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Bumpy Road Ahead for Smart Meters

There’s a product coming to your home that promises to lower your electricity and water bills, make your home more energy efficient and help the planet.

But there are questions about its accuracy, doubts about whether you’ll be able to easily understand it or find it of much use, and other questions about whether it will work with new appliances and vehicles.

And did we mention that some people think it harms your health?

That’s the set of circumstances faced by utilities as the roll out of smart meters continues. Across the U.S. and U.K., major deployments are underway or planned in the coming year.

According to Peter Fox-Penner, author of the new Smart Power: Climate Change, the Smart Grid and the Future of Electric Utilities and chairman emeritus of the Brattle Group, smart meter deployments recently reached 50.5 million meters or 25% of the U.S. residential accounts.

Fox-Penner, who spoke at UCLA’s Luskin Center for Innovation at the School for Public Affairs on Tuesday, October 12th, says that the deployment of the meters hasn’t been handled well.

“I think in any sort of technological revolution, there are early adopters and then the mainstream adopts and there’s always late adopters,” he says. “In that process, sometimes either because the product isn’t right when rolled out or there’s a group of customers that don’t like the product, there’s pushback. What’s unique about the rollout of smart meters is the utilities installed them, in a sense, on behalf of customers, so it isn’t a customer’s decision – it’s a utility’s decision on behalf of customers.”

That, Fox-Penner says, has created a climate where the strength of opposition to the meters has “surprised many people, including me.”

Smart meters are designed to enable a reduction in energy consumption while increasing real-time communications, improving service reliability, and facilitating the integration of renewable generation and micro-generation, which will all result in a reduction in carbon emissions, according to Gregg Edeson of PA Consulting, a long-time energy industry veteran. And, he adds, the smart grid will also provide the essential infrastructure to enable the expected growth in electric vehicles, heat pumps and energy storage.

That’s the good news. The Holy Grail of smart meters, variable pricing options for consumers, also lies in wait.

But underlying all of the projects are the shadows of experiments that have already gone awry in California, Texas and Maryland, where questions about the accuracy of bills, regulator concerns and jockeying for position among meter manufacturers, appliance manufacturers and others in the smart meter food chain are causing some hiccups.

“The smart grid has gotten real fuzzy around the edges,’” says Maurice Gunderson, the senior partner in energy and materials at venture firm CMEA Capital. “When first dreamed up by EPRI (the Electrical Power Research Institute), it meant the ability for the grid to reconfigure and route power around faults. That has grown to include smart metering and information systems and so on. Because of the expansion of the term and fuzziness, that’s why you see unexpected problems in the marketplace.”

The unexpected problems Gunderson refers to range from consumer confusion over interfaces to real questions about whether the cost of deployment is worth the price of deployment.

“What’s happened is that people have deployed things that not palatable to the consumer,” said one executive from a major appliance firm “There are a lot of people asking what we’re getting into.”

The factions are already lining up. “It’s an interesting market right now,” says Brian Payne, a senior executive at Accenture. “You have skeptics on one side, cheerleaders on the other. My opinion: we’re going to continue seeing forward movement and momentum, but the consensus is that movement is going to be slower than we all anticipated if asked last year. There still continues to be regulatory uncertainty, and the value proposition for customers is still not clear on a wide basis.

And on the horizon, the introduction of electric vehicles promises to further cloud issues, as utilities, meter manufacturers, car companies and charging stations decide who will own the data.

If there’s a lesson to be learned, it’s that utilities will be more proactive in engaging customers and regulators.

“I have seen a lot of polling that shows among all institutions out there, utilities rank relatively high (in esteem),” says Fox-Penner. “They clearly don’t have any understandable agenda other than to serve their constituents. I think utilities understand the benefits for a lot of these technologies. They just realize they have to be added in stages. It’s just inevitable that these technologies are adopted.”

But the road to Nirvana apparently has a few speed bumps ahead.