities must recognize consumer value as calculations that encompass much more than electricity consumption. (There will be more information about consumer value in a future article.)

Customer churn. The retail electricity providers in deregulated states are familiar with this term, as are all business sectors that compete for customers. Churn or attrition is the loss of a customer. Churn has costs – because to regain or reacquire that customer incurs greater expense than customer retention. Utilities traditionally enjoyed a captive customer base and direct interaction with their customers, but new technologies create viable alternatives for customers and new service providers can intermediate the direct relationships that utilities have had with customers. Increased customer churn and intermediation may result in increased grid operational challenges as well as increased costs.

Customer defection. Defection is the permanent loss of a customer. Given the ability of consumers to become self-sufficient prosumers, the electric utility sector may experience defections on a scale not seen in other industries. That won’t be an enjoyable distinction, and the loss of this aggregated consumer value will have significant financial and operational implications for utilities.  Its a situation every utility executive wants to avoid.

Contact centers perform critical roles for utilities to become consumer-centric and build consumer value, while reducing churn and preventing defections. We consider them to be the “tip of the spear” in successful consumer outreach, acquisition, retention and value-building strategies. There is no time like the present to work on your vocabulary and your plans to leverage your utility contact centers to perform to these expectations.

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Electric Vehicles and the End of Big Oil

The Gulf of Mexico oil spill now polluting fragile wetlands of several states is an environmental and economic disaster.  This is the downside of an addiction to oil, and it should serve as a potent reminder of the strategic value that electric vehicles will have to eliminating significant sources of carbon emissions and that crap coating every remaining living sea creature unlucky enough to be in the Gulf right now.  

Electric vehicles (EVs), a key component of the Smart Grid, serve many beneficial purposes.  First, even those that get electricity from fossil fuel power plants still have a far lighter impact on the environment than gas powered vehicles.  The cumulative greenhouse gas emissions from coal power plants powering EVs are still less than the cumulative emissions from millions of gas powered vehicles.

EVs also help shape electricity loads through smart charging, which uses communications and charging control software to manage the timing, pace, and extent of charging loads from utility to EV and manage the load stored in the EV.  It can respond to fluctuations in demand on the grid, so it charges when electricity is readily available and suspends charging when it senses peak load times.  EVs can help stabilize the grid, and avoid grid purchases of expensive peak power, keeping costs down for everyone.

EVs can earn money for their owners through carbitrage.  Carbitrage is defined in the 2nd Edition of the Smart Grid Dictionary as:  “The capability for an EV or PHEV (Plugin Hybrid EV) or charging station to communicate with the electrical grid to schedule charge/discharge activities based on conditions including pricing signals, tariff agreements, TOU (Time Of Use), DR (Demand Response) programs, and manual overrides by car owners.”  Just imagine – one day there will be an iPhone app that calculates how much money that sweet little EV you’ve been thinking about purchasing will earn for you.  Contrast that to the mental subtraction of a couple thousand dollars we all do as we drive a gas-powered car off the dealer’s lot.

EVs are much cheaper to operate than gas-powered vehicles, and electricity pricing has more predictability to it than barrels of oil.  And then there’s the convenience factor.  I can’t wait to eliminate filling up the tank as one of my chores.  How much better it will be to pull into my garage and plug in the EV – which my smart charging system will juice up when prices are at the lowest. 

But even more significantly, a shift to EVs means the beginning of the end of costly Big Oil.  You can take your pick of studies that calculate the sum total of US federal and state subsidies that go to these companies.  The eye-popping numbers range from $330B between 1950 – 2003, to a mere billion dollars a year.  That’s right fellow US taxpayers, at least a billion dollars a year in subsidies to mature, profit-engorged multinational oil corporations.  I’d much rather see those sorts of subsidies going to domestic, renewable energy  and EV businesses that will make the petroleum spewing a mile deep in the Gulf as obsolete and cringe-inducing a fuel as whale oil.   Wouldn’t you? 

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Consumer Participation in the Smart Grid

The Department of Energy lists active consumer participation as one of the most important characteristics of a Smart Grid.  This takes shape in two forms – electricity production and electricity consumption.  One of the many benefits of the Smart Grid is its ability to integrate renewable energy sources into large scale electricity production.  Another is the ability to communicate in real time on a broad scale to signal requests to modify electricity consumption.  Both of these benefits have profound, positive impacts for consumers.

I Want To Be A Prosumer

Alvin Toffler coined the term “prosumer” to describe a situation where a producer of electricity may also have a consumer relationship with a utility, aggregator, and other energy provider.

That’s exactly what is happening today.  Consumers can play the role of renewable electricity producers at individual or community levels.  For instance, in California, Community Choice Aggregation offers neighborhoods and municipalities opportunities to join forces to source renewable energy for their electricity needs.  This sensible policy encourages growth of local businesses to build and manage renewable energy production and stimulate local economies.  Unfortunately, Pacific Gas and Electric, the monopoly in Northern California, wants to undermine these policy goals and economic benefits to consumers through its Proposition 16 campaign (See my April 19 blog).

Future electricity production must also consider the “negation” of electricity use.  A negawatt is defined in the Smart Grid Dictionary as “A term that identifies watts of energy saved through a reduction in energy use or increase in energy efficiency.  It is the greenest form of energy.”  It is also called the “first fuel”, and it should be bought and sold like any other energy source.

There are growing numbers of solutions that enable homeowners to monitor and manage their electricity use, and create negawatts.  In other words, a consumer can actively participate in reduction of electricity consumption through new Smart Grid technologies.   Traditionally, utilities or third party aggregators enrolled customers into programs that usually delivered day-ahead notification of requests to reduce electricity consumption.  In the future, maintaining a stable grid with renewable resources will require real-time requests for electricity consumption adjustments (and energy storage too).  That implies low cost, high performance reliability in solutions that homeowners use to manage electricity consumption.  One of the most interesting technology platforms uses open source hardware and software – called OSHAN (Open Source for Home Area Networks).  Why is that important? 

Open source solutions (like Linux, MySQL, Apache –foundations of the Internet) have a solid reputation for top quality, reliability, security, and flexibility.  Open source solutions are created at fractions of the cost of traditional development cycles and eliminate risks of buying products that won’t work together. The OSHAN platform could play an important role in unleashing the creativity of software and hardware developers to create innovative products that manage and reduce energy use, creating negawatt value for consumers.   Just as the Smart Grid enables a broad base of participation in electricity production and consumption, technologies like OSHAN can propel the most cost-effective and easy-to-use energy management products into mainstream use.   I look forward to being a prosumer. 

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Electric Vehicles – Making a Connection with Consumers

Electric vehicles (EVs) are important pieces in the Smart Grid puzzle.  EVs will play an increasingly important dual role in transport and energy storage.  This role change has consequences that impact consumer lifestyles, wallets, and decision-making processes.  And unfortunately, there’s little being communicated to consumers at this point in time. 

For example, I recently attended an EV showcase.  Five manufacturers described their solutions, detailing power trains, their batteries and the pros and cons of these technologies, and other factoids.  I noticed two common elements to all EV cars and descriptions:

  1.  Not one car had a purse garage for women.  Apparently we can redesign cars from the engine out, but we can’t think about arranging a car interior oriented to women.
  2. More to the point of this blog, every manufacturer mentioned that consumers need to be educated about the differences between owning and maintaining an internal combustion engine (ICE) vehicle and an EV. 

Consumers need to LEARN how to manage an EV.  Think about it.  Remember history because it does repeat itself.  At one time, people had to learn how to manage a car instead of a horse. 

An EV means a charging station.  Most consumers will want Level 2 charging capabilities, which may mean scheduling a visit from an electrician to install a 3-prong plug like clothes dryers use to support charging an EV in a couple of hours instead of 8-12 hours.  Once you have that charging station, you avoid the inconvenience of filling gas tanks, and spend pennies instead of dollars to “refuel”.  And because an EV has fewer moving parts than an ICE, you may spend less time at auto repair facilities.  These are positive changes to lifestyles and wallets.  Are these positive benefits communicated on a broad scale to consumers?  Not really.  Many consumers will perceive an electrician’s visit to be an unwelcome additional expense or inconvenience.  And the majority of consumers suffer from “range anxiety” – figuring an EV could never support the daily distances they travel so they are not going to give it serious consideration.     

Let’s add in some more changes in the form of carbitrage.  The Smart Grid Dictionary (2nd Edition – June 2010) defines it carbitrage as “the capability for an EV or PHEV to communicate with the electrical grid to schedule charge/discharge activities based on conditions including pricing signals, tariff agreements, TOU, DR programs, and manual overrides by car owners.”  It’s a fabulous concept, and it means that one day my car can earn money for me while it is hooked up to the grid simply by selling back electricity at peak times.  This is a real game-changer, but not easy to explain in a sound bite to consumers. 

No matter the Smart Grid subject, if the technology is anywhere near the consumer, education is required.  We need coordinated communications campaigns to align consumer, government, and industry views of Smart Grid visions, realities, and most importantly, the benefits to consumers.  Consumers, taxpayers, and ratepayers need to understand what values they gain from making what will be some dramatic changes in their lifestyles. 

If EV manufacturers really want to sell EVs, they need to build educational campaigns to instill familiarity and confidence in consumers.  Stop spending marketing dollars promoting gas-guzzling SUVs.  Feature real-life EV owners and how they use their vehicles.  Every EV manufacturer should have a fun, interactive game on their website that engages consumers to enter info about their daily driving habits to learn just how often they would have to charge up an EV, and the cost comparison of their electricity charges versus avoided gasoline costs.  That would open a lot of eyes in the USA.

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The Smart Grid Library builds your Smart Grid knowledge

Welcome to the Smart Grid Library!  I’ve been an enthusiastic supporter of the concepts of the Smart Grid for quite some time.  What’s not to like?  Better energy sources, improved energy efficiencies, and new technologies that help everyone from power producers to consumers make intelligent decisions about energy use.

However, it was clear that there were some gaps in the information chain to build and maintain knowledge about the Smart Grid.  For instance, there was no dictionary dedicated to Smart Grid terminology.  There’s an abundance of acronyms in the Smart Grid sector, but no centralized source to decipher them – until now.

This Library delivers information to help you understand the Smart Grid, including the first reference ebook focused on the Smart Grid, titled the Smart Grid Dictionary. Whether you are a utility industry veteran, a new hire in a start-up, or interested in a new career in the Smart Grid sector – our information tools deliver invaluable information and increase your knowledge of the Smart Grid.

There are many definitions for the Smart Grid, but here’s the one that you’ll find in the Smart Grid Dictionary:

A bi-directional electric and communication network that improves the reliability, security, and efficiency of the electric system for smallto large-scale generation, transmission, distribution, and storage.  It includes software and hardware applications for dynamic, integrated, and interoperable optimization of electric systems operations, maintenance, and planning; distributed generation interconnection and integration; and feedback and controls at the consumer level.  The Department of Energy (DOE) identifies 7 characteristics of a Smart Grid:

  1. Enables active participation by consumers
  2. Handles all generation and storage possibilities
  3. Handles new products, services, and market models
  4. Delivers power quality
  5. Operates efficiently and optimizes assets
  6. Self heals in the course of any system disruptions
  7. Functions with resilience in natural and man-made disasters

The Smart Grid Library also contains a handy list that you can easily search to decipher Smart Grid acronyms.  Check it out today!

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