How Can Utilities Get Customers Engaged with the Smart Grid?

How Can Utilities Get Customers Engaged with the Smart Grid?

At GridWeek 2010, held in Washington D.C. last month, the theme of "consumer engagement" was ubiquitous, as it has been at similar conferences, such as the Gridwise Global Forum in September and the National Town Meeting on Demand Response and Smart Grid in June. Indeed, almost one-third of the conference was dedicated to this topic, reflected in such panels as "Consumer Engagement: A Recipe for Success", "Utility Outreach to Consumers: Lessons from the Field", and "Reshaping Utility/Customer Relationships."

What does the term "consumer engagement" represent, why is it important, and what should the consumer expect?

Unsurprisingly, there was disagreement among conference participants on the definition of "consumer engagement." Typically, it seems to represent the engaging of residential consumers to change their energy-consuming behavior.

Energy supply in periods of peak demand is expensive for the utility, and that price is passed on to consumers. If consumers can reduce their usage during peak periods, then it should result in lower overall energy prices and a lower bill.

The smart grid will enable the utility to communicate to the consumer those times of peak demand through dynamic meter pricing. However, the consumer must be "engaged" to adjust energy use appropriately to reduce electricity demand during this peak period, which is familiarly known as a demand response event.

If successful, utilities spend less on supply, consumers reduce their electric bills, GHG emissions are reduced -- and there is demonstrated return on the utility's smart grid investment, if one has been made. In order for a regulated utility to make the capital investment required for a smart grid implementation, it must receive approval from a state commissioning body since the required capital needed upfront is expected to be recouped in the form of higher electricity rates.

However, the commissioning body, working on behalf of the consumers, expects to see how the capital investment will benefit the consumers in the long run before approving a rate-case. In order to see the decline in long-term costs to customers required to offset the capital investment, the consumer needs to be "engaged" to adjust her demand profile when receiving signals from the utility, or engage in a demand response event.

So the question remains, how can utilities encourage the user to "engage" once the enabling technology of the smart grid is in place? Motivating factors could include cost savings, environmental benefits, or peer pressure.

The PowerCents DC project run by eMeter and Pepco Holdings demonstrated a 4-5 percent cost savings when variable pricing was introduced. Environmental benefits don't seem likely to motivate when almost two-thirds of Americans do not see global warming as a serious threat.

Peer pressure worked in recycling, with neighborhoods placing colorful bins on their driveways demonstrating their environmental prowess, not to mentioned competitive spirit. Similarly, this strategy has worked for energy with companies like OPOWER, which has demonstrated a 1-3 percent reduction in energy use by the consumers they reach, based on reporting on energy usage compared to neighbors.

Accenture claims that "the average customer thinks about their utility bill six minutes per year."

Utilities need consumers to "engage" to generate an ROI on a Smart Grid investment.

One way to reconcile these facts would be to automate consumer engagement and automate demand response. Many utilities practice "load control" today through controlling irrigation or HVAC systems to prevent blackouts in times of peak demand. The key variation on this theme is to allow the consumer to opt-out of this control, or resume function.

For example, if the utility turns the thermostat down a few degrees automatically, the consumer can simply turn it back up. In this way the consumer has the control, but the utility can help the consumer "engage" in energy efficiency and demand response. A representative from GE stated that 85 percent of the energy use in the home can be controlled between HVAC and appliances. The next generation of appliances should be "smart" such that they can receive signals from the utility and adjust operations accordingly.

Again, if an appliance is turned off or operations are delayed because of the utility signal, consumers can override the signal and resume operations as desired. In this scenario, utilities can deploy capital, become more efficient, and be more assured of a return on investment; and commissioning bodies will see the benefit to consumers financially through their "engagement" in energy efficiency.

While this appears to be a winning scenario for all involved, the migration to "smart" HVAC systems and appliances will take time. Perhaps utilities can request additional funds for "cash-for-clunkers" type programs at the same time as they request capital expenditure approval for smart grid infrastructure from state commissioning bodies. Once the pieces are in place, consumers can remain "engaged" in the same "6 minutes per year" while benefitting from lower electricity prices and a sense of environmental stewardship.

Photo CC-licensed by Loadmaster.