Smart-Grid Success Depends on Alignment of Interests

I wonder whether utility executives are suffering from survey fatigue. Every week or so, new smart-grid market research, derived form surveys of the utility industry, hits the streets.

Maybe the utility executives enjoy the attention. That, at least, would explain why so many of the studies seem to receive participation rates that result in useful sample sizes.

Interestingly, the surveys are producing similar findings. One thing that seems clear is that utilities aren’t certain when the smart-grid payoff will come — for them or for their customers.

For instance, according to the results of a Comverge survey of 100 utility-industry attendees at last week’s DistribuTech utility conferencein Tampa, almost an equal number of respondents believed that measurable smart-grid benefits are one to three years from realization (27 percent) as believe that measurable benefits will accrue in 10 or more years (29 percent). Ten years, or more, is a long way off.

While spending on smart-grid initiatives seems strong, with 77 percent of respondents indicating budgets allocated to energy-management resources have increased in the past year, the industry’s smart-grid vision would benefit from greater clarity, coherence, and consistency.

Indeed, if the utilities aren’t sure when they’ll realize a return on their smart-grid investments, they seem even less certain about how and when their customers will derive benefits. I get the distinct impression the utility industry has’t fully thought through the customer angle. The formation of the Smart Grid Consumer Coalition (SGCC) was a sign that the industry at least recognized the problem, but the smart-grid spending priorities of the utilities suggest that remedial action is lagging.

How else to explain why smart meters are getting an aggressive push while smart energy outlets, in-home energy displays, residential energy-management systems remain afterthoughts?

Let’s consider: The smart meter is just a digital two-way, real-time meter. It allows the utility to implement time-of-use (TOU) billing based on variable pricing. Consumers will pay more when energy is in peak demand, and presumably they will pay less when consuming energy during off-peak hours.

But f consumers have no means of accessing information and services that help them reduce their energy consumption during periods of peak demand, they will not realize savings on their energy bills. In fact, if experience is any guide, they’ll receive higher energy bills, which will sour them on smart meters and the smart grid.

That would be unfortunate, not just for utilities and for the vendors that supply them, but for everybody. The smart grid has the potential to deliver value that flows downstream from technology vendors and utilities all the way to their commercial, industrial, institutional, and residential customers.

What needs to happen is proper alignment and reconciliation of interests.,It will not be enough for utilities to foist feel-good sentiments on consumers about how smart meters contribute to energy conservation and environmental sustainability. That’s great, for as far as it goes, but it doesn’t go nearly far enough — not during an era in which tapped-out consumers already will be trying to do more with less.

The smart grid can’t be exclusively about utilities saving money, either as result of not having to utilize higher-cost energy-generation facilities for peak loads or of not having to build new electric-generation facilities to cope with rising demand. Consumers will have to share in the benefits; if they don’t, they’ll become adversaries, not partners.

Of course, the smart grid shouldn’t just be about making or saving money. It plays into a bigger picture, having to do with economic viability, industrial growth, technological innovation, and environmental sustainability. (That’s another post, which I will save for another time.)

Nonetheless, to the extent that money can and will be made, the utility industry must give careful consideration to ensuring that everybody in the value chain derives real benefits. If such consideration isn’t paid, then the rosy market forecasts might never come to fruition.

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