by Kit Hagen, Convergys Corp.
Energy efficiency is all about using less energy to accomplish the same task. Utilities are putting a lot of energy into it, but customers aren’t reciprocating. We can’t achieve energy efficiency without them.
U.S. utilities spent $5.3 billion on energy efficiency programs in 2009, which is 43 percent higher than 2008, according to the Consortium for Energy Efficiency. These billions of dollars spread across 46 states, up from 37 states in 2008. Energy efficiency spending will continue to go up with mandated emissions cuts and rising energy prices. But is this all it takes?
More dollars are rushing toward smart grid development; that is, toward technology enablement for energy efficiency, but what’s being done to ensure that when we build it, they will come? This is the challenge to utility companies: getting customers to move. Utilities are doing everything from changing rate plans to building smart cities such as Xcel Energy’s SmartGridCity, but customer adoption is still believed to be more than three years off, according to a recent Smart Grids Europe survey.
The smart grid will enable data, information access and automation to give electricity customers the power to better engage in energy efficiency. Even with the smart grid boost, utilities still haven’t answered a tough question: How can we effectively bring together customers and technology so customers will want to engage in energy efficiency? Achieving this level of engagement requires more than a smart grid. Let’s explore areas where the smart grid will make over energy efficiency efforts, where it falls short and what technology changes utilities must make to fill in that gap.
New Data for Better Decisions
The smart grid can incentivize electricity customers to take on more energy-efficient behaviors—right when utilities need it most. In reality, customers stretching under their desks to turn off power strips will not mean much to a utility on a cool night vs. the hottest day of the year. Smart technologies—from smart meters to smart thermostats to smart appliances—will produce real-time data that utilities and customers can use to understand when consumption happens and when energy efficiency has the greatest impact.
A smart grid’s real-time data feed means that more real-time pricing programs and dynamic demand response events can take place, so customers have the right incentives to take on energy efficiency at the right time. Utilities have offered direct load control programs, varying rate structures and demand response aggregators for years, but they targeted commercial and industrial customers. The ability to extend these programs to a broad consumer base means innovating on more of these programs faster, but can current utility systems handle it? Smart meters enable a more timely and granular level of data that utilities can use for more dynamic demand management by charging real-time prices based on true energy supply and demand. Are systems downstream in the data path from the meter capable of handling and applying the data that smart meters collect?
Customers having the right information and incentives at the right time is an exciting proposition, but existing utility systems can’t handle the complex analysis needed to make this proposition a reality. Utilities are installing smart devices that will produce the necessary real-time data, but turning the raw data into information takes more processing power and capabilities than current customer care systems and historical databases can handle. Utilities will need next-generation systems to turn real time into actionable information.
Improved Automation, Access to Information
It is great to have incentives to drive changing utility needs, but what if a customer isn’t around to make a critical decision? The smart grid can help customers automate energy efficiency with new technologies, but it needs additional systems to provide customers with access to customer information and decision-making capabilities through multiple channels. Customers can ultimately automate but still remain in the driver’s seat with their energy efficiency decisions.
On the new technologies side, the addition of grid communications networks and home area networks enable machine-to-machine (M2M) communication so a person doesn’t have to be home to control his or her televisions and appliances. Based on customer preferences, utility systems can communicate real-time energy prices to customer premise equipment, such as a smart thermostat, and make energy consumption changes in real time, much like the capabilities that novice traders have today to tell a company such as E-Trade to automatically sell stock when it hits a certain price.
The smart grid can empower customers to automate their energy efficiency preferences, but automation can only go so far. Smart grid enables customers to make energy efficiency decisions through multiple channels, no matter their locations. For example, coming home early from work? A few clicks on the cell phone through an iPhone app or Microsoft Hohm can turn on the air conditioner so your home is at the right temperature when you arrive.
Even with systems where customers can set their preferences and control energy use from anywhere in the world, people are busy. Utilities can offer different customer energy efficiency packages that best suit individual customer interests and needs. Customers could select an energy efficiency package based on when they are home. For example, a nightshift worker would have different energy efficiency preferences than a person working 9 a.m. to 5 p.m.
The smart grid enables a variety of energy efficiency choices, but today’s utility systems still don’t interact sufficiently with customers. Most Web portals don’t even offer real-time energy consumption. Utilities need new systems beyond smart meters and smart grid to provide ways for utilities to distribute information to customer equipment, enable real-time, two-way customer interaction through multiple channels, and provide customers with energy efficiency options that can save them time and money. There’s more to driving energy efficiency than installing the grid and the meter.
Better Energy Efficiency Marketing
No two customers have the same understanding or capacity to adopt energy-efficient ways. At a Saturday dinner party, the opinions around the table varied from, “What’s a smart grid?” to, “We don’t need energy efficiency,” to, “My solar panels are helping, but I need to generate more of my own energy.” If utilities are going to offer new energy efficiency options, they must figure out what energy efficiency programs will be accepted by which customers. Smart grid can help energy efficiency by enabling utilities to leverage new customer consumption data to better market efficiency programs. But market segmentation is the name of the game. Amassing smart grid information will provide invaluable insights for utilities regarding customer consumption patterns and behavior that can then be used to show end customers how energy efficiency can be obtained and how they benefit from it.
There are challenges with bringing together smart grid and energy efficiency. Utilities must bring together customer information and marketing tools in ways they never have, but it is possible. Consider how other industries have used customer consumption patterns to better serve customers, in particular, the retail grocery market. Product scan codes have gone from a way to speed up checkout to an invaluable source of customer information. Armed with this information, grocers can analyze customer information to deliver targeted coupons and loyalty programs to better serve customers based on their individual preferences. Likewise, smart grid data and improved systems can help utilities better serve their customers by putting them in touch with the right energy efficiency programs that best serve their needs.
There are powerful possibilities for energy efficiency when combining smart grid and the will of customers. Utilities, however, must ensure they have the right systems to support the complex information processing and distribution requirements to drive smart efficiency. Smart grid alone isn’t enough; utilities must work through the effective engagement of a slew of new systems and technologies to engage customers, and this customer engagement is critical.
Author
Kit Hagen is senior director of utility market strategy at Convergys Corp., a global relationship management company in Cincinnati. Reach him at kit.hagen@convergys.com.
