Bringing the Smart Grid Home: Will Consumers Opt-in?

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The consumer face of the Smart Grid looks like you and me.  It is tall and short, conservative and liberal, lazy and driven.  In short, it is everyone, which means that it can be both random and ordered depending on changing conditions, geographic realities, and discordant behavioral patterns.

Capitalizing on Smart Grid opportunities in the residential consumer market means finding order and predictability across a wide range of variables: different ecosystems, temperature variation, number of people living under one roof, behavioral patterns, etc.  Currently, data is measured home-to-home, which means that fine-grained details under the roof are usually unaccounted for.

As a result, the Smart Grid ushers in many unknowns related to consuming electricity.  In doing so, it simultaneously offers the potential for substantial gains in efficiency, distributed generation, and reduced costs as well as the threat of widespread, financial-shock-inducing grid failure.

If the failure part of the equation – i.e. blackouts — weren’t so dangerous, it would be easy to test technologies and systems aggressively in order to build a new infrastructure, well…intelligently.

In addition to losing money, the risk of grid failure is a big reason why utilities are scared of the residential market.  As a result, bringing lab-tested technologies to the consumer market has many utilities putting on the brakes.  It is exactly this uncertainty and variability that raises the stakes for utilities, who must proceed cautiously when implementing consumer-facing smart grid programs to maintain grid reliability while also keeping costs low for their customers.

At ConnectivityWeek last month in Santa Clara, CA, which is the largest gathering of Smart Grid experts on the West Coast, industry insiders, utilities, and consumer advocacy groups came together to discuss the importance of engaging the consumer and best practices for doing so.

One Size Does Not Fit All

Understanding the consumer is the key to making the Smart Grid intelligent as well as manageable.

While some argue that we (the consumer) have too many interests, limited time, and limited capacity to interact with the myriad of technologies that are invented and commercialized, consumer-facing smart grid companies are exploring new frontiers in the area of behavioral psychology, marketing, and technology in spite of these assumptions.

Operating somewhere between the supply and demand endpoints in the residential market, companies like OPOWER seek to make sense of consumer-related behavioral data so consuming energy makes sense for the consumer, but also in a way that works for the utilities.

The reality today is that the average consumer spends six minutes or less per year on their energy bill.  While some might see this as a barrier to bringing control technologies to the consumer energy market, opportunists like Seth Frader-Thompson, CEO at EnergyHub, contend that the key to engaging the consumer is simplicity.  While there will be a steep learning curve for consumers once they’re given adequate information, the goal must be to enable consumers to understand the information before they can be expected to engage with it.

The consumer energy space, ultimately, is about trying different things, seeing what works and what doesn‘t, then tweaking, explains Frader-Thompson.  There is no silver bullet solution as demand response (DR) and behavioral trials producing variable results across different markets have shown.

Engaging the Energy Consumer

Although engaging you and me in the Smart Grid is of paramount interest for technologists, currently, residential consumers are trapped behind a wall of utility infrastructure and one-way control solutions (e.g. programmable thermostats and cycling pool pumps).  They lack the sophisticated tools or the infrastructural and informational capacity to align their consumption patterns with emerging time-of-use (TOU) and peak pricing (CPP) utility billing structures.

But all this may be changing.  Kirk Oatman, Founder and CEO of I’m In Control, a home energy management startup, explains that the national standards process is now effectively supporting in-home decision-making as well as the old-style direct load control.  That means more opportunity for real-time “ecosystem” control in the home for residential consumers, which Oatman demonstrated to me via a mobile phone interface connected remotely to his home.

The consensus at the ConnectivityWeek is that service providers should engage consumers proactively rather than wait for opt-ins, the utility strategy so far.

Mark Ishac of Zpryme, a business research and consulting firm, noted that there is no Smart Grid brand that has penetrated the home.  In an informal survey, Zpryme found that 8 out of 10 consumers didn’t know what the Smart Grid even is; meanwhile, 9 out of 10 consumers would take measures to save money and the environment.

The branding void is aching to be filled.  Sean Harrington of OPOWER explains that bridging this discrepancy requires utilities going beyond a “green” pitch and showing consumers how they’ll save money through education.

But a proactive approach must be mindful of the fact that power is constant (always on) and real-time information is more than consumers want to deal with.  Constant prodding can lead to resistance from consumers.  Accordingly, the goal should be to capture a fraction of mindshare.

Consumer backlash

Key to engaging consumers is educating them about how they will benefit.  Frader-Thompson explains that utilities have a long history of looking at their customers as “rate payers,” or even “load.”

Consumers are ultimately concerned with costs, and when Smart Grid build-out leads to increases in their monthly bill, expect the consumers to fight back.  The takeway: utilities need to establish better relationships with their clients and it comes down to effective communication initiated by utilities.

PG&E learned this the hard way after implementing a smart meter program, which led to bill increases for Bakersfield, CA residents.  All consumers saw were higher utility bills with ineffective communication that failed to explain the smart meter program behind it (complaints ultimately led to lawsuits against the utility).

Laurence Daniels, a lawyer with the Office of the People’s Counsel in Washington, DC, emphasizes three key elements of successful engagement with the residential energy consumer:

1. Consumers most important component

2. Education/empowerment most important investment

3. Smart grid is utility company’s 2nd chance to make a first impression

To maximize the interaction with consumers, messaging to consumers must answer the following questions, Daniels explains:

* Why do we need it?

* What is it?

* What benefits are in it for me?

* How to use it?

* How will this be paid for?

Accordingly, home area networks (HAN) must be used as empowerment tools.  To do so, they need to be easy to use with default functionality.  Pricing and billing, and the corresponding information, should take the same approach.  Consumers also need to know that their data is safe and utilities need to provide privacy and security.

Tragedy of the Grid Commons

Craig Boice of Boice Dunham Group argued that the grid’s current paradigm of low cost entry and utility-centric programs will lead to system-wide failure.  He drew an analogy to Garret Hardin’s Tragedy of the Commons framework which goes something like this: herders share a pasture on which their cattle graze; each herder seeks to maximize his profits by adding an additional cow to his herd, “and another; and another,”; until ultimately, all the grass is eaten.  In short, free access and unrestricted demand for a finite resource ultimately dooms the resource through over-exploitation.

The problem with lower electricity prices, Boice argues, is that while more families with limited means have access to power, those with more means will just overgraze on energy.  The only answer to stress on the grid is to lower demand.  Changing consumer behavior is the most effective strategy for accomplishing this.

While Boice acknowledges that both TOU and CPP pricing mechanisms are necessary to lower demand, they remain insufficient.  Ultimately, it must be up to the Smart Grid to change the consumer‘s behavior.

Conclusion

Building out a Smart Grid is a unique challenge that can not be compared to telecommunications in the 90s.  The grid is about transformation of existing infrastructure — if you screw it up, people die.  Telecommunications, by contrast, was about building out a whole new infrastructure on top of old infrastructure.

The challenge of Smart Grid is that a multitude of players are coming into the space, which creates an ecosystem model far different from the point-to-point approach utilities are accustomed to.

This opens up the possibility of collaboration among a multitude of players, but also dependent upon an actively engaged residential consumer market.

Mackinnon is Of Counsel with Cleantech Law Partners where he specializes in smart grid, biomass, and biofuels issues.

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